Startups shouldn't raise money

I worked at a startup that took waaaay too much money too early. they hired a ton of people that they didn’t need and refused to make some hard decisions because they thought they had all the time they needed to “figure it out”. That company is still around but they’re probably going to collapse. they’re almost out of money and don’t actually have a thing that people want to buy. all they’ve done is spend a lot of vc money.

That said, I don’t think you want to swing the pendulum the other way and everyone should bootstrap everything. Hiring good people takes money. I think you should raise the amount of money you actually need and no more. Scarcity drives the hard decisions.

So many companies see funding as a replacement for actual revenue. These companies are doomed to fail and deserve to. If you look at their founders then this is their existence. They live off of the funding for a few years until the funding runs out then move to the next idea. It’s the modern day snake oil spoon fed to investors.

> snap

As far as I know that one is still on very shaky grounds as their profit comes from pushing really trashy clickbait and I think they've already maxed out the amount of clickbait their users are willing to take so they can't scale that aspect any further. Not to mention that Instagram basically took over their target market, at least in my circles.

The pattern that I see is startups succeeding on money alone. Ideas and execution that would never be sustainable turns into the next big thing because so many people are invested in it, and everybody is pumping hard to find the greater fool.

If a VC sees a good business with great execution that doesn’t need their money, they’ll rush out immediately to find a competitor that does. If an investor is sitting on a good business, they want to keep it quiet and hold their shares privately. If it’s a toxic money pit, push it onto the LPs and then get them to help you pump and raise.

The cost of big-money capital is so cheap now that it inverts the incentive for business discipline. The more you lose, the more you raise, the bigger the valuation.

As a founder who has an experience with kind of both and raised after more than a year generating revenue, I'd say the things you mentioned as negative are actually often positive. Facing with these problems head-on will burst a founder's "happy-bubble" of their perceived reality, and often early entrepreneurs tend to be over-optimistic. Inexperienced founders who raised funds may easily over-estimate the value of their business, hire prematurely, hire too expensive people who will not be ROI positive. Being forced to work with limited capital can make a talented & ambitious entrepreneur become very creative and efficient with its capital. The opposite of course is the distortion we're seeing in the market with "Softbankish" type of businesses who use their capital to distort the market. The optimal course of action is probably somewhere in the middle but my main point is I'd argue the things you mention as negative are actually positive and will allow for a founder, gradual and healthy growth.