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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#231

Post by branchless »

eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

And thanks to the enormous hero worship of YC it's taken until now for this to dawn on the majority of readers. I say that as it's the top comment and I feel that a few years back it would have been downvoted.

Re: Startups Rejecting Venture Capital

#232

Post by chillacy »

mr_puzzled wrote: post #20
chillacy wrote: post #14

Earlier quoted context omitted.

> Are there any good examples of publicly traded companies which have lasted a long time (more than a few decades) with minimal impact of the "we have to keep growing" mindset? Are there publicly traded companies which _didn't_ have a thirst for growth? By definition, companies which go to the lengths of raising money on the stock exchange are exactly those who grew beyond small business / private equity levels. So t…

I should have worded it differently: what I was trying to ask was - publicly traded companies by definition have to keep growing and have the "we have to keep growing" mindset, and this often negatively impacts the products eg- facebook showing ads way too often, collecting more user data and it's parly driven by the desire to keep growing and earning more ad dollars. Fb is a perfect example of a product going downhi…

I see, something like sacrificing long term viability for short term growth? Since jacking prices may give you a great quarter but destroy your brand in the long run.

My understanding is that big value stocks which pay dividend have less pressure to grow, while growth stocks use growth rate to justify their extreme PE ratios, and so might seek it more.

Re: Startups Rejecting Venture Capital

#233

Post by r00fus »

hsk0823 wrote: post #139
will_brown wrote: post #119

Earlier quoted context omitted.

The Green Bay Packers are valued at $2.35B...not bad for a non-profit. How is the Packers model a scam? Because people support it and don’t get profits? Does that make the 90% of VC funded startups that fail scams? Are other NFL teams that are privately owned scams, because as I said the NFL publicly acknowledges the Packers community ownership is a competitive advantage over the other teams. Sure maybe people won’t…

It's a scam because the equity have any decision making power. It's still controlled by a small group of people aka the board of directors, the stock structure is setup that fans could not mount a hostile takeover. It's called ownership, but it's not, it has no value, it cannot ever be sold back, it doesn't grant you any say over how the team operates. The Packers are not a community owned organization, it's operates…

Would the Packers ever move the team? Perhaps it buys the fans at least that much.

Re: Startups Rejecting Venture Capital

#234

Post by jarjoura »

wslh wrote: post #220
peterlk wrote: post #18

This might be an unpopular opinion, but my view of VC money has changed significantly in the last couple years. Raising money is a failure mode. If you are raising money it is because you failed at something and you need the money to catch yourself. This is more true for software companies than, say hardware companies, but I think is still generally true. For example, if you are raising because you need to hire peopl…

I don't agree, even as a founder who bootstrapped two companies. Nowadays, software companies are capital intensive. They don't start in a garage like in the 70s, 80s, or 90s. Are there exceptions? Sure, but they are outliers. Marketing is one of the components that make your service or product capital intensive. Another is the level of details your product need to be in the market. In the past you were competing in…

The garage stage is usually the seed round, just like YC helps make it a formal process. Get a working provable prototype up and iterate quickly on your idea to something that works and can turn a profit. Then off you go to find customers till you show demand. That's when you evaluate whether a VC fund makes sense for your business.

Even back when SJ and Woz were in "the garage" stage building Apple 1s, they were seeded by their previous Blue Box profits and then after clear demand was proven they had Mike Markkula fund them to get Apple 2s built.

Companies will always have been and always will be capital intensive, nothing has changed there. Insurance, employees, real-estate, legal, just basic company things have always required significant capital.

Re: Startups Rejecting Venture Capital

#235

Post by TACIXAT »

noddy1 wrote: post #85

Moving towards the model where a portion of early VC investment goes straight into the pocket of the founders and early employees, as bird has done. If I've built a company with an implied valuation of 200 million, why can't I bank a couple of million for a rainy day? I've heard VC's state with a straight face that this is a misalignment of incentives.. apparently if the founder is financially comfortable they aren't…

Any links on what the Bird founder did?

