Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Don't Take VC Funding – It Will Destroy Your Company

eidel.io

Post reply on HN
Print view View original

151–160 of 398 posts

Re: Don't Take VC Funding – It Will Destroy Your Company

#151

Post by zrail »

XCabbage wrote: post #113

> VC Funding Means You Will Sell Your Company > Remember when I wrote earlier that the VC dudes definition of “making everyone happy” after investing in your company doesn’t mean making it profitable? So now you might ask: Okay, so what do my VC investors want? ... They want to make a lot more money. > ... > Now, all of this might be none of your business, you might think. But it is! Because now the inevitable conseq…

The control is the desire to hold open the option for future funding rounds. If you gain a reputation for not caring what the VCs think then they won't want to invest in future rounds.

Re: Don't Take VC Funding – It Will Destroy Your Company

#153

Post by tptacek »

mwcampbell wrote: post #128
tptacek wrote: post #112

Earlier quoted context omitted.

If you feel that way, don't start a product company.

This seems to assume that the only reason to start a product company is because you want to gamble on the slim chance that you'll get rich. But what about starting a product company because there's a problem you believe really ought to be solved, and developing a commercial product is the best way to solve it? In that case, wouldn't it be prudent to avoid unnecessary risk?

You'll still most likely fail! This is a really important part of why the VC math works the way it does. You can de-risk a product company by not trying to shoot for the moon, but it's an incremental derisking.

Re: Don't Take VC Funding – It Will Destroy Your Company

#154

Post by cj »

smallerfish wrote: post #135
cj wrote: post #57

My favorite model is “seed-strapped” (a play on bootstrapped). 1) Raise $1-2 million (ideally from multiple small investors rather than 1 big investor, many smaller investors increases your control since every investor alone is too small to make serious demands about how you should run your business) 2) use the $1-2 mill to find product market fit and (more importantly) achieve profitability (or be cash flow neutral)…

Aren't VCs less likely to want to invest if they get wind that you're going to go this path?

Not necessarily.

Not all VCs operate on the "we just need 1 unicorn" model. Some VCs are a bit more conservative and would be happy with a 4-5x return on their money.

What's nice about the seed-strapped model is primarily optionality (which is good for you and also good for seed investors). Meaning you can start out with a seed-strapped mentality and flip to a "Big VC" mentality later on IF it makes sense. IMO during seed stage, most founders won't know upfront whether they would benefit from a huge capital injection or not, so IMO it's best to start with raising a small amount and then raising larger amounts later if/when you want to.

Again, VC is 100% a game. You need to know how the game is played in order to know whether you want to play it in the first place. So many founders don't understand VC/Founder dynamics, especially first time founders. Starting with a seed-strapped model gets your feet wet in the VC game without diving head first.

Re: Don't Take VC Funding – It Will Destroy Your Company

#155

Post by dang »

freediverx wrote: post #37
version_five wrote: post #27

I recognize there must be good VCs around, but so much of what you see looks really like a kid's game to me. So many douchy people with the same cliche advice acting like they're visionaries. And a certain kind of "lifestyle" "founder" fawning all over them. Starting a company has been commoditized and turned into an internship for smart kids. I know it's not all like this but for anyone seriously interested in doing…

VC is a cancer on society. No exceptions.

Ok, but can you please stop posting unsubstantive comments to Hacker News? We're hoping for something different here.

https://news.ycombinator.com/newsguidelines.html

Re: Don't Take VC Funding – It Will Destroy Your Company

#156

Post by franciscop »

tempusalaria wrote: post #132
franciscop wrote: post #115

> "The first and main takeaway is this: Companies which receive VC funding are not profitable." This is patently untrue and deceiving by the author, doubtlessly set to tell a narrative. Sure, some companies that receive VC funding are not profitable, maybe even most, but a sizable portion of the companies that receive VC funding ARE profitable. Denying this is deceiving the readers. In fact, the easiest way to receiv…

The majority of public VC backed companies are not profitable and those are the best of the group. Must be 90+% of VC backed companies are unprofitable, and that’s ignoring all the ones that just shut cause they can’t make money

Yes, but the author is making a strong claim that is untrue, that "Companies which receive VC funding are not profitable", specially since from VC economics THOSE VC-backed companies that are profitable are the quintessential part of the equation!

