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Camera+ turned down acquisition offers and says no to VC money

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Re: Camera+ turned down acquisition offers and says no to VC money

#31

Post by jsprinkles »

miles wrote: post #30
jsprinkles wrote: post #28

Earlier quoted context omitted.

That means DHH is doing well, and has little to do with 37signals.

Sorry to post this here, but jsprinkles' profile is empty. @jsprinkles: do you have a blog or website? Really enjoyed your xip.io comments ( http://news.ycombinator.com/item?id=4082017 ) and would like to keep up with your adventures. On a related note, it would be nice if HN had RSS feeds for specific user submissions and comments.

I prefer to stay semi-anonymous, but a few people know who I am (it wouldn't be rocket science to deduce). When I posted under my real name folks I did not know would come up to me at conferences and argue with me about things I had said on Hacker News. People tend to get offended by my remarks because I disagree with a lot of this culture, so it's also easier to just keep that separate from my career.

Thank you for the kind words.

Re: Camera+ turned down acquisition offers and says no to VC money

#32

Post by its_so_on »

SonicSoul wrote: post #26
its_so_on wrote: post #12

Earlier quoted context omitted.

because there are six hundred million people worldwide in your target audience, you have convinced 10,000 of them to pay you, and all told you need to spend $5 on a new customer, and make $10 from a customer in a year. What, do you expect to grow organically from 10k users one year to 40k, then 160k, then 640k, and so on, hoping the market stays EXACTLY THE SAME FOR THE NEXT 8 YEARS? (Oh and you can't spend anything…

i'm trying to follow your example, but still not sure about: " and all told you need to spend $5 on a new customer, and make $10 from a customer in a year" who is making this demand? if you're lean enough you should be able to keep growing at a more organic rate.

sorry, I was not putting as much thought into the specific numbers as you are - or into my particular phrasing - I just tried to make the numbers round, specific, and illustrative. Use different numbers by all means.

I think it's fair to say you must spend something on customer acquisition and infrastructure to service them: it's impossible to spend $50,000, get to 10k customers, and not spend another nickel but three months later you have two hundred million of them. There are a lot of variable costs and acquisition costs, even though they get factored into your total expenditure.

I mean, what fixed costs does a 3-person startup actually have? 3 times 160 hours @ $0.00 per hour, i.e. the founders' time, sure, and then what? If you get to two hundred million customers, every item in your budget is much greater. I can't think of a single service that can get those customers for free, and on a paying-for-conversions rate a few bucks seemed realistic (rounded to factor in all your variable costs broken down to customers).

I think though that pretty much any numbers you pick you will see that if a startup is 'taking off' it needs more money to address the money left on the table (from the rest of its proven, addressable market) if they want to do it fast. (Whiile the iron is hot, while they have momentum and maybe press coverage, while they're young and hip and new, while market conditions don't change due to unforeseen external changes, and finally before well-funded competition arrives on the scene, including from big companies who will enter if the growth holds out. Big companies don't just enter any market that has 10k customers, they might not even do market research yet, which you already have. Etc etc etc.)

What startup can you think of in which if you bootstrap to $100,000 in revenue from 10k customers, and let's say miraculously have the complete $100,000 to spend, you can magically address the whole 600million person market your 10k customers are in by the end of the following year?

I think that's what I meant by the word 'all told' - factor in every cost into those 10k customers. (Except your fixed costs of 3 x 160 hours @ $0, of course! And a $10 domain name.)

Re: Camera+ turned down acquisition offers and says no to VC money

#33

Post by its_so_on »

joshuahedlund wrote: post #19
its_so_on wrote: post #12

Earlier quoted context omitted.

because there are six hundred million people worldwide in your target audience, you have convinced 10,000 of them to pay you, and all told you need to spend $5 on a new customer, and make $10 from a customer in a year. What, do you expect to grow organically from 10k users one year to 40k, then 160k, then 640k, and so on, hoping the market stays EXACTLY THE SAME FOR THE NEXT 8 YEARS? (Oh and you can't spend anything…

You may have a general point, but there's a couple orders of magnitude difference between 10,000 (your example) and 8 million (the company we're discussing).

Fair enough. Though I do think that 10k is less of a sure thing than 8 million customers. The latter proves the model a lot more efficiently, and probably gives enough data for a better overview of the market.

In my example, you're actually asking the VC to speculate on what you say is the size of the market. Sure you can grow from 10k to 30k easily. The question is the size of the market you're trying to get them to invest into.

Whereas, at 8 million, the question is, do you really have a model that you've proven? Or, have you been spending more on getting the customers than you can ever hope to get from them? (wihout mentioning any names!)

If you're doing a good job being competitive and ensuring high customer satisfaction, it's hard to see how you can quickly grow organically from 8m to a size of market of 700m (say), if that is the size of your market, in just a couple of years.

