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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

#371

Post by DeathArrow »

bombolo wrote: post #243
verdagon wrote: post #141

Earlier quoted context omitted.

I know nothing on this topic so perhaps a naive question but: what about the employees? I imagine part of their TC was in stock, so if I was a CEO I'd feel pretty motivated to reward my employees, who quite literally bet their family's income on me (and indirectly, their retirement and kids' college funds and inheritance etc.)

If you work at a startup and you expect the stocks to be worth anything in 10 years you're an idiot.

You mean FAANGS hired a lot of idiots when they started?

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

#372

Post by DeathArrow »

cx42net wrote: post #366

I so much agree with this article! I always had the same thinking about investment, Mostly the part where you don't control your company (or control it way less). And I would have kept it the same until we discussed with my co-founder about https://getfernand.com The reason that makes us consider VC funding would be for the network and the exposure. It would help us get in touch with other (big) founders with a broad…

Aren't there better strategies for PR and publicity than VC financing?

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

#373

Post by DeathArrow »

jacquesm wrote: post #336
DeathArrow wrote: post #300

Earlier quoted context omitted.

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.

I am glad to hear that! So hard work pays out if you have determination.

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

#374

Post by DeathArrow »

sfink wrote: post #268
DeathArrow wrote: post #208

Looking at the author's bussineses website, here's a sales pitch for potential new employee: >OpenRegulatory is different. It's 100% boostrapped. Ironically, having no investors (and less money) opens up interesting opportunities: We can serve customers who don't have a lot of money, like, Healthcare startups. And we can build software which only solves a tiny problem, and solves it well. While eating your own dog fo…

> future employees most likely won't be pure idealists who will take a lower pay out of the satisfaction that their work helped others If you rewrite that to "a much smaller percentage of prospective future employees won't be pure idealists..." then I would agree. But it's about the pool being smaller, and in fact small enough that you risk not being able to find anybody, but the fact that 95% of people are not going…

Of course you are right. I didn't mean that they positioned themselves out of the market, just that it will be harder for them to find employees.

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

#375

Post by JodieLeal »

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…

[dead]

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

#376

Post by DeathArrow »

berniedurfee wrote: post #291
sfink wrote: post #268

Earlier quoted context omitted.

> future employees most likely won't be pure idealists who will take a lower pay out of the satisfaction that their work helped others If you rewrite that to "a much smaller percentage of prospective future employees won't be pure idealists..." then I would agree. But it's about the pool being smaller, and in fact small enough that you risk not being able to find anybody, but the fact that 95% of people are not going…

I was going to say exactly this. There are many talented engineers for whom compensation is not their primary motivation. Working on interesting problems, working in specific domains or working for a mission-based company trying to make the world a little better are all strong motivators. I suppose the overall pool of available candidates is smaller, but I don’t think the pool of candidates with strong skills is nece…

>I was going to say exactly this. There are many talented engineers for whom compensation is not their primary motivation.

I presume those engineers and their families already solved some problems like having what to eat and having where to sleep, so they have the luxury to pursue other objectives.

I also presume only a small number of engineers are in that position.

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

#377

Post by cx42net »

DeathArrow wrote: post #372
cx42net wrote: post #366

I so much agree with this article! I always had the same thinking about investment, Mostly the part where you don't control your company (or control it way less). And I would have kept it the same until we discussed with my co-founder about https://getfernand.com The reason that makes us consider VC funding would be for the network and the exposure. It would help us get in touch with other (big) founders with a broad…

Aren't there better strategies for PR and publicity than VC financing?

We're definitely thinking of anything that could help. It's also common that funded companies appear more serious and long-term oriented, which can help. (It goes along with what is written in the article, as the "successful unicorn raises money" while it might no be the case, but the reality vs what people believe is often different). Since, for us, it wouldn't be because we aren't profitable and desperately need money, having VC money could help, or not ... :D

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

#378

Post by XCabbage »

jaysinn_420 wrote: post #133
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…

Because as part of the VC investment, they are also taking positions on the board of your company. Maybe enough of a position that they can oust you if you don't do as they "suggest". Also, one round of funding is rarely the end of it, and if you are demonstrating that you are not playing their game and trying to become a Unicorn, then you will not get a second round of funding. Why do you think VC control is bullshi…

Hmm. I can believe this happens, but definitely not all VC investors take board seats. In fact I'm not aware of this having happened at any of the 5 startups I've worked for in my career, despite having at least partial knowledge of who made up the board of 3 of them (for at least 1 of whom I know the entire board membership and can say with certainty there were no VC plants on it).

Would be interested in stats on how normal this is or information about VCs' policies on it.

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

#379

Post by bombolo »

DeathArrow wrote: post #371
bombolo wrote: post #243

Earlier quoted context omitted.

If you work at a startup and you expect the stocks to be worth anything in 10 years you're an idiot.

You mean FAANGS hired a lot of idiots when they started?

For 1 FAANGS there are millions of failed ones, and you don't know what'll be.

So if the salary isn't decent, better to refuse the job rather than hope the stocks will eventually compensate you for the missed salary.

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

#380

Post by kijin »

jaysinn_420 wrote: post #133
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…

Because as part of the VC investment, they are also taking positions on the board of your company. Maybe enough of a position that they can oust you if you don't do as they "suggest". Also, one round of funding is rarely the end of it, and if you are demonstrating that you are not playing their game and trying to become a Unicorn, then you will not get a second round of funding. Why do you think VC control is bullshi…

> then you will not get a second round of funding.

A couple of years ago when the VCs were throwing money around like crazy, I had this bright idea that perhaps all I'm ever going to need is a single round of funding. Use the money to put the company on a modestly profitable track, cut the head count, cut the cloud costs, eliminate the office, and cruise along indefinitely. Just like passive income, but on a corporate scale.

The reason this doesn't work is that the market changes very, very quickly in our industry. You can't just put your app on cruise control and expect a consistent ARR forever. As soon as some other VC finds out that you aren't making an "optimal" use of your money, they'll invest in a competitor who will eat you alive for breakfast.

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