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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

#331

Post by tptacek »

vidarh wrote: post #315
tptacek wrote: post #233

Earlier quoted context omitted.

Every time you raise a round, the outcome you're shooting for is magnified. If you're raising an A round, you're not getting acquired after your seed; you're rolling the dice on getting a much better outcome. If you're raising a B round, you've got some facsimile of product-market fit, and you've decided to take the company to the point where the only "successful" outcomes are denominated in hundreds of millions of d…

It gets even worse, because a proportion of those raising another round are doing it because they're failing to grow fast enough, and are grabbing more cash before it's too late. So you get a mix on those rolling the dice one more time in the hope of that next 10x, and those unable to get an exit, and unable to earn enough, but able to convince investors one more time that this round will pay off, and who will rarely…

Right, but that blows up the causality of the stat proposed above.

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

#332

Post by adhesive_wombat »

buzzscale wrote: post #160
adhesive_wombat wrote: post #33

Earlier quoted context omitted.

And some companies are only profitable as-run for the shareholders, temporarily, despite being theoretically sound long-term businesses. Take a profitable company, cut costs to bone, arbitrage off all the goodwill generated by an erstwhile decent product, strip assets, pay executive salaries, bonuses and dividends on the "stunning" short term profits and flit before the emptied husk crashes down on top of the employe…

Fascinating. Seems like similar issue risk management issue to silicon valley bank where they didn't account for a jump in interest rates and increase in inflation.

Calling such shameless pocket-stuffing a "risk management issue" seems to rather be like calling a drink-driving accident that kills a pedestrian an "unforeseen kinetic event".

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

#333

Post by dustingetz »

Centigonal wrote: post #143
XCabbage wrote: post #113

> VC Funding Means You Will Sell Your Company > Remember when I wrote earlier that the VC dudes definition of “making everyone happy” after investing in your company doesn’t mean making it profitable? So now you might ask: Okay, so what do my VC investors want? ... They want to make a lot more money. > ... > Now, all of this might be none of your business, you might think. But it is! Because now the inevitable conseq…

Many VCs take board seats, allowing them to replace the CEO

also google "Series A Exit Clause"

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

#334

Post by SkyPuncher »

Hermitian909 wrote: post #266
tptacek wrote: post #94

Earlier quoted context omitted.

(1) SOC2 is somewhere between $10,000 and $20,000 if you do it cheap. (2) That's a dollar amount that most bootstrappers can swing. (3) Critically, you don't do SOC2 until you have a critical mass of purchases requiring it. (4) Many (most?) of your customers, especially your early customers, won't require it, and/or will have alternate paths for companies without a SOC2 attestation. (5) When you finally do hit the bi…

SOC2 is also waaaay less expensive on the development side if you do just a little upfront development in dev tooling: logging, backups, encryption in transit and at rest, tagging data with sensitivity levels, IAM policies, and CI. I've seen a few founders who invested a few weekends pre-funding into this sort of tooling get to SOC2 and have almost no development costs (still have to document those processes though).

SOC2’s cost is primarily just the branding and audit.

Most of the controls are easy ti meet if you follow any sort of best practices.

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

#335

Post by qeternity »

jefftk wrote: post #222
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…

Many startups raise multiple rounds, so I think you're double counting? Don't you need to either divide 16,464 by the typical number of funding rounds or only count, say, series As?

Most startups don't raise multiple rounds in the same year.

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

#336

Post by jacquesm »

DeathArrow wrote: post #300
jacquesm wrote: post #198

Earlier quoted context omitted.

You're right that in numbers of survivors there bootstrapped ones are going to outnumber the VC ones. But in terms of total # of employees, total $ of turnover and profits I would expect it to be the reverse. But for any individual founder, if you want to aim for 'successful enough to be relatively wealthy and worry free' then 'bootstrapped' is the way to go. If you aim for an outsize success, wealth for the next N g…

Seeing that you wrote the article 12 years ago, I am curious how did it work for you. Did you make it to the top of the mountain?

Well over and beyond my wildest expectations.

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

#337

Post by mwint »

qeternity wrote: post #335
jefftk wrote: post #222

Earlier quoted context omitted.

Many startups raise multiple rounds, so I think you're double counting? Don't you need to either divide 16,464 by the typical number of funding rounds or only count, say, series As?

Most startups don't raise multiple rounds in the same year.

They also don’t IPO more than once, usually.

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

#338

Post by jacquesm »

DeathArrow wrote: post #305
jacquesm wrote: post #273

Earlier quoted context omitted.

I would expect it to be close to 100%. The difference between the 80% and the 100% is the ones that grow in spite of and sometimes because of their problems. Every business will run into trouble, sooner or later. In fact I don't recall a year in the past decade without some kind of crisis that needed fixing. Some self inflicted, some just circumstance and some outside malice. Never a dull moment if you run a small co…

>Every business will run into trouble, sooner or later. Even large businesses that have comfortable cushions and safety nets?

Yes. But they are better positioned to deal with it and will likely survive. But even the IBMs, HPs and Boeings of this world are not immune.

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

#339

Post by jefftk »

qeternity wrote: post #335
jefftk wrote: post #222

Earlier quoted context omitted.

Many startups raise multiple rounds, so I think you're double counting? Don't you need to either divide 16,464 by the typical number of funding rounds or only count, say, series As?

Most startups don't raise multiple rounds in the same year.

I don't think that matters?

(An extreme example to prime your intuition: imagine that there are one IPO and 10 VC deals annually. If every startup raises money annually and there are 10 startups at any one time, then every funded startup eventually IPOs.)

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