Live data from Hacker News

Raise less, build more

trohan.com

61–70 of 73 posts

Re: Raise less, build more

#61
post #50

Earlier quoted context omitted.

I cofounded a robotics startup a decade ago and one point we needed cash to keep going. We received 2 offers: 1. VC offer of a couple million dollars for significant share and crazy expectations about growth and scaling up and short timelines etc. 2. Half a million from a private investor for a reasonable share ask who insisted we just kept doing what we were doing. We opted for 2 and have been running the company su…

I work for a company with founders that have a similar philosophy, I'm paid reasonably and really like my job, but one thing that bugs me is that I don't see a path towards making more money in the long run. My equity will likely be forever worthless, or a small windfall in the longshot event of an exit. I wonder if there's a path as an early employee that gets me further ahead than a nice job with decent work life b…

Ask for more stock/promotions/pay. You won't get what you don't ask for. As an early employee, you have value in your company knowledge.

Otherwise, I'd probably just leave for a company with better pay and better work/life balance.

I've done the startup rodeo before. Worked several nights till 1am. Once worked till 4:30am, slept 3 hours and then right back to the office. After 18 months at that job, badly burnt-out, I was rewarded with layoff and had to find a new job. Never again.

It's much less stressful to just get a higher paying job where you only have to work 6-8 hours a day, with maybe an on-call rotation.

Re: Raise less, build more

#62

Earlier quoted context omitted.

> Many (most?) of these companies I've seen could have started with a smaller fit. That could test the market theory for cheap (Lean) - cheap in terms of time and money. If the fit is good one ends up with a small business with medium good margin - and a way better idea of what the scaled up universe looks like. One model that also works before that phase but that's eschewed is consulting in the sector founders want…

How would you start consulting in a sector you have no experience or proven track record with? I can’t see how this advice would apply to say, Dropbox, Zalando, Stripe or any other success story that comes to mind.

I imagine most consulting is operation specific rather than sector specific. For example, the experience of raising a few rounds of VC money would provide opportunity for financial consulting; the experience of hiring 50 engineers for HR consulting; or spending a few million on ads for marketing consulting.

Disclaimer - I have no consulting experience.

Re: Raise less, build more

#63
post #40

> A large, poorly performing fund (1.5x) pays its GPs dramatically more than a smaller, higher performing (4x) fund. Stunningly, the large fund GPs would earn dramatically more on simple management fees alone (i.e. even if the fund was 0x, the GPs earn $200M). Granted, the $1B fund may have more GPs, but the payout differential is eye opening. I've been re-reading this for the last 10 minutes and this is not an expla…

High return investment opportunities are limited in number and amount of cash which can be deployed into them. As cash under management grows a higher percentage of it gets invested into lower return investment opportunities which are better than risk-free rate, reducing the overall performance of the fund (relative, not absolute). Hypothetical: consider 100 startups each looking for $10m investment. One will return…

>High return investment opportunities are limited in number and amount of cash which can be deployed into them. As cash under management grows a higher percentage of it gets invested into lower return investment opportunities which are better than risk-free rate, reducing the overall performance of the fund (relative, not absolute).

Larger funds supposedly being more risk averse COULD be a reason for less yield but it might as well on average yield MORE. All you said is just hypothetical. And again, the article frames it as an incentives issue, which it isn't.

>Not really fair to compare performance between funds with such dramatic differences in cash under management IMO.

This literally makes no sense at all. OF COURSE you can compare them and you should. If I have a billion dollars to invest I could invest it all in one fund or I could spread it out of a thousand small funds. It makes no sense to NOT compare them. Is a dollar from a small fund's return different than a large funds? No.

Re: Raise less, build more

#64

I was caught up in the scale mentality and corrected by a friend who is an excellent CFO. We looked at the finances for our company, and the way he laid it out was that we only need a very few number of customers, relative to market size, to be profitable. That's default alive. Ignore growth beyond that number, just get to that number. Then look at growth past that. I had modelled growth directly, and because we're i…

I cofounded a robotics startup a decade ago and one point we needed cash to keep going. We received 2 offers: 1. VC offer of a couple million dollars for significant share and crazy expectations about growth and scaling up and short timelines etc. 2. Half a million from a private investor for a reasonable share ask who insisted we just kept doing what we were doing. We opted for 2 and have been running the company su…

I did the same, although we took the other path, figuring we'd learn faster by going all in. We learned that the slower path is likely more appropriate for most hardware based robotic startups.

We had fantastically supportive VCs, and raised nearly 10 million, but some things just don't go faster with more money, especially selling to slow moving industrial buyers. We stopped trading a few years ago and helped our employees find other roles while we entered cockroach mode to try and revive it, without success.

I'm happy to share my learnings with anyone who may benefit. It was still a wonderful experience, and worth it just for the people we met along the way.

Re: Raise less, build more

#65
post #35

Earlier quoted context omitted.

Wouldn't getting 50% on a billion be a harder problem than getting 300% on 100MM.

> Wouldn't getting 50% on a billion be a harder problem than getting 300% on 100MM. Seems unlikely. Does whatever you were doing with the 100MM really scale that badly?

You found 5 unicorns. Can it really be that hard to find 45 more???

Re: Raise less, build more

#66

Earlier quoted context omitted.