Re: Startups Rejecting Venture Capital

#236

Post by jarjoura »

NickBusey wrote: post #2

My current startup has taken VC funds. Never again. What a nightmare.

My take on work is there's always someone who will be your boss and dictate what you can and cannot do. If you bootstrap, then it'll be your paying customers. If you take family/angel/seed money, then it'll be them and their expectations. If it's VC money, they will have a seat on the board and expect you perform. If it's the public market, then every quarter you'll be expected to show significant results.

I fail to see how a nightmare isn't just code for, I don't like what this person wants me to do, I did this startup to get away from having a boss, but feel free to correct me if I'm wrong.

Re: Startups Rejecting Venture Capital

#237

Post by jarjoura »

bayesian_horse wrote: post #208

One problem with rejecting venture capital (or any other form of external capital) is that the founders (and likely the early employees) are investing in the company, in the form of lower pay. Which is all fine and dandy, but the founders are likely risking most of their net worth, including the potential income of some of their best years. Taking outside capital not only means growing faster, but also diversificatio…

Another problem this article misses is that it's quite arrogant to assume a founder has other means to build a company. Most founders are quite honestly usually young and that also means they lack capital, but would otherwise be brilliant and the perfect person/team to create the next Facebook/Uber.

Re: Startups Rejecting Venture Capital

#238

Post by jarjoura »

For everyone bitching about VC's demand on speed and profits, it wouldn't be any different working inside of FAANG. Your team is given a time limit on how fast it can work and it will need to make the parent organization money otherwise it'll get shut down and re-org'd after a year or two.

If you bootstrap a company, and it's successful enough to turn a profit, you're still at the mercy of finding a steady stream of customers. Most successful bootstrapped companies usually find 1 or 2 anchor companies that then start dictating how your company should run so that you can get paid and continue the relationship. Also, companies will prefer to have other options, so your bootstrapped company will be one of many options. (or replaced internally)

There really is no magical solution to working and making money. You should just approach this problem as, I want to build a company, I believe in this idea so much I'm willing to risk a lot to make it happen. If a VC gets you what you need but forces you to get there in 3 or 4 years time, but you think you need 5, it's not like you have a better option to prove your idea, so figure out how to get there in 3 or 4.

Re: Startups Rejecting Venture Capital

#239

Post by Aeolun »

dunpeal wrote: post #180
babaganoosh89 wrote: post #164

Earlier quoted context omitted.

FAANG tends to pay ~300k for senior engineers. For 400k you usually need to get lucky with stock appreciation.

You can't just claim one absolute number as the comp for all "senior engineers". There's a huge amount of variance, within FAANG and elsewhere. As a simple example, SDE III at Amazon typically pays a bit more than $300k. Principal SDE, the next rank above that, will pay well over $400k. And don't forget that during years of steep stock appreciation, like much of the past decade, actual compensation will often be high…

I can pretty much guarantee you’ll only get that in the US.

Re: Startups Rejecting Venture Capital

#240

Post by cdoxsey »

hamandcheese wrote: post #53
hn_throwaway_99 wrote: post #39

Earlier quoted context omitted.

I think your point about employees is especially true, particularly since the large tech companies pay disproportionately so much more. If you are a senior-level software engineer, even if the startup is successful in the "unicorn" range, for most people that means an equity payout on the couple hundred K to the $1 million range for all but the very largest successes. Not bad at all, but when the FAANGS are already p…

This is assuming one can get hired by a FAANG, which is not true for many.

Thank you for saying this.

The point about FAANG paying so much gets made a lot, and that employees of startups are fools for their decisions, as if everyone's handed a dozen offers and makes a choice.

Most of us are lucky to get a single offer, sometimes after months of trying, so we take what we are given. The rosy picture portrayed on HN isn't at all accurate to my experience.

Though to be fair my current salary, as far as it is from the unrealistic portrayal of salaries here, still feels far better than almost any other job I would remotely have the capacity to do, and certainly far more than I need to live and have a pretty easy life if I were honest.

I'm payed a crazy amount of money to do something I love.

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