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How to proceed when you run out of cash, but you still believe?

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Re: How to proceed when you run out of cash, but you still believe?

#61

Post by tenpies »

jassmith87 wrote: post #58
RussianCow wrote: post #41

Earlier quoted context omitted.

This is very real. A friend of mine started a company with over a million in seed funding with what basically amounts to just an idea. Years later, the company isn't doing that well in terms of sales/revenue, but they still manage to raise money because they have a couple obvious acquisition targets. It seems crazy to me to throw millions of dollars at a company with the hopes that one of maybe three or four megacorp…

Seed and Series A is investment in the people always. They assume if the product doesn't work the team will pivot until they find something that does. It sounds to me like your friend failed to pivot when needed.

Not even. I'm seeing seed and series As/Bs on unproven teams of recent graduates with no experience in the field where the "start up" operates. No business plan, no prototype, huge regulatory walls to climb.

It is worst than tulip mania.

Re: How to proceed when you run out of cash, but you still believe?

#62

Post by chrisgarand »

t222 wrote: post #48
dwrodri wrote: post #26

As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision. That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be…

Asking the real questions. > That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Biggest mistake IMHO. But is quite common these days. Everybody is chasing the unicorn dream.

It's important to consider that most businesses that start in new areas/ try re-defining the market don't have business models, as they are too small to build a model from. Sure they can bootstrap from one idea to the next until something takes hold, but unless it's a new paradigm that is on the cusp, you're many years (think 5+) from attaining a scalable model. The funding is to be able to hire people, and iterate quickly to expand the business, and find a scalable business model. Trying to build a business model with out a pre-existing business is like trying to solve for x when the right side of the equation is missing. You'll come up with answers, but they're probably wrong once tested.

Re: How to proceed when you run out of cash, but you still believe?

#63

Post by rolltiide »

dwrodri wrote: post #26

As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision. That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be…

The business of selling securities is a business.

Tapping into the sentiment steered by macroeconomic trends is wise. Limiting that to the consumer product model is unwise.

Re: How to proceed when you run out of cash, but you still believe?

#64

Post by bobloblaw45 »

AchieveLife wrote: post #30
dwrodri wrote: post #26

As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision. That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be…

"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?" That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies. Fear of missing out is huge right now. I know of a startup that received a multi-million valuation and many more million in funding. They don't even…

I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea?

Like if you wanted to open a dry cleaners.

Re: How to proceed when you run out of cash, but you still believe?

#65

Post by harrisonjackson »

toomuchtodo wrote: post #8
overcast wrote: post #7

Earlier quoted context omitted.

Who you know, luck, being in the right place at the right time are MAJOR components of success in life. Infinite number of equally talented people in this world, without the right path.

https://www.technologyreview.com/s/610395/if-youre-so-smart-... (If you’re so smart, why aren’t you rich? Turns out it’s just chance.)

There is a positive take away. If it is up to chance, then you "just" need to increase your exposure to opportunities + the longevity of your efforts. More opportunities, over a longer period of time, gives you more coinflips.

Re: How to proceed when you run out of cash, but you still believe?

#66

Post by dwild »

dwrodri wrote: post #26

As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision. That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be…

> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?

I offer you 3.5M to start a business, without needing a business model, why wouldn't you take it?

The real question is, how did they were able to raise 3.5M and why haven't they made sure that they had a strong business model.

Re: How to proceed when you run out of cash, but you still believe?

#67

Post by Analemma_ »

bobloblaw45 wrote: post #64
AchieveLife wrote: post #30

Earlier quoted context omitted.

"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?" That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies. Fear of missing out is huge right now. I know of a startup that received a multi-million valuation and many more million in funding. They don't even…

I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea? Like if you wanted to open a dry cleaners.

No, because the mania for throwing money at tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs after the initial Big Spend on capex, and hence potentially gigantic returns for investors.

Now, how well the current crop of startups is delivering on that promise is an exercise left to the reader, but it's there in theory. A dry cleaner has marginal costs and no economy of scale, and so can't attract unicorn valuations.

Re: How to proceed when you run out of cash, but you still believe?

#69

Post by j45 »

If there is a smaller part of your business that can generate $, it can be a good way to help you stick around/simmer until the timing is right for the demand to increase.

Products are about as much as deciding what part of your solution you're building that lines up with what the market is ready to actually do and growing from there incrementally.

A neat example of this I read about was how the iPad was designed for many years before the iPhone came out, but the iPhone in a way was a starter/training device for a larger touch computing experience.

Re: How to proceed when you run out of cash, but you still believe?

#70

Post by nostrademons »

bobloblaw45 wrote: post #64
AchieveLife wrote: post #30

Earlier quoted context omitted.

"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?" That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies. Fear of missing out is huge right now. I know of a startup that received a multi-million valuation and many more million in funding. They don't even…

I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea? Like if you wanted to open a dry cleaners.

Well, yes, but not in the way you mean. If you want $100K for a dry cleaners you get a bank loan, the same way people have been doing it for a century.

Equity capital is solely interested in business models that either wow people or fail outright. The reason has to do with risk: most such business ideas have various things that can go wrong, and those risks are generally manageable but not really quantifiable. Basically a VC wants to see "These are the assumptions in our model, and if we build this it will revolutionize X industry, which is currently worth $50B but could be worth a lot more with our product, and that will give you a 50% annualized return on your fund." And they're giving you money to prove out whether those assumptions are actually true, with the expectations that for a good number of startups they won't be and their whole investment will be wasted.

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