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A startup doesn't need to be a unicorn

mattgiustwilliamson.substack.com

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Re: A startup doesn't need to be a unicorn

#271

Post by jamil7 »

cardanome wrote: post #75
fastball wrote: post #19

Earlier quoted context omitted.

And yet Germany still doesn't seem to have much more startup / entrepreneurial success than any other European country. What gives?

Bureaucracy is crazy in Germany. Forget about doing anything online, paper and in person only. Founding any form of limited company is expensive and complicated. Want to put a website online? Have fun putting your full name and address in the imprint. Want to offer some courses that teach X? Yeah, no, you need a license for that, mate! Also being self-employed you lose most social benefits. You need to get private he…

> You need to get private healthcare

No you don't, you can stay in the public system.

> you need to save up for retirement and so on

You can still contribute voluntarily to the public pension if you want to but the majority of self-employed people here don't as this is seen as a feature not a bug.

Part of the concept of being self-employed in Germany is that you're opting out of the welfare state and are responsible for taking care of yourself. With the potential upside of better raw earning potential.

Re: A startup doesn't need to be a unicorn

#272

Post by milesrout »

mediaman wrote: post #259
beambot wrote: post #147

https://paulgraham.com/growth.html "A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth."

Yes, this is what every venture capitalist says. You aren't doing a startup unless you want extreme growth, which requires our services and cuts us in. Building in a capital efficient way that generates substantial wealth for founders, but without giving VCs a cut of the pie, is, of course, "not a real startup," and often also slandered as a "lifestyle business" for low-ambition people. PG is great in many ways but h…

It is the definition of the word. Nowhere does pg say you can't start a non-startup business.

>The founders I'm particularly impressed with are the ones who have such a nuanced understanding of capital efficiency that they do not require VC, and only take money much later in the cycle

That isn't "understanding capital efficiency" it is called having enough capital already.

Re: A startup doesn't need to be a unicorn

#273

Post by PaulRobinson »

paulddraper wrote: post #139
jillesvangurp wrote: post #20

I live in a country (Germany) that is famous for having a lot of "mittelstand". These are basically family owned businesses. Some large German companies fall under this. Aldi and LIDL for example, which are super market chains that at this point have a global presence. And some large companies (Bosch, Siemens, VW, etc.) are actually a multitude of smaller companies. Much of the German economy is smaller and bigger sp…

Yes that’s not how Germany produces OpenAI or Space X. But it’s how you produce a lot of other things.

Only psychopaths with other people's money to burn want to produce OpenAI or Space X.

I think if you want to produce a sustainable business that lasts a long, long time, and provides a good product to a lot of customers, and employ a lot of good people and provide them with a good living, you want to do this, not that.

Re: A startup doesn't need to be a unicorn

#274

Post by codethief »

martin_a wrote: post #133
greenavocado wrote: post #129

Earlier quoted context omitted.

You are lying by omission. The Gewerbeanmeldung typically registers you as a sole proprietor (Einzelunternehmer) or GbR (partnership). Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Those require notarized founding documents, minimum capital requirements (€25,000 for GmbH), and a commercial register entry (Handelsregister) The simple Gewerbeanmeldung structure is problematic f…

> Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG. Meh, do they really? Only if they want to go the VC route. But in this topic we're talking about more healthy ways to build and grow a company and for that you don't need a GmbH or GbR to start.

> > Most tech startups need a limited liability structure like GmbH (similar to LLC) or UG.

> Meh, do they really? Only if they want to go the VC route.

Funnily enough, a German friend of mine and his buddy got accepted into YC some years ago and apparently YC handed them the funds before they had even incorporated or anything, so at least from the point of view of German law they were essentially a partnership (GbR). Not sure how that even worked, especially in terms of delineating what the entity actually was that they and YC owned together. Did YC own 7% (standard deal) of… them? (Without incorporating you are personally liable after all.)

Anyway, from what my friend told me they had a whole bunch of cash lying around on a personal account for quite some time lol

Then again, this was before covid – money was incredibly cheap back then.

