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So as I understand you play these games with cash flow but ultimately the objective eventually is to still turn that into profit. After you've grown your company for several decades at aome point you stop growing and you start milking it. Similarly you want to accumulate float as a restaurant to prepay your suppliers to get better prices and hence more profit.
This is hackernews, and we, as an audience live in a little bubble where the only right way to do business is by disrupting a market and becoming the next Google, Microsoft or Apple. Just like some of the contemporaries that originated from this subculture here like; Stripe, Reddit and openAI.
There are many ways of doing business. The original article had a sound strategy for one particular way of business. This article by common cog has another sound strategy for doing business.
Different target audiences, different games.
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That makes no sense to me. They could give the company to the employees instead right? Unless they wanted the code or something.
Unless the founders own 100% of the company (which they don’t if they raised money), no, they can’t give it to employees.
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I never understood, what is to prevent a startup from raising a VC seed round, then a series A round, and then simply grow at its own pace? Is there something in the SAFE note or whatever, that says the startup MUST fail fast, go big or go home? It can grow methodically, can't it? The closest explanation I've ever heard is that VCs do "signaling" in future rounds... but listen, if you have a few extra million dollars…
Huh, I’ve always assumed it has to do with some about of “de jure” control over the board that the VC assumes when the capital is raised. If they don’t like the founders growth strategy , can’t they just throw them out? Or is that not how it works?
A company is a different animal. Lawyers, bankers, suppliers, partners, accounts and so on. Lots of paper gets signed by founders and investors regarding ownership, liabilities ("for all debts current and future") and so on. When VC capital comes into the mix things get a LOT more complicated.
you can't just "give the company to the employees" because, frankly, that would be really bad for the employees (what liabilities are you taking on?) It'd also be really bad for current founders and investors. (There's likely paper floating around linking you to the company, and that doesn't go away just 'cause you lost interest etc.)
At some point it's all just too complicated and too scary for the old owners and the new owners etc. Basically the risk (to all) just exceeds the potential value of what is there.
Then there's agreements with banks, suppliers and so on, which can on occasion be "non-transferable" so it's not even just as simple as creating a new structure and moving all the IP into that.
I'm speaking generally here - your mileage will be vary a lot depending on the exact circumstances.
Earlier quoted context omitted.
I never understood, what is to prevent a startup from raising a VC seed round, then a series A round, and then simply grow at its own pace? Is there something in the SAFE note or whatever, that says the startup MUST fail fast, go big or go home? It can grow methodically, can't it? The closest explanation I've ever heard is that VCs do "signaling" in future rounds... but listen, if you have a few extra million dollars…
During the dot com boom / crash, I worked at a profitable, VC funded startup. I don't know the legal / financial mechanism by which they did it, but our VCs shut us down six months after the crash. They wanted to put all of their attention into the other company in the portfolio that survived the crash, Yahoo, because their revenue was already far higher than ours could ever be. We were profitable (100s of K per year…
eg I'm certain that Google Inbox could have been a decent modest company on its own.
I learned from reading u/patio11 that there's a market for buying and selling small businesses. Is it weird that nothing like that has popped up for VCs/investors who want to divest from their non-unicorn companies?
So as I understand you play these games with cash flow but ultimately the objective eventually is to still turn that into profit. After you've grown your company for several decades at aome point you stop growing and you start milking it. Similarly you want to accumulate float as a restaurant to prepay your suppliers to get better prices and hence more profit.
Actually,I don't think you ever need to be profitable, as long as you are cash flow positive, there isn't really a reason to stop the merry-go-round. It sounds weird, but if every month you collect more cash, and you pile it into future investments/raw materials, it just turns into more cash flow later.
They literally created a new product out of thin air that they are untethered to in terms of time or specs (except that it has to be able to accelerate with the force of a jet engine?) to “unlock” millions of dollars of cash flow to fund current operations. (I imagine this to be the brainchild of Zach Kirkhorn.)
I don’t know how many startups can employ “pre-order” tactics with their lack of brand power, but the basic essence is probably useful.
Much of the received wisdom of Silicon Valley startup culture is centered on developing new markets that do not currently exist. This activity has a very specific set of risks and rewards and for that profile, the advice is generally sound.
If your business is attacking an existing market with entrenched players, more than half the advice is wrong.
Cedric does a great job navigating these differences IMO.
One of the most genius “games” that I’ve seen in real life is Tesla’s offering of a roadster for a huge up front payment to pre-order (~$45,000). They literally created a new product out of thin air that they are untethered to in terms of time or specs (except that it has to be able to accelerate with the force of a jet engine?) to “unlock” millions of dollars of cash flow to fund current operations. (I imagine this…
Saying "give me money now for something later", making it vague and then not delivering isn't new or genius. It's something which is illegal, and this will be found to be illegal, once there's political will to investigate/prosecute.