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We need a middle class for startups

neilthanedar.com

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Re: We need a middle class for startups

#211

Post by bombcar »

tptacek wrote: post #178
bombcar wrote: post #165

Earlier quoted context omitted.

I think one thing that can help is many businesses (we read about them on HN all the time) are "successful" and could be $1m, $10m, even $100m/yr - but they have to be pushed to $1b/year or more to satisfy the ICs. Somehow to allow them to "exit" at 1/10/100 instead of trying for 1b or crash would be nice. But it would need a different type of "VC" partner. One funding mechanism could be something akin to "guilds" -…

Again: the winners have to pay for the losers. The unusually large successes are what makes the model work. I'm sure they're pushed past the point where they need to go to be economically viable, but by the time you've reached that scale, you're already out of the "mid-market" bracket.

Sure, but if you're 9/10 on successes it's a lot easier than if you have to deal with 1/100.

Re: We need a middle class for startups

#212

Post by coderholic »

bspear wrote: post #206
coderholic wrote: post #103

Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…

> Promote employee stock ownership for American Mittelstands This is crucial. Many bootstrapped companies don't offer much stock ownership from employees. Yes, they can pay a good salary, but these employees are laying down the business brick by brick, but never see a dime of the upside. Mailchimp comes to mind. I'm sure there are others. This basically leaves stock ownership in VC-backed startups as a way to get ric…

Yes, I think this is one of the most important pieces to solve! There have been some approaches (profit sharing, etc) but I think there's room for a lot of improvement & innovation here.

Re: We need a middle class for startups

#213

Post by russdpale »

bsimpson wrote: post #210

I studied entrepreneurship in college. They didn't know what to do with me when they realized I was planning on running a lifestyle business. Everybody else's forecasts were in the millions. I would have been happy making more than I spend.

Exactly what I find also, everyone wants to take over the world, as if everything is a zero sum game with one winner and billions of losers.

Re: We need a middle class for startups

#214

Post by joshpadnick »

michaelbuckbee wrote: post #92

This post is describing a structural issue on the funding side of new ventures: - - bootstrapping is very hard - traditional credit/loans aren't structured well for the "mid" type risks of starting software businesses (not much collateral) - and on the VC side there is much less opportunity for the Unicorn 1 in 10 exits. Tackling this problem are two funds that I didn't see mentioned in either the article or the comm…

I really appreciate these suggestions. We're a fully bootstrapped ~20 person, $5M+ ARR company in the DevOps space. We're growing quickly and often wonder what an extra $1.5 - $3M could mean for us, but don't want the overhead associated with a traditional investor, nor to invest the time in raising. We get emails from 3 - 4 VCs per week, but never any alternative funding options like the ones you listed. CalmFund in particular could be worth exploring. I wish this space ("Tech Mittelstands"?) were better established.

Re: We need a middle class for startups

#215

Post by keppy »

di4na wrote: post #44

As someone that has been working hard in this domain, there is one major problem to this in software. Initial funding. There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. You used to raise that money through other local mittrlelstands. At the Masons lodge. At the local kiwanis or Rotary. But these have closed to young member decades ago…

This resonates with me. I have close friends who would be great co-founders, 3 out of 4 have moved in to camper trucks or vans. They work easy remote jobs and just enjoy life. We are mostly in our early 30s, worked in startups together over the years as engineers, sometimes as first or second hire. It's going to be quite hard to talk one of them in to being a principal co-founder at this point.

Re: We need a middle class for startups

#216

Post by coderholic »

hooande wrote: post #205
coderholic wrote: post #171

Earlier quoted context omitted.

No, I actually think it's much more closely aligned with a VC business than a regular business. It's just a more "regular business" approach towards it. That is, it's still serving a large market, creating a competative advantage (which "regular businesses" rarely have), has compounding growth - it just doesn't need to rush to make it all happen in a few years in a very high risk way.

what is the competitive advantage of ipinfo.io?

Data.

This is a really incredible article about the economics of data businesses, if you haven't seen it: https://pivotal.substack.com/p/economics-of-data-biz?s=r

Re: We need a middle class for startups

#218

Post by noodle »

philsnow wrote: post #189
coderholic wrote: post #103

Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…

This size of company and mindset seems pretty well served by MicroConf [0], which tends somewhat to the bootstrapping crowd but is very much not the "4 hour work week" crowd. ... Is that what you mean by "optimize for lifetyle"? "lifestyle business" is used as kind of epithet in some circles, as an "othering" term to identify people who don't work as hard as they do, but the MicroConf audience has a lot of people who…

Microconf is definitely more oriented towards smaller businesses than the previous commenter seems to be.

Re: We need a middle class for startups

#219

Post by rwalling »

noodle wrote: post #218
philsnow wrote: post #189

Earlier quoted context omitted.

This size of company and mindset seems pretty well served by MicroConf [0], which tends somewhat to the bootstrapping crowd but is very much not the "4 hour work week" crowd. ... Is that what you mean by "optimize for lifetyle"? "lifestyle business" is used as kind of epithet in some circles, as an "othering" term to identify people who don't work as hard as they do, but the MicroConf audience has a lot of people who…

Microconf is definitely more oriented towards smaller businesses than the previous commenter seems to be.

It depends on what you mean by "small." MicroConf focuses on SaaS founders who are, or aspire to run, 7- or 8-figure companies. We do also provide early stage education, but with the idea of folks building ambitious startups, though no in the traditional Silicon Valley Unicorn sense.

Re: We need a middle class for startups

#220

Post by fxtentacle »

bspear wrote: post #206
coderholic wrote: post #103

Totally agree with this article. It's not just about funding methods, but also playbooks for these types of businesses, and best practices. I've bootstrapped IPinfo.io to millions in revenue and a team of over 20 - so we're squarely in the "Middle class", and there's a tension between the "bootsrapper advice" (which mostly applies to optimizing for lifestyle and eliminating any risk) and "VC backed advice" (which mos…

> Promote employee stock ownership for American Mittelstands This is crucial. Many bootstrapped companies don't offer much stock ownership from employees. Yes, they can pay a good salary, but these employees are laying down the business brick by brick, but never see a dime of the upside. Mailchimp comes to mind. I'm sure there are others. This basically leaves stock ownership in VC-backed startups as a way to get ric…

Agree. In Germany, some Mittelstand companies do offer employee stock options which allow you to buy a certain quota of stocks per month at a pre-negotiated price which is typically much lower than market value. The idea is that over time, employees can choose to reinvest their salary into the company, thereby becoming partial owners.
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