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Before the Startup

paulgraham.com

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Re: Before the Startup

#131

Post by mahyarm »

philwelch wrote: post #104
staunch wrote: post #20

It seems odd not to acknowledge that most successful startups are not created like this. Very few are. Perhaps only the truly great ones take the organic personal project route. Apple, Google, Facebook, and YC are among the handful one could list out of thousands of startups. Most successful startups are the result of ambitious people working hard to come up with good ideas. PG has explicitly said he started Viaweb t…

As an investor, you'd rather fund Apple, Google, or Facebook than Viaweb.

Not necessarily. Would you properly fund EverPix or TextSecure, or would you worry about them sticking to their principles too much and avoiding potential profit opportunities?

Re: Before the Startup

#132

Post by strlen »

rokhayakebe wrote: post #122
strlen wrote: post #116

Earlier quoted context omitted.

Getting university and government grants requires a great deal of gaming the system. I'd say governments and academia also attract gamers of the system moreso than startup world (indeed, that is a point that pg makes). I can't speak of "most interesting", I can only speak of what I've worked on :-)

What have you worked on that could not have been done without VC backing?

Distributed systems that span tens and hundreds of thousands of nodes and provide excellent reliability characteristics. A multi-year C++ project being built by a small/medium sized team. Those are just a few example (stated deliberately vague due to NDAs, etc...)

Re: Before the Startup

#134

Post by tptacek »

AznHisoka wrote: post #133
tptacek wrote: post #119

Earlier quoted context omitted.

That thought pattern doesn't alarm you a little bit?

the grandfather's thought pattern? No, why would it?

The idea that one would like or dislike someone to the extent that the person confirms their biases. Not that it's an offensive thought; just that it's a handicap.

Re: Before the Startup

#136

Post by soundlab »

beachstartup wrote: post #123
soundlab wrote: post #118

Earlier quoted context omitted.

I think one of the distinctions is that for bootstrapping you can start with something (very) small and end with something big over a long period of time. Whereas when you take on venture capital the expectation is to build something very big very fast. The latter requires more capital to expedite the ROI for the VC whereas the former is typically a much slower, organic process that may not reach an equivalent scale…

> you can walk into a commercial bank (gasp!) and setup revolving lines of credit or expansion capital to fund more growth. commercial banks are incredibly hesitant to do this even if you've passed the magical 5 year mark. their commercials loans are underwritten by people who are extremely risk averse, and the "commercial bankers" at your local branch are basically the people who aren't good enough for investment ba…

Sounds like you've had some negative experiences with your bank. I would beware of "specialized finance firms" that have "sprung up overnight". Typically their lines are very limited and come with huge rates. I don't think there's really much complexity to technology businesses that most competent finance guys can't figure out. They are looking at your P&L and financials for some key ratios, pretty simple. Regardless of whether you're selling lawn mowers or SaaS they want to see strong cashflow. If you're trying to get a loan on MAU growth projections you're probably right.

Re: Before the Startup

#137

Post by 7Figures2Commas »

j45 wrote: post #115
johnward wrote: post #91

Earlier quoted context omitted.

I don't really remember those two talking about startups being gameable in the way that PG is talking about megacorps. Most of the reasons they prefer bootstrapping vs startups are around the idea that bootstrapping has a predicable model for success. Where as your chances of a successful exit in a startup are like winning the powerball. Even PG notes that one good exit covers the losses of hundreds of other investme…

Bootstrapping is not excluded from being a startup. 98% of all startups in Canada, for example (tech included) are self-funded. There ultimately is little freedom from bosses. Either your VC's are, or paying customers are.

You can fire customers you don't want; you can't get rid of investors so easily.

Re: Before the Startup

#138

Post by beachstartup »

soundlab wrote: post #136
beachstartup wrote: post #123

Earlier quoted context omitted.

> you can walk into a commercial bank (gasp!) and setup revolving lines of credit or expansion capital to fund more growth. commercial banks are incredibly hesitant to do this even if you've passed the magical 5 year mark. their commercials loans are underwritten by people who are extremely risk averse, and the "commercial bankers" at your local branch are basically the people who aren't good enough for investment ba…

Sounds like you've had some negative experiences with your bank. I would beware of "specialized finance firms" that have "sprung up overnight". Typically their lines are very limited and come with huge rates. I don't think there's really much complexity to technology businesses that most competent finance guys can't figure out. They are looking at your P&L and financials for some key ratios, pretty simple. Regardless…

first of all, "pop up overnight" is in "quotes" because they didn't pop up over night. this industry and firms have been in existence for decades but only grew quickly in the last 10 years because commercial banks stopped lending money. did you hear about something called the "credit crisis"?

second, what you're saying is so blindingly obvious that it doesn't even need to be said - startups do not fall into the category of traditional businesses with strong P&Ls and great balance sheets and constantly increasing margins, like a bank wants to see. most bootstrapped startups operate at break even, or can even dip into loss for a few months at a time. these are the companies that need the money.

this will immediately disqualify you for a bank loan. which is the original premise of this entire thread - the banks won't give you shit.

Re: Before the Startup

#139

Post by justin_l »

moron4hire wrote: post #97
3pt14159 wrote: post #95

Earlier quoted context omitted.

I'm doing it right now, actually. It is possible; there are clients out there that will pay for problems to be solved or for deep expertise. Even in the cases where they want a warm body for 3 months to a year, if it brings in enough cash for your other two partners to keep working, then great! Outside of America this is basically how you have to do it pre-traction.

I'm not saying it's impossible, I just take issue with your description of it as "easy".

I think freelancing equips you with other skills (knowledge of the Big Three financial statements, ability to work independently, relevant laws, how to value a company etc) that will prove beneficial when it comes time to start a company.

Re: Before the Startup

#140

Post by rayiner »

IsaacL wrote: post #47

So this is the third counterintuitive thing to remember about startups: starting a startup is where gaming the system stops working. Gaming the system may continue to work if you go to work for a big company. Depending on how broken the company is, you can succeed by sucking up to the right people, giving the impression of productivity, and so on. [2] But that doesn't work with startups. There is no boss to trick, on…

Even users are gameable. What do you think advertising is?Companies spend vast sums of money on user acquisition.
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