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Indie.vc: Unicorns Are Out, Profits Are In

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Re: Indie.vc: Unicorns Are Out, Profits Are In

#71

Post by loceng »

Does anyone know a VC similar to Indie however that doesn't convert to equity if more funding occurs from another party? Give me $100k and sure I'll pay you back $300k, however let me use that $100k to see how much more valuable I can make my company and therefore leverage its new metrics including revenues.

These current models don't only want the icing (their returns on initial investment) but they want to eat their cake too; they're currently doing this because they can get away with it because their current competition, traditional VCs, is far worse - but once a new competitor comes in that only wants the icing but not the cake from the transaction, they'll lose out on potentially a lot of this deal flow.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#72

Post by grumple »

teej wrote: post #64
epicureanideal wrote: post #61

Earlier quoted context omitted.

Is there any existing term for "funding for business that will never be a unicorn but can clearly become profitable and provide good returns"? Is there an equivalent of VC for "lifestyle businesses"? If not, if someone can establish a term it'll be easier to talk about this.

There’s tons of existing finance infrastructure for this already, it just doesn’t reach tech. Small business loans, traditional banks, franchisors, local business investor groups, etc all facilitate these sorts of businesses today. They just don’t do tech. This is because their risk models are built on 30+ years of priors and the financing is very often business sector specific. Tech is too much of an unknown for thi…

Are you saying banks won't provide loans to small tech businesses, but they will to things like restaurants?

Re: Indie.vc: Unicorns Are Out, Profits Are In

#73

Post by whack »

smogcutter wrote: post #28
manfredo wrote: post #15

In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…

> A high-risk high-reward investment model may still produce higher rates of returns than a low-risk low-return model. So, this isn’t really my area, but if the market is efficient shouldn’t these come up about the same over a long enough period? In other words if one or the other has dramatically better returns that just means the risk was mis-priced to begin with. The immediate objection I can see to this (without…

In an efficient market, investments that are more risky will produce higher returns. If they didn't, no rational investor would invest in them. Why invest in a venture that is more risky, unless you're compensated via higher returns.

You can already see this playing out in the public markets. Stocks produce far higher returns than corporate bonds, which produce higher returns than treasury bills.

There's further nuance here around systematic risk vs unsystematic risk, but I don't think it's as relevant to VCs since their number of investments is too small to diversify away all unsystematic risk.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#74

Post by airstrike »

nickff wrote: post #58
vkou wrote: post #57

Earlier quoted context omitted.

The Canadian model for business isn't all that great. It doesn't do a great job of serving the country's social needs, and it also doesn't do a great job of producing competitive businesses. There's a fair number of public funds that get funneled into unproductive firms through things like innovation grants, and there's a lot of protectionism for incompetent incumbents. All of this seems to enrich a small class of el…

Ballard Power being a classic example of this, though there are many.

Can you share more on how this applies to Ballard Power? It's a name that just came up on my radar this weekend and I was planning on doing research on them, so thought I'd ask in case you have something specific to share

Re: Indie.vc: Unicorns Are Out, Profits Are In

#75

Post by airstrike »

grumple wrote: post #72
teej wrote: post #64

Earlier quoted context omitted.

There’s tons of existing finance infrastructure for this already, it just doesn’t reach tech. Small business loans, traditional banks, franchisors, local business investor groups, etc all facilitate these sorts of businesses today. They just don’t do tech. This is because their risk models are built on 30+ years of priors and the financing is very often business sector specific. Tech is too much of an unknown for thi…

Are you saying banks won't provide loans to small tech businesses, but they will to things like restaurants?

Getting a loan when you have no cash flow to service it doesn't usually work well

Re: Indie.vc: Unicorns Are Out, Profits Are In

#76

Post by munk-a »

vkou wrote: post #57
troughway wrote: post #54

Earlier quoted context omitted.

>Canadian "venture" capital. I love this. I wish it were a thing, "The Canadian Model".

The Canadian model for business isn't all that great. It doesn't do a great job of serving the country's social needs, and it also doesn't do a great job of producing competitive businesses. There's a fair number of public funds that get funneled into unproductive firms through things like innovation grants, and there's a lot of protectionism for incompetent incumbents. All of this seems to enrich a small class of el…

As a Vancouver-side Canadian I must say that the support for tech up here is pretty poor in a large part due to the labour laws being gutted by EA. Providing information on OT policies and OT compensation is one of the first rounds of questions you can expect to receive during hiring.

On the other hand - Canadian business expenses are still quite high, but quite a bit lower than US business expenses. Healthcare and cost of living are huge factors in labour costs.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#77

Post by munk-a »

ClumsyPilot wrote: post #41
manfredo wrote: post #15

In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…

I found the point about minorities and women curious, is that perhaps due to the fact that profitable-ish business can be assesed more rigorously on the foundamental, rather thsn on VC's opinion of the founders?

Less is riding on personal promotion and networking, both of which men tend to have advantages in. Instead, the focus on business performance allows a less biased selection criteria.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#78

Post by nickff »

airstrike wrote: post #74
nickff wrote: post #58

Earlier quoted context omitted.

Ballard Power being a classic example of this, though there are many.

Can you share more on how this applies to Ballard Power? It's a name that just came up on my radar this weekend and I was planning on doing research on them, so thought I'd ask in case you have something specific to share

Ballard's been getting government grants and subsidies for over 20 years, and produced very little in terms of saleable product on the other end. They make fuel cells and related products, but their business model seems to be mostly taking government and investor money, and using it to produce units which they 'sell' at below-cost to companies trying to look green by 'testing' alternative fuels.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#79

Post by mifeng »

leesalminen wrote: post #32
manfredo wrote: post #15

In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…

I think both worlds can exist. You can have the "traditional" VCs going for the high-risk, high-reward model. And you can also have "new" VCs going for low-risk, medium-reward. As an anecdote, in 2014 we looked for ~$250k investment. We had a business model that realistically took us to ~$5mm/year revenue in 5 years. We pitched various "traditional" VCs. The overwhelming feedback we got was that nobody doubted our te…

This is an important point. It's not about what VCs want to fund, it's about the types of businesses that founders want to build. Founders have a lot more choices than they realize.

Re: Indie.vc: Unicorns Are Out, Profits Are In

#80

Post by adriand »

leesalminen wrote: post #32
manfredo wrote: post #15

In short: this author is endorsing a funding model focused on low initial investment and faster profitability. The benefits key benefits are that this funding model results in more women and minorities getting funding, as well as higher rate of companies surviving (10% vs. 44% [1]). The former is good, but probably isn't sufficient to motivate most investors. The latter doesn't necessarily translate into better retur…

I think both worlds can exist. You can have the "traditional" VCs going for the high-risk, high-reward model. And you can also have "new" VCs going for low-risk, medium-reward. As an anecdote, in 2014 we looked for ~$250k investment. We had a business model that realistically took us to ~$5mm/year revenue in 5 years. We pitched various "traditional" VCs. The overwhelming feedback we got was that nobody doubted our te…

Another fund in the "new" category is TinySeed: https://tinyseed.com/

Also, congrats on your success!

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