301–310 of 320 posts
From an investor side, what I see is that I'd have to keep my risk the same (these "Mittelstands" have the same chance of succeeding as any other VC backed company) while drastically reducing returns. Why would anyone go for this?
Earlier quoted context omitted.
the "-stand" comes from the German word for "estate" in the medieval sense [1]. It's typically translated with small- and medium-sized enterprises, which is also the lingo used at EU level. As you said, it's a mass noun, so if you want to refer to an individual enterprise belonging to the "Mittelstand," you'd effectively use it as an adjective and speak of e.g. a Mittlestand firm. [1]: https://en.wikipedia.org/wiki/E…
How would you call a person belonging to the Mittelstand in German? In another Germanic language, Dutch, you would say "middenstander" (or plural"middenstanders"), derived from "middenstand".
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…
Perform better towards what end?
It’s a PR problem. I think it matters the name we use to call them and how they are interpreted by general public. Currently we call them like IndieHackers, bootstrapped startup, life style business. All not fancy as “unicorn” it is. We need a new PR that makes this kind of business cool for the general public. In these day if you have a profitable bootstrapped business (<1M$) people say that you should raise capital…
What's wrong with "small business" ?
Businesses that are shooting for the "middle class" (say, less than $50M in earnings at their peak) are of course possible and healthy and good for the economy. What's missing in this analysis is that those businesses are not going to be "founder-friendly" the way that the prototypical YC-seed-stage startup is. To use the article's definitions: * "Bootstrapped from zero" is, of course, founder-friendly - no investors…
Even without this restriction the common definition in Germany is the equivalent of SME, i.e. less than 500 employees and less than €50M annual revenue. This includes some 95% of companies in Germany.
So unless he's asking VCs to invest without demanding equity or any amount of control that would interfere with the will of the family owners of the business and for the goal to be capped at €50M annual revenue, I don't see how "Mittelstand" is the right concept to use.
FWIW the resilience of (traditional, i.e. older) Mittelstand companies is likely more related to the same factors as the resilience of worker co-ops (which likewise tend to be growth-limited but stable across economical crises): the owners have a personal (often generational) stake in the company and the workers are assumed to be in it for the long run rather than being laid off at the next opportunity. Plus of course the owners' fortunes being so tightly coupled to the well-being of the company means that they're able and willing to inject their own capital as necessary to weather crises.
Businesses that are shooting for the "middle class" (say, less than $50M in earnings at their peak) are of course possible and healthy and good for the economy. What's missing in this analysis is that those businesses are not going to be "founder-friendly" the way that the prototypical YC-seed-stage startup is. To use the article's definitions: * "Bootstrapped from zero" is, of course, founder-friendly - no investors…
I think this would be much more healthy than the multi-phase aim-for-the-moon approach everybody takes today. And quite likely brings better results for both the investor and the founders. If the business is already on the path to a small profitability, it is much more likely to get into large profitability than something that wasn't even started. And much less likely to get into a total loss. Your points also seem a…
That's not the right metric. An investment balances risk and reward. If the reward of the less risky business is too low, then there will be less capital. If I guarantee your money back, and also zero growth (I'll just hold the money then return it), no one would invest - not enough reward.
Next, you have to outperform other risk/reward outcomes, such as bond or stocks or real estate, etc. Otherwise investors should (and likely will) put their money elsewhere.
For some market to get significant investment, it has to do well on the risk/reward frontier compared to alternatives.
Those reasons are why there is not massive VC type funds investing in companies like these. It's not that VCs are stupid, or investors are stupid. It's that the risk/reward for such companies has to compete against all other options for that capital.
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…
Earlier quoted context omitted.
Tracy here from TinySeed, thanks for linking to our thesis! Point of clarification: we don't do profit-sharing. Instead, we are equity owners. So when a company gets to the point of success where they want to take money off the table, they can issue dividends (and TinySeed get's a pro-rata amount of those dividends). I find this is one of our most unique points and aligns the incentives of the founder with TinySeed.…
On the thesis page it makes it sound like only B2B are considered, but here you stated primarily. Is this just a mis-wording here, or is it more that the focus is B2B but you won't outright deny a B2C company, if you think they have a good idea?
Correct — also, most B2C companies have, or will build, a B2B component due to the higher contract prices they allow.
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…
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 is an English-speaking board where people have individualistic preferences so it isn't surprising that people default to an answer from private capital, but in Europe the government does this, and it works. Starting a company in the Netherlands was a breeze, and the tax breaks are very generous in the first few years.
I went to talk to our local chamber of commerce and industry, which handle navigating the subsidies, and their answer was "how many local jobs are you creating ? Just you for now ? Then we cannot help you, come back when you create a dozen in the region"