Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Don't Take VC Funding – It Will Destroy Your Company

eidel.io

Post reply on HN
Print view View original

101–110 of 398 posts

Re: Don't Take VC Funding – It Will Destroy Your Company

#101

Post by boppo1 »

jorvi wrote: post #31
DethNinja wrote: post #14

On the other hand, my first self-funded startup got destroyed by a VC funded venture. They had a worse product but far better marketing and they used every dirty trick in book to tarnish my company’s reputation. There is no way I’ll start another startup unless I receive backing from a huge VC company. Current economic paradigm is more similar to centralised/controlled economies of USSR. Thus if you want to succeed,…

> central banks I think you mean big banks. Aside from maybe a line of communication due to their financial size, VCs have very little to do with the Fed or ECB.

Well, directly, no. But QE and ZIRP were pretty fundamental in their current ubiquity.

Re: Don't Take VC Funding – It Will Destroy Your Company

#102

Post by tptacek »

version_five wrote: post #27

I recognize there must be good VCs around, but so much of what you see looks really like a kid's game to me. So many douchy people with the same cliche advice acting like they're visionaries. And a certain kind of "lifestyle" "founder" fawning all over them. Starting a company has been commoditized and turned into an internship for smart kids. I know it's not all like this but for anyone seriously interested in doing…

It's an availability bias. You're noticing the worst founders and VCs, because the worst of them work to be noticed (some good ones, too, but all the worst ones). But as long as you understand the modality, it's also fallacious to write off a whole financing model just because its douchiest practitioners rub you the wrong way. Remember Sturgeon's Law!

Re: Don't Take VC Funding – It Will Destroy Your Company

#103

Post by anonzzzies »

andsoitis wrote: post #98
anonzzzies wrote: post #44

Earlier quoted context omitted.

OR (as you say, but many miss) you do not care about being the market leader. I just want to have a nice company with nice people, no stress and making millions for all to live. I don’t need vc money, stress, be the market leader or ‘be faster than the competition’. A LOT of services or products you can make a long term (decades) money with like this. I don’t need more than 10m euros in my life, nor do my colleagues…

> nor do my colleagues and our clients are happy Your colleagues can get better jobs elsewhere, so you are constantly competing for talent. Your customers can get a better deal, or product or service from one of your competitors, so you’re in constant competition with them too.

But I am in the EU and we all do better money than what I hear here what most American devs make. But sure; my colleagues just will never leave here so it would have to be better paid, many vacations, no stress, wfh and more money.

Re: Don't Take VC Funding – It Will Destroy Your Company

#104

Post by duxup »

raesene9 wrote: post #32

The article has a lot of interesting points, but seems to miss out on one of the main reasons (IMO) that startups take funding, which is to grow faster than (or as fast as) their competition. Unless you're lucky enough to be in a market segment without competition, you need to keep an eye on what your competitors are up to. If they can expand faster, add features faster and get more customers than you, it damages you…

I agree with what you said.

> which is to grow faster than (or as fast as) their competition

But I also work for a privately held company and there has been a whole series of companies pop up outgrow us … then fold … It’s like a parade of VC failures. They weren't bad people or bad ideas, they just had so little time and sometimes were so focused on their one cool trick, that was it.

Velocity also means velocity to failure, and arguably less time to learn from mistakes or just make money. I've seen a few who didn't even have time to learn.

That might work for some ventures, much less for others. Just gotta know what you're signing up for.

Re: Don't Take VC Funding – It Will Destroy Your Company

#105

Post by detourdog »

cheeseblubber wrote: post #43

The person ultimately responsible for the success of your company is yourself and most likely you'll fail regardless of VCs. I take issues with some of the second order effects: 1. "Because your goal is to sell the company later, it has to grow." You don't have to hire just because you take VC money. You should hire at the right rate. 2. "You’ll be spending much of your time on finding the next investors". If you man…

That list sounds right I think their is nuance for this one

>3. "You have to focus on large markets with many (or large) customers" >Yes you shouldn't take VC money if you don't want to go big eventually.

One can want to grow to a point of organically understanding the problem domain before going big.

The VC and the company may differ on the short term but agree on the long term.

Which is a distraction. If the company is doing everything else suggested and the VC pounds on this issue.

