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

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

#161

Post by hotpotamus »

Kye wrote: post #65
blibble wrote: post #52

Earlier quoted context omitted.

> You’re so right! It was an absolute disaster for us. Never do it!!!!! has cloudflare ever had a profitable quarter? I could give away my investor's $10 bills all day too

On a skim, they seem to be losing money the same way Amazon did. It's marginal, with a purpose, and could be turned around by trying to.

Would any business leader say anything like, "we have no idea if we'll ever be profitable, or what we would need to do to get there?". Everyone made fun of Softbank's presentation on Wework[0], but it just looked to me like a simplified outline of nearly every over-confident business presentation I've seen in my life.

[0]https://nymag.com/intelligencer/2019/11/softbanks-insane-pre...

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

#162

Post by DethNinja »

dinp wrote: post #92
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,…

> 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. Would you be willing to give a few more details about what happened? I'm not interested in the identities of the companies or people, just interested in a high level overview of what happened. We don't hear…

- Hired a journalist on some mid-size news company to tarnish the company’s reputation. I never imagined they would bother to do this, but I was wrong.

- Used an APT for hire but I don’t believe they did succeed , still it is quite insane. I was lucky enough to catch a targeted rootkit but issue was quickly remediated. I’ll eventually find a consultant to analyse the Win 11 rootkit. They were definitely not script kiddies.

- Some black hat SEO and shills for hire, but that is expected.

I’m really surprised by hired journalist / APT aspect. Something I never imagined would happen, but apparently it does happen.

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

#163

Post by eastdakota »

j45 wrote: post #136
eastdakota wrote: post #130

Earlier quoted context omitted.

You still eventually need to return money to your private market investors at some point. So that just pushes the outcomes out later. Or, again, in the super rare case that you’re generating so much case that you can pay investors back at a rate of return they’re happy with with dividended cash flows.

I meant the ‘super rare’ case. It’s not so rare in some industries like oil and gas, etc where cashflow is the purpose of the work. Add software that does what nothing has before.. and the table turns.

Agree.

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

#165

Post by api »

VCs are not all created equal. Some are better than others. Some like to stick to a company’s vision unless things are clearly not working while others don’t care and will make you flail around. Some understand and specialize in a given market and others just throw spaghetti at the wall. Some are decent people and some are assholes.

Terms matter a lot too. If you raise a ton or raise on a super high multiple you will have to show cocaine growth to make that make sense. If you raise sanely the expectations are going to be more sane. (Lots of companies raised overstuffed rounds in 2021 to 2022 at batshit multiples. Expect some carnage soon.)

That being said it does put you on a certain track. If you don’t have something that can show VC scale growth, you shouldn’t take VC money. As with all other things know what you are getting into.

Right now I would consider VC for B2B but not B2C. There are no VC scale B2C business models right now that do not involve exploiting people. B2B can be done in much more above board ways because businesses will just pay for things directly. You will have to build a sales org though.

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

#166

Post by exabrial »

Apologies and I don’t mean this as a snarky question, but I have been asked to be a part of a lot of start ups, because you know “I can write an app”.

All of the offers have just had equity is compensation. I’ve dodged the many of bullet, but I definitely would’ve taken cold hard cash.

My advice to a lot of them was "Get funding, I'll come work on the idea". How does HN propose they do that instead?

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

#167

Post by Alex3917 »

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.

> But no less unusual than building a successful company to begin with.

Statistically, companies that raise venture capital are vastly less likely to succeed than those that are bootstrapped.

Think about it this way: from the perspective of VCs, the most successful apps of the iOS era were Uber and AirBnB. But from the perspective of entrepreneurs, the most successful app of the iOS era was the Flashlight app.

Which one do you think was easier to build?

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

#168

Post by DethNinja »

chris_j wrote: post #24
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,…

What does SSBC mean in this context?

Sorry, it was meant to be USSR (Union of Soviet Socialist Republics).

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

#169

Post by eastdakota »

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...

Thank you for posting. We could never have built Cloudflare without Lee. His disease is incredibly tragic and in many ways literally unimaginable. Today he is still alive but has continued to cognitively decline. I am happy that Cloudflare’s success has ensured he has the support he needs. I miss having him as a cofounder and friend every day.

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

#170

Post by JumpCrisscross »

dabeeeenster wrote: post #35
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…

> While there are plenty of VC horror stories, there are fairytales as well. What's the ratio, though??? 10/1? 20/1? 50/1?

> What's the ratio, though??? 10/1? 20/1? 50/1?

About the same as the ratio of successes to failures in a VC portfolio.

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