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

201–210 of 398 posts

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

#201

Post by mwcampbell »

eastdakota wrote: post #158
conradfr wrote: post #120

Earlier quoted context omitted.

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…

One perspective that's missing here is that of the users that are presumably benefitting from the company's product(s). The users would probably prefer that the company keep slogging than that it get acquihired and the "failed" product get killed. I recently read _The One Device_ by Brian Merchant, and I'm reminded of the story, told in that book, about how FingerWorks sold out to Apple. The FingerWorks users got screwed when Apple discontinued FingerWorks product development and put the team to work on developing multitouch for the iPhone instead. Now, the iPhone has several assistive technologies of its own (FingerWorks developed products for people with RSI), but the death of the FingerWorks products was still definitely a loss.

So in my own company, as long as I have the power to do so (I have a cofounder, so it's not entirely my decision), I'll keep slogging rather than shut down a product that is benefitting users.

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

#202

Post by tptacek »

rattray wrote: post #66
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?

Probably closer to 100/1, or worse - that's the gamble you (should) know you're taking if you accept venture capital. It's not for everyone, but eastdakota is right that it's not for nobody .

If it was 100/1, no VC would stay afloat, right? The math here isn't that hard to work out; it tracks the portfolio logic of the funds themselves.

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

#203

Post by Alex3917 »

jacquesm wrote: post #198
Alex3917 wrote: post #167

Earlier quoted context omitted.

> But no less unusual than building a successful company to begin with. Statistically, companies that raise venture capital are vastly less likely to succeed than those that are bootstrapped. Think about it this way: from the perspective of VCs, the most successful apps of the iOS era were Uber and AirBnB. But from the perspective of entrepreneurs, the most successful app of the iOS era was the Flashlight app. Which…

You're right that in numbers of survivors there bootstrapped ones are going to outnumber the VC ones. But in terms of total # of employees, total $ of turnover and profits I would expect it to be the reverse. But for any individual founder, if you want to aim for 'successful enough to be relatively wealthy and worry free' then 'bootstrapped' is the way to go. If you aim for an outsize success, wealth for the next N g…

> But in terms of total # of employees, total $ of turnover and profits I would expect it to be the reverse.

In general, the less money that startups raise, the better their returns:

https://techcrunch.com/2016/10/15/overdosing-on-vc-lessons-f...

There are a number of reasons for this, a big one being that marginal revenue is always the least profitable:

https://techcrunch.com/2017/10/26/toxic-vc-and-the-marginal-...

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

#204

Post by network2592 »

eastdakota wrote: post #158
conradfr wrote: post #120

Earlier quoted context omitted.

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…

The cog can be an outcome that is almost as bad the slog. You are overestimating the amount and range of learning that is possible under the vc path outside of the slog (eg the cog).

Indeed, you may feel like you are learning quite a bit. But that will generally be lessons that the vc investors want you to learn.

Your statements imply that there are lessons to be learned that can only be facilitated by the kind of money that vc investors offer. But your own company (Cloudflare) makes cloud technology more affordable and partially weakens the rationale for getting vc investments.

When you have a soft money bed to land on, you will be less incentivized to search for a broad range of knowledge. Arguably, you will be learning less as a result of this money safety net.

You will be operating under the vc cog thinking that you are learning significantly both quantitatively and qualitatively. As the vc cog wheel continues to churn, you have the illusion of epistemic progress.

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

#205

Post by 8n4vidtmkvmk »

eastdakota wrote: post #158
conradfr wrote: post #120

Earlier quoted context omitted.

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…

I'm in The Slog and coming up in 10 years Bootstrapped. Not sure what to do.

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

#206

Post by c7b »

onion2k wrote: post #68
eastdakota wrote: post #22

You’re so right! It was an absolute disaster for us. Never do it!!!!! Kidding aside, it is true that raising money from VCs puts you on a very defined path with really only three potential outcomes: 1) failure, 2) sell to acquirer, or 3) go public. There are a small handful of exceptions, mostly for companies that throw off massive amounts of cash, but, realistically, those are the outcomes. If you don’t like any of…

According to Statista there were 16,464 VC deals signed in 2022. There were 181 IPOs in that year. The most IPOs in a year ever is 1,035. Obviously the two aren't directly comparable, but the point I'm getting at is that an IPO exit for any company is really unusual. If you found a company and take on VC funding your exit event is much more likely to be getting acquired if you don't fail. It does happen, and deserved…

According to the same source, 2022 was the second-most VC deals since 2006, and ca the 4th worst for IPOs according to stockanalysis.com. There's clearly a massive upward trend in VC deals, while IPOs are much more stationary. Eyeballing those charts, the average number of VC deals, especially in the relevant period for today's IPOs (10+ years ago), is probably closer to 5-6k, and the average number of IPOs to 250, ie ~5%. Combining this with the folk wisdom that 90% of all startups fail, this seems to suggest that half of the successful startups go public, actually. Lots of things that we'd need to account for (not all IPOs are probably startups, # VC deals != # of startups,...), but speaking about tendencies, the data doesn't seem to support such a strong statement.

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

#207

Post by eastdakota »

mwcampbell wrote: post #201
eastdakota wrote: post #158

Earlier quoted context omitted.

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…

One perspective that's missing here is that of the users that are presumably benefitting from the company's product(s). The users would probably prefer that the company keep slogging than that it get acquihired and the "failed" product get killed. I recently read _The One Device_ by Brian Merchant, and I'm reminded of the story, told in that book, about how FingerWorks sold out to Apple. The FingerWorks users got scr…

Yup, that’s one big reason people keep up The Slog. It’s even an honorable one. But, knowing people who are 10+ years into that journey, it can be extremely painful.

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

#208

Post by DeathArrow »

Looking at the author's bussineses website, here's a sales pitch for potential new employee:

>OpenRegulatory is different. It's 100% boostrapped. Ironically, having no investors (and less money) opens up interesting opportunities: We can serve customers who don't have a lot of money, like, Healthcare startups. And we can build software which only solves a tiny problem, and solves it well.

While eating your own dog food has a certain face value, future employees most likely won't be pure idealists who will take a lower pay out of the satisfaction that their work helped others who "don't have a lot of money".

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

#209

Post by AlbertCory »

> you’ll also have the non-obvious effect that you hire people who are not perfect fits for your team.

That's only if "you" are not a smart manager. You hire some 'B' players, and they in turn hire 'C' players. An 'A' player will hire other 'A' players.

The article assumes that your business is already there and running. Many VC-funded startups only really get started when they have enough backing to do it. Hiring really good engineers and marketers takes some money (although less than it did back in the day).

He's right, though, that bootstrapping is cool and worth trying. It forces you to think about profitability right from the start, instead of all those BS metrics he decries.

Post reply on HN