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Want to help startups? Just give them money

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Re: Want to help startups? Just give them money

#11

Post by michaelochurch »

There's good and bad here.

The good: right now, the funding racket for startups (unless they can get clients, and under-35's tend not to have those kinds of relationships yet) is unfair and, due to the illegal comparing-of-notes whereby a VC can turn off interest in supposed competitors, probably extortionate. It sucks. A lot of good businesses are shut out. Here's some writing I did on how to fix that: http://michaelochurch.wordpress.com/2013/03/26/gervais-macle... .

The bad: this means that startups are funded based on their ability to attract attention and raise money (tip-jar model) when they really should be funded according to provision of value. These will probably converge over time, so you get eventual consistency.

On the whole, I think the good outweighs the bad. It's just that you couldn't use a tip-jar model to fund, say, a new GPU-aware C compiler. There's a lot of infrastructural technology that can't easily be funded by "dumb money" of the populace nor by the "I-think-I'm-smart money" of meddlesome VCs and executives.

There are a lot of hard financial problems to solve, but ideas like this are bringing us in the right direction.

Re: Want to help startups? Just give them money

#12

Post by nemesisj »

In context this is a really strange article. The government bodies listed in this article do give money to startups, and the bar is extremely low. In addition, private investors (angels and angel syndicates) get matching funds "for free" where the public money matches private money. I'm not sure why this isn't exactly what's being described in the article.

Re: Want to help startups? Just give them money

#13

Post by lmm »

nthj wrote: post #6
plantedd wrote: post #5

Earlier quoted context omitted.

(The One Direction solution??) I agree that more tax breaks for startups would help and it would be a more straightforward thing to achieve. The two things don't have to be mutually exclusive though, so I'd say we need both. For early-stage startups though, sometimes the challenge is more in actually reaching the stage where there's anything to tax - which is why I still think actually giving them the money in their…

> For early-stage startups though, sometimes the challenge is more in actually reaching the stage where there's anything to tax Sure, I get that. I live in the startup world too. I just disagree that it's the government's job to take my money and give it to you — and, of course, vice versa: I won't ask the government to take your money and give it to me. We already have a solution for the problem you bring up. It's c…

>Sure, I get that. I live in the startup world too. I just disagree that it's the government's job to take my money and give it to you — and, of course, vice versa: I won't ask the government to take your money and give it to me.

Fine, good for you - but that's your opinion, and one at odds with most of the electorate. Don't write as if it were obviously correct.

Re: Want to help startups? Just give them money

#14

Post by 5l »

nemesisj wrote: post #12

In context this is a really strange article. The government bodies listed in this article do give money to startups, and the bar is extremely low. In addition, private investors (angels and angel syndicates) get matching funds "for free" where the public money matches private money. I'm not sure why this isn't exactly what's being described in the article.

The point is rather than these bodies acting as gatekeepers deciding what they think will work or not, funds should be distributed via a lottery subject to some basic criteria.

In fact, that is rather the point of the matching funds you mentioned - they let the private sector decide the winners and come in on the same times. That said, there's still a checklist of what sectors they will and won't fund - and it so happens that some startups get unreasonably pigeonholed.

Re: Want to help startups? Just give them money

#15

Post by nthj »

lmm wrote: post #13
nthj wrote: post #6

Earlier quoted context omitted.

> For early-stage startups though, sometimes the challenge is more in actually reaching the stage where there's anything to tax Sure, I get that. I live in the startup world too. I just disagree that it's the government's job to take my money and give it to you — and, of course, vice versa: I won't ask the government to take your money and give it to me. We already have a solution for the problem you bring up. It's c…

>Sure, I get that. I live in the startup world too. I just disagree that it's the government's job to take my money and give it to you — and, of course, vice versa: I won't ask the government to take your money and give it to me. Fine, good for you - but that's your opinion, and one at odds with most of the electorate. Don't write as if it were obviously correct.

The Internet would be a really boring place if we had to prepend "It is my opinion that: " to every sentence.

[And now I'm wondering if I could write a Chrome extension to do exactly that, how hard could it be? pseudocode: `$('form').submit(function() { $('textarea').val().split('. ').map(function(){ return "It is my opinion that: " + this; } ); });`]

Re: Want to help startups? Just give them money

#16

Post by swombat »

As someone who is running a business whose main occupation is to help the government give money to tech companies and startups, I actually disagree with this.

I think most startups don't need money (and they typically don't get any, because most government funding is match funding, and so you have to spend to get, and very early startups don't spend anything). Or rather, they need money, but probably not from investors, and certainly not from the government. They need money from customers.

My thoughts on why money is toxic to most entrepreneurs are pretty well summarised in this article: http://swombat.com/2011/12/8/investment-cushion-springboard

Growing companies that have figured out how to make their own money already do need money, but the reason they can make good use of it is also the reason why they don't need it as much as the cash-starved early startups.

To a functioning company, money is lifeblood, and more money can help make the company a bigger success than it already is (or make it more competitive against other companies in the same space).

To an early startup, money is a toxic sludge that will slow it down, cause weird and unpredictable mutations, and possibly kill it when it might have lived.

Disclaimer: I'm talking about startups operating outside of the Magical Land of Silicon Bubbles, who have to actually create a viable business rather than just build something popular that makes no money and then sell it for a billion dollars.

