Earlier quoted context omitted.
Do you understand what a metaphor is?
Of course. Stats say it’s a bad one though
Not really; the "lottery" includes all the stupid smaller games too.
Don't Take VC Funding – It Will Destroy Your Company
391–398 of 398 posts
Re: Don't Take VC Funding – It Will Destroy Your Company
#392You’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…
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Re: Don't Take VC Funding – It Will Destroy Your Company
#393Only 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 many rockets are there really though? Most VC funded ventures are pretty underwhelming concepts in my opinion. (Well maybe that will change in this current economic climate).
Re: Don't Take VC Funding – It Will Destroy Your Company
#394Earlier quoted context omitted.
Most startups don't raise multiple rounds in the same year.
They also don’t IPO more than once, usually.
Didn’t know this was even possible. Had to research.
It wouldn’t be called “IPO” anymore, but a company can offer subsequent market shares through a Follow-on Public Offering (FPO.) This occurs when a business raises capital in a second round of stock through either dilutive or non-dilutive options. Good to know.
Re: Don't Take VC Funding – It Will Destroy Your Company
#395> In your restaurant, would it make sense for your chef to spend their first six months on building a stove? No, that doesn’t make a lot of sense - your chef should instead be preparing food and supervising other people in the kitchen. Buy the stove, don’t build it yourself.
By that logic - why even have staff in the first place? Pay for a catering service, don't make the food yourself.
> This may sound obvious. Yet, at VC-backed software startups, I see software engineers spending months on building “internal tooling” without shipping an actual product.
That may or may not make sense; but more importantly - it's independent of whether or not there's VC money. In fact, VC's may want to supervise you to make sure you're only working on getting something to market.
Re: Don't Take VC Funding – It Will Destroy Your Company
#396The first and main takeaway is this: Companies which receive VC funding are not profitable. They would run out of money if they wouldn’t get the VC funding. So the news announcement that your company MagicalUnicorn received VC funding is actually not a message of success, it’s rather a confession of failure. I remember when a small company I worked for was super excited to announce how much of a loan they got. I took…
Contrarians are so funny, everything is a hammer. A bunch of very smart bankers have spent an enormous amount of time doing due diligence on the company you work for and they think that the risk is low and repay-ability is high … but the contrarian always knows better. To them this is a sign that the end is nigh, and they rejoice in the feeling of their beautiful superiority.
The company was sold in less than a year, everyone laid off 6 months after that, and the equipment was all shut down within 3 years of that announcement.
But your right, I'm sure the 5 shareholders and the bankers did fine for themselves.
Re: Don't Take VC Funding – It Will Destroy Your Company
#397Earlier quoted context omitted.
There are plenty of other ways to exit that don't involve an IPO. Acquisition, selling shares on secondary markets or privately etc... Doing VC the wrong way can make your life hell, but taking all the risk yourself and bootstrapping is in its own right a special kind of hell if you're not careful. IMHO, it's all about time horizon. Working on a startup for 3-4 years without a clear product market fit or some kind of…
And is worse to fail losing your own time and money than to fail losing VC money. In the second case, you can get up and try it again easier than in the first case.
Could not agree more!
There are smart ways to leverage VC $$ without losing your shirt.
I'd rather buy a car wash business from a boomer with a bank loan than risk my own time with a non VC funded startup.
Re: Don't Take VC Funding – It Will Destroy Your Company
#398Earlier quoted context omitted.
Failure is definitely the commonality. The BLS reports typically that 1/2 of all new businesses (in the US) will formally fail within five years. One can safely guess that at least half of those remaining are something between zombies and hanging on by a thread. 1/4 or fewer will make it 15 years or more. And of course it varies by sector, restaurants notoriously have an exceptionally high failure rate. For all busin…
I’m wondering about the failure rate for technology companies. It may be higher or lower than restaurants, I have no intuitions.
90%+ for "tech startups," although it's very hard to find data that sorts through all the startups and separates them into tech and non-tech startups. Good source is https://www.failory.com/blog/y-combinator-failures#:~:text=O....