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Ignoring the app, and disruptive gimmick, I have to wonder what your average diner could have achieved with $13.5m in funding. You could build a small, well br
by anexprogrammer 11y ago
Ignoring the app, and disruptive gimmick, I have to wonder what your average diner could have achieved with $13.5m in funding. You could build a small, well branded chain. Probably selling food above cost to boot! :)
- wmeredith 11y agoAH, but you couldn't get any investors for that.
- pc86 11y agoYou could absolutely get investors. Just not any VCs.
- tptacek 11y agoIn fairness, that's because VCs can't really make money investing in companies like those.
- jedrek 11y agoIn fairness, that's because VC culture is a parasite on normal society.
- bdcravens 11y agoAre they really? The high failure, high return model has allowed many programmers (and others within VC-backed companies) to have employment that wouldn't otherwise exist. I'm happy to be outside of SV, doing well in a 100% bootstrapped company, but I think VC culture has had the opposite effect of a parasite (or at worst, I'd call it a symbiote)
- bazqux2 11y agoYes, in many many ways. They are money losers. It only looks like they are not because of a temporary bubble. This bubble is popping and their losses are becoming clearer. There are many that will personally make money despite running a fund that loses money. Their culture is steeped in groupthink. Which by definition results in malinvestment and destruction of wealth. This wealth comes from pensioners who can't get sufficient returns from lower risk investments. At some point pension funds and pensioners are going to run out of money which will be bad. Specifically for bootstrapped companies. VCs increase the input cost; labor and rent etc. And they subsidies competitors. E.g. Customers who would normally pay you for services get it free from a VC funded startup. Then VCs run out of money and competitor goes bust. This induces boom and bust cycles that mask steady improvements with hype. This hurts the market. Programmers would be much better of with a steady market where there is a discoverable market value for their work.
- tptacek 11y agoPension funds invest tiny, tiny portions of their portfolios in venture capital, and they do it deliberately, as part of a strategy to diversify asset classes. Venture capital is probably not going to mess with too many people's pensions. The Kaufmann report on venture capital (which is not, to put it charitably, aggressively pro-venture-capital) is a good place to start on this. As for bootstrappers (I am one of those, and have been for ~12 years now), I think @Pinboard has a thing or two to say about the VC threat/menace.
- pc86 11y agoI think it's just that the VC model is predicated on finding that fraction of a percent of investments that gives you astronomical ROI as opposed to more conservative investors seeking lower returns more often (the type of person who would invest in a restaurant just to get a check every month). They are willing to get nothing back a majority of the time while the more conservative investor would probably be bankrupt if even 50% of his investments netted a total loss of investment.
- tptacek 11y agoRight. If you're going to accept a 50% failure risk, your average return from the companies that don't fail has to be better than 2x. If 70% of them fail, even 3x isn't enough.
- nkozyra 11y agoThey could (and do), but the prospect is longer-term and riskier, which makes it far less appealing.
- Fomite 11y agoChipotle, even after getting hammered in the recent past, has a market cap of 15.5 billion dollars. It's rare, but it's possible.
- mbesto 11y agoThat's not the point. VCs are interested in quickly (5-7 years) getting to 15B in market cap, not 22 years.
- Fomite 11y agoChipotle went public 13 years after it was founded at half a billion dollars in market cap. While not as flashy as some of the unicorns, that would still have been a pretty decent showing.
- melvinmt 11y agoNothing is impossible: Philz Coffee has raised $15m [1] and The Melt (grilled sandwich chain) has raised money from Sequoia [2] [1] http://techcrunch.com/2015/02/18/philz-coffee-funding/ http://techcrunch.com/2015/02/18/philz-coffee-funding/ [2] http://blogs.wsj.com/venturecapital/2014/11/12/sequoia-backed-the-melt-moves-beyond-grilled-cheese/ http://blogs.wsj.com/venturecapital/2014/11/12/sequoia-backe...
- hkmurakami 11y agoBlue Bottle Coffee. https://www.crunchbase.com/organization/blue-bottle-coffee https://www.crunchbase.com/organization/blue-bottle-coffee
- tikhonj 11y agoFood service has a terrifying reputation as a business sector—restaurants routinely go out of business in their first year. Deep funding would create a buffer and help it grow, of course, but I still wouldn't want to bet on a restaurant.
- pbreit 11y agoIndie restaurants, maybe. But for franchises, the opposite.
- Fomite 11y agoDepends on the franchise. Subway, for example, is apparently an absolutely brutal franchise to run, whereas Chik-fil-a is super careful about who they give them to.
- treehau5 11y agoRestaurants, not junk fast food chains. He or she was probably referring to corporations like Bloomin' Brands (OSI) and Brinker International.
- Fomite 11y agoI happened to pick two fast food chains because I know they're on polar ends of the "How nice is it to be a franchise" spectrum. The core of the point is that not all franchises are created equal.
- treehau5 11y agoBut it matters which franchises you are talking about. A restaurant like Maggiano's, or Bonefish Grill is as far removed from Subway as Subway is as far removed from a 7-Eleven.
- mangeletti 11y ago
- kevinflo 11y agoYes, but on a serious note the difference in potential upside between investing in this vs. a traditional restaurant chain is like that between investing in Amazon vs. a traditional book store chain. If you can find a way for the business model to work it is operating in a way where the inventory and distribution are handled in fundamentally different ways than in the past.
- abrookewood 11y agoYour average diner knows NOTHING about scaling a business to a national or international level, nor about venture capital and the pressures of shareholders.
- egd 11y agoFrom the look of things around here, your average tech company ain't much better.