I mean, you have to be providing these customers something, and at a competitive rate. that has to cost you money. no business just explodes without any marketing or other costs to a size of 700m (say). This is where VC money comes in.

in the concrete example of an 8million user organization, it would be impressive of them to get to 9m, 11m, 12.1m, 13.1m year-over-year all organically. It would be impressive of them to, profitably, get to 20m from 8m in 10 years, all organically.

If, however, the size of the market is more like 200m, this is a good place for VC money instead of that 10-year plan!! Especially if competition might end up better-funded.

(also see my cousin comment here - http://news.ycombinator.com/item?id=4085660)

Re: Camera+ turned down acquisition offers and says no to VC money

#34

Post by bignoggins »

mseebach wrote: post #11

It seems to make sense to run the numbers here: 8 million sold $1 apps, less 30% to app stores, that's $5.6m. If all 17 people on the about page took $100k salaries for the full two years (which they probably haven't, they've likely grown to this size from a lower number over the two years), that leaves $2.2m for running costs and profit. Besides that, they have 7 other apps in their portfolio which must be expected…

if you count IAP, it's probably double that, just based on my own experience with paid apps and IAP.

Re: Camera+ turned down acquisition offers and says no to VC money

#36

Post by clarky07 »

muellerwolfram wrote: post #27
clarky07 wrote: post #14

Earlier quoted context omitted.

Generally I wouldn't want to, but one possible reason is to take some money off the table. Just sell part (non-controlling) of your stake to have FU money personally. You don't want to sell the company, but you might want the life-changing amount of money that says you don't ever have to work again. That can be done by selling part of the company to another investor.

But is selling a part of your company really the only way to get some FU money, if the company is doing really good and is highly profitable? can't they payout the profits as some sort of dividends. (Not claiming that this particular company has a lot of profits, the question is more meant to be general. lets take rovio as an example maybe)

Of course. But profits from say a year or two aren't going to be nearly as high as selling off 25% of the company for example.

To take this way past reasonable, consider Instagram. If they could convince someone to give them 250 Million for 25% of their company instead of selling the entire company, that would be huge FU money and they could keep running their company, while evening maintaining a majority stake. I could see that as a very tempting option.

Also, it allows the founders to diversify a bit. Consider that these people are multi-millionaires on paper, you wouldn't generally recommend they put all of their money into one investment, even if it is their own company.

Re: Camera+ turned down acquisition offers and says no to VC money

#37

Post by sayemm »

petenixey wrote: post #6
muellerwolfram wrote: post #3

if you have a product thats selling so well, is growing organically, and is already build...why would you ever consider outside funding?

We seldom acknowledge it but I think the truth of the matter is that a lot of people become entrepreneurs because they want the recognition, the fame and the status. As silly as it is, taking VC money gives you that in a way that is much harder to achieve with actual tangible success. You might be killing it with your product but carefully explaining your company metrics to someone over dinner is seldom more impactfu…

Fund-raising is only a means to an end. And sometimes it's an excellent way to scale a business after the business has been figured out. But taking VC money just because it makes you feel cool and high-status is a terrible risk-reward decision. You're trading the next 4+ years of your life and a huge chunk of your company's value for bullshit short-term prestige.

I think entrepreneurs should always maintain a tunnel-visioned focus on hard results and performance, if you absolutely kill it and dominate your market, everything else will follow. Fame, recognition, and status are for tech scenesters and bloggers - not startup founders.

Startups are the ultimate test of your inner scorecard - http://therealfoxyroxy.wordpress.com/2009/07/11/an-inner-sco...

Re: Camera+ turned down acquisition offers and says no to VC money

#38

Post by Tomis02 »

I never understood this whole rush to sell your business. When I build something I become emotionally invested in it and I wouldn't sell unless I started hating my product or not believing in it any more.

There should be a clear motivation behind selling something you care about (well, if you ever cared about your product in the first place, that is), not because techcrunch or VCs tell you it's the right thing to do.

Re: Camera+ turned down acquisition offers and says no to VC money

#39

Post by TazeTSchnitzel »

RandallBrown wrote: post #25
Jgrubb wrote: post #2

This whole scene reminds me so much of the record business of yore. The bit about VCs swooping in with just enough money to keep you alive and not really giving much of a rip about your creative endeavors and as soon as it looks like you might not be a million dollar baby dropping you like a hot potato. "punk and indie developers". I really like that.

I read an article or comment somewhere that compared making a startup to making a band. There really are a lot of parallels.

Well, a band essentially is a start-up business. Although funding etc. works a little differently.

Re: Camera+ turned down acquisition offers and says no to VC money

#40

Post by perlpimp »

Perhaps they can take the money and invest in iPad version of the app. iPad is the next thing after iPhone and it is shame that I have to use such app in iPhone compatibility mode.

But reading from the story seems like taking money from those kind of investors isn't such a good idea going forward.

2c

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