How VC’s Get to “Yes” • Hacker News Board

Re: How VC’s Get to “Yes”

#11

Post by diziet » Mon, Feb 10, 2014, 9:44 AM UTC

syllogism wrote: post #4

> For example, there is sort of a magic number for SaaS businesses to achieve $100K MRR, which is usually a good benchmark for being able to raise a decent VC-led series A or B. Wait, what? If you have $100k MRR, why do you need any venture capital at all?

100k MRR does not mean that much if you've got staff costs. Let's break down super simple costs:

Office - 5-10k/mo Employees - 10k/mo ea Servers - 5k/mo Legal/accounting/etc - 5k/mo Misc - 10k/mo

All of a sudden with 10 employees you're losing 20-30k/mo. Want to hire 5 new amazing engineers? Now you're losing 80+k/mo.

100k mrr is great if it is you by yourself or a tiny team, but to scale you need a lot more.

Re: How VC’s Get to “Yes”

#12

Post by sanswork » Mon, Feb 10, 2014, 10:33 AM UTC

syllogism wrote: post #10

sanswork wrote: post #5

Earlier quoted context omitted.

First two reasons I can think of. Imagine you're doing that on an expensive cloud hosting setup and your expenses are really high. An infusion of capital could allow you the opportunity to build out your own server infrastructure(or pay annually on the cloud infrastructure) and dramatically lower your expenses and push your margins up a lot. It would also offer you the flexibility in your funnel to offer back loaded…

An extra large EC2 instance is $360-$3311 per month. Maybe I have an imagination failure, but I can't see how cloud costs could be past 10k per month. So, how much could the infrastructure cost, and still be worth the investment? Maybe I just don't understand the costs.

First two ideas that spring to mind would be a realtime video encoding service and a CI service. In both cases your users to server ratio would be very low and in the first case your data costs would be very high. So you might be only making profit of $X per server per month even if your revenue is $XXX per server. When you're running your own servers you need a big investment up front but lower operational costs which is where the funding would come in.

Re: How VC’s Get to “Yes”

#13

Post by ninh » Mon, Feb 10, 2014, 11:05 AM UTC

syllogism wrote: post #4

> For example, there is sort of a magic number for SaaS businesses to achieve $100K MRR, which is usually a good benchmark for being able to raise a decent VC-led series A or B. Wait, what? If you have $100k MRR, why do you need any venture capital at all?

Because revenue != profits.

Re: How VC’s Get to “Yes”

#14

Post by mathattack » Mon, Feb 10, 2014, 2:57 PM UTC

jey wrote: post #3

> fundraising is about “searching for true believers, not convincing skeptics.” Interesting and well said. Makes sense, but I hadn't thought of it in those terms.

This is a Sales truism too. It's much easier to convince people who believe than people whose job it is to say "No". Early stage funding requires shared optimism between the funder and funded.