> Many (most?) of these companies I've seen could have started with a smaller fit. That could test the market theory for cheap (Lean) - cheap in terms of time and money. If the fit is good one ends up with a small business with medium good margin - and a way better idea of what the scaled up universe looks like. One model that also works before that phase but that's eschewed is consulting in the sector founders want…

How would you start consulting in a sector you have no experience or proven track record with? I can’t see how this advice would apply to say, Dropbox, Zalando, Stripe or any other success story that comes to mind.

>How would you start consulting in a sector you have no experience or proven track record with?

Like billions of people, since time immemorial, have started at their first job ever. How would they start at a job in a sector they have no experience or proven track record with? That argument cuts deeper with directly creating a product with no experience or proven track record.

The point of my original reply wasn't that of mutual exclusion, it was that of "de-risking", and a lot of the work is about reducing risk. Heck many if not most questions investors ask are about figuring out risks and their types. What's your story? (i.e: expertise and relevance of why you think you might be onto something or right about something or seeing a pattern, etc) Interviews? Do you have traction? Sales? Sign-ups? Usage? Growth rate? Churn?

Many technical people start coding right away because it's easier for them, but that's precisely why coding might have to come later: the technical risk is lower for an engineer than the other types of risk, so they should check those first. Is that a problem people know is a problem in the first place? That means prospects need "information/education", which impacts on your marketing and on your sales process (instantly becomes high-touch). It could obviously mean you're creating a whole new market, and if you win, you could win big, but it adds risk. Have they spent spent money trying to fix it? How did it go?

You can start building the product right away, then hope people know about it, love it, and buy it. Knowing people people have fallen off buildings and survived will not entice me to try my luck.

Even in consulting, this is useful. When the founder and CTO left, ~65% of employees left and I took over. I killed about a dozen projects we were involved in that were not generating revenue and were only a distraction. I was a contributor in practically all of them and, for some, was the main person (i.e: 70% of the code, and support, client relation, invoicing, ensuring we get the check, and you bet cashing it). The first thing I pushed for was revamping the very way we were doing "consulting" starting with qualifying prospects before anything is done, then understanding the problem before a word describing a potential solution is uttered, and it took as long as it needed until we got the problem down, and iteratively scoping, managing expectations, being aligned on what "success looked like" and pushing for all the stakeholders to be involved (execs/economic buyers and the users, including those who were adamantly against our "intervention" and understanding all the politics of whichever enterprise client we were serving), extracting a set of features, prioritizing for impact and usefulness, etc. and then and only then, we'd start building. All these steps were carried out while explaining the rationale of thought processes so the team could understand the whole process (and eventually each member would be able to operate on the whole life-cycle, create a company, build product, etc). Then extracting all this experience into a scoping document we'd send a prospective client so they do this effort, as opposed to doing ten or more meetings to come up with this (and our clients thanked us, saying that that document, which was a set of questions, really helped them pin-point their own problem and clarify what it is they were after). Then, the second mutation (the first was overhauling our consulting process), was product.

The "valuation" of the company was multiplied by a very large number, people turnover was ridiculously reduced, there was almost no-one leaving, and the service revenue generated in one year with mainly two people surpassed the almost 20 people, combined multi-year revenue since company creation.

There's a famous Antoine de Saint-Exupéry quote that guides this effort: "Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away."

PS: Excuse me for the muddle-head reply, I have something cooking.

Re: Raise less, build more

#67
post #9

In observing 100s of deals, advisor to dozens of early stage businesses I'd add: So many folk show up asking to raise because they only see how their company can work "at scale". They have forgotten to do things that don't scale. It's like they skip problem-market fit, jump way past MVP (but still call it that) and almost have to raise - then try to force the market to exist. Many (most?) of these companies I've seen…

>Like, do you want a 0.01% chance to raise money or a 2% chance to build a business that keeps you and a few others well paid and perhaps out of the rat-race.

I don't do startups to have a job, I do startups to do the hard things in an attempt to build something groundbreaking.

Presenting "raise money" vs "have a job" is a false dichotomy.

Re: Raise less, build more

#68
post #35

Earlier quoted context omitted.

> Wouldn't getting 50% on a billion be a harder problem than getting 300% on 100MM. Seems unlikely. Does whatever you were doing with the 100MM really scale that badly?

You found 5 unicorns. Can it really be that hard to find 45 more???

You've only gotta find 3 more to hit that 50%, and you get 9x as many tries as it took you to find the original 5. I like those odds, shrug.

Re: Raise less, build more

#69
post #68

Earlier quoted context omitted.

You found 5 unicorns. Can it really be that hard to find 45 more???

You've only gotta find 3 more to hit that 50%, and you get 9x as many tries as it took you to find the original 5. I like those odds, shrug.

Ahh I did the math wrong. I agree now the initial premise is a little silly. Although, don't discount that it will take you 9x the amount of time to spend those resources. So this is going from a 1 year search to a 9 year search. Or, you're building a team and trusting other people, which scales better long term, but not in the short term.

Re: Raise less, build more

#70

Earlier quoted context omitted.

How would you start consulting in a sector you have no experience or proven track record with? I can’t see how this advice would apply to say, Dropbox, Zalando, Stripe or any other success story that comes to mind.

> How would you start consulting in a sector you have no experience or proven track record with? Like billions of people, since time immemorial, have started at their first job ever. How would they start at a job in a sector they have no experience or proven track record with? That argument cuts deeper with directly creating a product with no experience or proven track record. The point of my original reply wasn't th…

Thanks for the insights, that’s an interesting story. I was thinking of becoming an independent consultant when you actually meant joining a consultancy business. That does sound like a great shortcut to understand a new industry.
Post reply on HN