BTW that's not even entering on the fact that "profitable" is not even clearly a financial goal for large companies: on one end Amazon has been "unprofitable" for a decade or so but that's BS ofc. On the other end WeWork was unprofitable as well but was highly valued, and that was BS ofc (being highly valued).

Re: Don't Take VC Funding – It Will Destroy Your Company

#157

Post by [deleted] »

anonzzzies wrote: post #64
sf4lifer wrote: post #23

Only take rocket fuel (VC funding) if you've got a rocket (PMF in a massive TAM with net revenue retention) If you don't have a rocket, the rocket fuel will be wasted and disappointing in any other vehicle. Ideally you bootstrap until it's clear. But if you start the company with VC funding, you should know the expectation. If you truly have a rocket the economics of VC funding is favorable for everyone.

How do you know if you have a Rocket? Many (most?) VC funded companies are just appearance, no substance and it’s all very apparent. All the new AI ‘products’ for instance. So those are clearly not rockets, just blah and hype. Maybe we had rockets before, but I don’t want to lie and cheat like some of our vc invested companies did (most are gone). Never were rockets, just hype, Twitter presence and faking all around.

[deleted]

Re: Don't Take VC Funding – It Will Destroy Your Company

#158

Post by eastdakota »

conradfr wrote: post #120
dabeeeenster wrote: post #35

Earlier quoted context omitted.

> While there are plenty of VC horror stories, there are fairytales as well. What's the ratio, though??? 10/1? 20/1? 50/1?

Your VC founded business can fail without being an horror story though.

Indeed! And an honorable failure — where you learned a ton, tried your best to succeed, but it just didn’t work — is a terrific outcome. We acquihire “failed” startups quite regularly. The founders of those companies have often turned into some of our best senior engineering and product leaders. And some of them go on to then leave after learning from us to give a startup a go again.

Success or failure aren’t the bad startup outcomes. The worst startup outcome is The Slog. The Slog sucks. I have several friends stuck in The Slog. Symptoms: you’re growing just barely enough to hold things together (call it 10–20% YoY on THAT is the recipe for disaster. You can wake up and realize 10 years have passed and you have nothing (economically, educationally, or emotionally) to show for it. It’s possible both with bootstrapped and VC-backed startups. The Slog is the worst startup outcome.

Bad VCs can definitely make The Slog worse. There’s so much money in the system there’s almost always someone who will put more in, even if on worse and worse terms. Good VCs, on the other hand, can help get you out of The Slog. They can counsel you when it’s time to give up. They can introduce you to potential acquirers. And while it may not be a huge financial win for you or them, it’s a much better outcome than slogging on indefinitely.

Re: Don't Take VC Funding – It Will Destroy Your Company

#160

Post by buzzscale »

adhesive_wombat wrote: post #33
DeathArrow wrote: post #16

>You know, in ancient times, when Peter Drucker, the Master Yoda of business books, was still roaming the planet (alongside dinosaurs, probably) and writing business books, the definition of a successful company actually included the fact that the company was making more money than it was spending - it was profitable. I guess some companies like Yahoo were never profitable but some people got rich buying and selling…

And some companies are only profitable as-run for the shareholders, temporarily, despite being theoretically sound long-term businesses. Take a profitable company, cut costs to bone, arbitrage off all the goodwill generated by an erstwhile decent product, strip assets, pay executive salaries, bonuses and dividends on the "stunning" short term profits and flit before the emptied husk crashes down on top of the employe…

Fascinating. Seems like similar issue risk management issue to silicon valley bank where they didn't account for a jump in interest rates and increase in inflation.
Post reply on HN