Re: A startup doesn't need to be a unicorn

#275

Post by Nemi »

xandrius wrote: post #207
Oras wrote: post #33

Someone investing $1M for 10% might better off buy gold or a property. It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?

If for 1M I get 10%, the company is valued at 10M. Going from 10M to 20M is not a big stretch, and that would net me 1M already. More than gold appreciation I believe.

10M to 20M in what amount of time? This is not incidental, it is critical to determining IRR (Internal Rate of Return).

If the company goes to 20M in 10 years, that sounds great, but is only a 7% compound rate of growth. I can get that with much less risk by investing in the S&P 500. And don’t discount the risk. It is critical. A small business has a very large chance of 100% total loss. Compare that to the 500 index, which has a very small chance of a 50% loss, max.

To count for risk, I would look for a doubling (10M to 20M) in at least 2-3 years, min.

You also have to think about liquidity. If you want to cash out, who is going to buy your shares at the price you want? This might not be as easy as you might think. I can liquidate 500 index shares in seconds. It might take a year or more to find a buyer for your 10% at the price you want.

Re: A startup doesn't need to be a unicorn

#276

Post by fsndz »

codethief wrote: post #266
dinoqqq wrote: post #265

Earlier quoted context omitted.

You probably missed SAP then. > The company is the largest non-American software company by revenue and the world's third-largest publicly traded software company by revenue. As of December 2023, SAP is the largest German company by market capitalization. https://en.m.wikipedia.org/wiki/SAP

I suppose OP specifically excluded SAP as it was founded more than 40 years ago.

SAP is kinda of a monopoly no ? The software is bloated and complex to use. The UI is dated but everyone still uses it because it is so embedded into the core arteries of businesses.

Re: A startup doesn't need to be a unicorn

#278

Post by ninetyninenine »

boxed wrote: post #258
datavirtue wrote: post #161

First time on substack, apparently first time writing also. Enough undefined acronyms to get an 8th grader smacked.

> For most B2B SaaS businesses, you shouldn’t need more than $1M in capital to get to PMF, find a GTM motion that works (not that it needs to scale), and reach an ARR figure where the revenue multiple for valuation starts to look pretty tasty—enough to offer significant upside even after investors are paid out. That sentence (yes, ONE sentence) is some of the worst I've seen.

You don’t speak tech bro.

Re: A startup doesn't need to be a unicorn

#279

Post by nottorp »

Propelloni wrote: post #264
nottorp wrote: post #92

Earlier quoted context omitted.

> Second, the money is not gone. It is right there in the company's account. You use it to pay company bills. That's fine if you start a restaurant or small workshop and need money for salaries, materials etc, of course. It's a barrier to entry when you can start something digital only with just a person or three putting in sweat equity and zero to very little actual cash.

The barrier to entry is the idea that you need a limited liability corporation to start something digital by the seats of your pants. You can always start as a GbR (virtually no costs, spend a day at your city's administration to get a tax id). I mean this in the most charitable way, what kinds of liabilities are you afraid of in that scenario? Once your idea gets traction and money comes in you hopefully will be abl…

> I mean this in the most charitable way, what kinds of liabilities are you afraid of in that scenario?

Why do you think I know all the kinds of companies one can register in Germany? :)

I'm not even german or in germany, just keeping myself informed. You never know when it becomes useful.

Up until today I only knew of the GmBH. Now I know of two more types.

Re: A startup doesn't need to be a unicorn

#280

Post by nickff »

morkalork wrote: post #170
skeeter2020 wrote: post #123

Earlier quoted context omitted.

Parts of this feel a lot like Canada's SRED program, which is intended to be a subsidy for technology research but the expected bureacracy has spawned an industry of consultancies that work solely to find marginal & questionable activities within companies that qualify. It can be worth it for a company to jump through the hoops - especially if they get something while another company does all the work - but it's an i…

SRED and other grants/tax rebates is lifeblood for small tech companies here. Also, you know you're a senior dev when you make the yearly pilgrimage to meet with SRED consultants with architecture diagrams in hand!

SRED is a waste of time for companies actually doing R&D, and a profit center for consultancies getting 50% of a pizza joint's write-off of a ski-doo.
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