I would think the ideal time frame for the use of VC funds is probably about 2 years. If the company can't make productive use of the funds and return it in 2 years the timing of the funding is bad. If funding is needed for some large capital expenditure that will depreciate over decades should have existing revenue support.

I think Wall Street has created a different industry that is a business model of its own fantasy.

Re: Don't Take VC Funding – It Will Destroy Your Company

#106

Post by jacquesm »

metadat wrote: post #46
eastdakota wrote: post #22

You’re so right! It was an absolute disaster for us. Never do it!!!!! Kidding aside, it is true that raising money from VCs puts you on a very defined path with really only three potential outcomes: 1) failure, 2) sell to acquirer, or 3) go public. There are a small handful of exceptions, mostly for companies that throw off massive amounts of cash, but, realistically, those are the outcomes. If you don’t like any of…

Tangential: I'll never forget the story of Lee. One of the few times I've I've shed so many tears over someone I never met. https://www.wired.com/story/lee-holloway-devastating-decline...

Holy crap that's a heavy story.

Re: Don't Take VC Funding – It Will Destroy Your Company

#107

Post by 71a54xd »

onion2k wrote: post #68
eastdakota wrote: post #22

You’re so right! It was an absolute disaster for us. Never do it!!!!! Kidding aside, it is true that raising money from VCs puts you on a very defined path with really only three potential outcomes: 1) failure, 2) sell to acquirer, or 3) go public. There are a small handful of exceptions, mostly for companies that throw off massive amounts of cash, but, realistically, those are the outcomes. If you don’t like any of…

According to Statista there were 16,464 VC deals signed in 2022. There were 181 IPOs in that year. The most IPOs in a year ever is 1,035. Obviously the two aren't directly comparable, but the point I'm getting at is that an IPO exit for any company is really unusual. If you found a company and take on VC funding your exit event is much more likely to be getting acquired if you don't fail. It does happen, and deserved…

There are plenty of other ways to exit that don't involve an IPO. Acquisition, selling shares on secondary markets or privately etc...

Doing VC the wrong way can make your life hell, but taking all the risk yourself and bootstrapping is in its own right a special kind of hell if you're not careful.

IMHO, it's all about time horizon. Working on a startup for 3-4 years without a clear product market fit or some kind of exit is a waste of time unless you're a Jensen (which most of us aren't anyways).

Re: Don't Take VC Funding – It Will Destroy Your Company

#109

Post by adventured »

jacquesm wrote: post #74
onion2k wrote: post #68

Earlier quoted context omitted.

According to Statista there were 16,464 VC deals signed in 2022. There were 181 IPOs in that year. The most IPOs in a year ever is 1,035. Obviously the two aren't directly comparable, but the point I'm getting at is that an IPO exit for any company is really unusual. If you found a company and take on VC funding your exit event is much more likely to be getting acquired if you don't fail. It does happen, and deserved…

Of course it is unusual. But no less unusual than building a successful company to begin with. What's normal is failure.

Failure is definitely the commonality. The BLS reports typically that 1/2 of all new businesses (in the US) will formally fail within five years. One can safely guess that at least half of those remaining are something between zombies and hanging on by a thread. 1/4 or fewer will make it 15 years or more. And of course it varies by sector, restaurants notoriously have an exceptionally high failure rate. For all businesses the failure rate is around one in five in the first year [0]; for restaurants the failure rate is ~60% in the first year, and ~80% fail within five years.

[0] And again, don't forget to assume the figures are even higher because the figures will never fully account for zombie businesses or quasi-zombies and the equivalent.

Re: Don't Take VC Funding – It Will Destroy Your Company

#110

Post by jacquesm »

tptacek wrote: post #102
version_five wrote: post #27

I recognize there must be good VCs around, but so much of what you see looks really like a kid's game to me. So many douchy people with the same cliche advice acting like they're visionaries. And a certain kind of "lifestyle" "founder" fawning all over them. Starting a company has been commoditized and turned into an internship for smart kids. I know it's not all like this but for anyone seriously interested in doing…

It's an availability bias. You're noticing the worst founders and VCs, because the worst of them work to be noticed (some good ones, too, but all the worst ones). But as long as you understand the modality, it's also fallacious to write off a whole financing model just because its douchiest practitioners rub you the wrong way. Remember Sturgeon's Law!

Exactly, if it bleeds it leads and boring VC stories (of which there are many) don't make for good headlines.
Post reply on HN