Re: Want to help startups? Just give them money

#17

Post by mindcrime »

michaelochurch wrote: post #11

There's good and bad here. The good: right now, the funding racket for startups (unless they can get clients, and under-35's tend not to have those kinds of relationships yet) is unfair and, due to the illegal comparing-of-notes whereby a VC can turn off interest in supposed competitors, probably extortionate. It sucks. A lot of good businesses are shut out. Here's some writing I did on how to fix that: http://michae…

I'm really intrigued by the possibilities that crowdfunding may offer, once the SEC fully implements the JOBS ACT stuff. I'm not sure I see the rosy picture that this guy paints:

http://radar.oreilly.com/2013/03/how-crowdfunding-and-the-jo...

But I think he makes some interesting points. I don't think this just relevant to Open Source companies either, although they may be uniquely positioned to really tap into this mode of funding (or not... I need to spend a lot more time thinking about this, especially since I run an Open Source startup).

I'd be curious to hear your thoughts on crowdfunding, michaelochurch.

Re: Want to help startups? Just give them money

#18

Post by saosebastiao »

I know of a few VCs who just can't help themselves...not just giving them money, but telling them how to spend it too. And for some reason, they all seem to want them to spend it on a hotshot HBS-trained former big consulting general partner that will suck up all their cash and equity and give them a failed business in return.

They like to claim that there is some value-add with having their experience as "part of the team"...but for 90% of the VCs out there, it is bullshit. It is just a ploy to get better deals.

Re: Want to help startups? Just give them money

#19

Post by mindcrime »

swombat wrote: post #16

As someone who is running a business whose main occupation is to help the government give money to tech companies and startups, I actually disagree with this. I think most startups don't need money (and they typically don't get any, because most government funding is match funding, and so you have to spend to get, and very early startups don't spend anything). Or rather, they need money, but probably not from investo…

Ehhh, I don't know. I mean, yeah, I agree with the general gist of your blog post there, but... For some startups, especially early-stage startups, they do need money...not necessarily big money, but enough money to actually start at all. Or, let me put it a different way, even for the very early stage startups, capital can be very important - in at least some cases.

I'm thinking of the bootstrapper scenario, where the founders don't have the kind of cash reserves just lying around, to enable them to quit and work on the startup fulltime right away. So they're forced to keep dayjobs and work on the project nights and weekends. Now, you can get a lot done, especially from a product standpoint, working nights and weekends. But when you need to go out and meet people (potential customers, partners, distributors, investors, whatever)... well, those people usually expect to do business during "business hours". If you have a potential customer on the table, but you can't meet with them because you're at work at your 9-5 all day, or because you can't afford to fly to $EAST_BUMFUCK, or whatever, it really puts a crimp in things.

Of course, I'm not saying it can't be done... In fact, I'm in the middle of doing this myself, and we find workarounds: I meet people over lunch, or come in early and leave early at the $DAYJOB so I can meet early afternoon (or flip it around for a breakfast meeting), and I use Skype, chat, etc. to do remote meetings. And we solve the travel expense problem by focusing on customers who are geographically close to us. And for us, the advantages of bootstrapping justify doing this for now. But I can see where many startups would really need - at a bare minimum - enough money for the founders to be able to work on the project fulltime, and maybe some money to cover incidental expenses from going through Customer Development.

Re: Want to help startups? Just give them money

#20

Post by michaelochurch »

mindcrime wrote: post #17
michaelochurch wrote: post #11

There's good and bad here. The good: right now, the funding racket for startups (unless they can get clients, and under-35's tend not to have those kinds of relationships yet) is unfair and, due to the illegal comparing-of-notes whereby a VC can turn off interest in supposed competitors, probably extortionate. It sucks. A lot of good businesses are shut out. Here's some writing I did on how to fix that: http://michae…

I'm really intrigued by the possibilities that crowdfunding may offer, once the SEC fully implements the JOBS ACT stuff. I'm not sure I see the rosy picture that this guy paints: http://radar.oreilly.com/2013/03/how-crowdfunding-and-the-jo... But I think he makes some interesting points. I don't think this just relevant to Open Source companies either, although they may be uniquely positioned to really tap into this…

I think crowdfunding is an excellent idea but it's too early to see how it plays out. It could fail; it could be The New Thing. Too early to tell.

One idea I've had, which I think has major steam, is passive payment. Given that my consulting rate is high (full rate I don't disclose but it's well over $200/h; however, I give lower rates, sometimes zero, for businesses I believe in and non-profits) it really isn't a major cost to pay $2/hour for websurfing. That's a rounding error. I have no problem paying $0.25 for the time it took to write this post because the value of the time itself is an order of magnitude greater.

People would need to have the ability to calibrate their passive payment, obviously. For me, $2/hour is nothing; for the developed world, it's far too much.

Right now, advertising is the only passive payment system we have and it's extraordinarily inefficient.

Passive payment would make living by blogging much easier. For example, I get about 1700 hits per day (2.5 minutes each) on my blog. If we assume the average web user sets his passive payment level to $1.00 per hour (median would be lower; mean might be around that) then I'd be making $70 per day. Not enough to live on (in New York) but it would almost cover my too-damn-high rent.

Passive payment would also be great for time-tracking. I probably wouldn't waste as much time if I realized "holy shit, I wasted $0.73 reading that garbage!"

Finally, it would obsolete those damn paywalls. I don't mind paying 95 cents to read a good NYT article (again, the time is much a greater expense) but bringing out my credit card is a hassle.

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