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You seem to be attaching a moral axis to the decision on whether to raise capital. Consider that people look at you like you have two heads because you're makin

You seem to be attaching a moral axis to the decision on whether to raise capital. Consider that people look at you like you have two heads because you're making an irrational decision. Capital usually comes with two strings -- giving up a part of your company, and giving up control (both of which are correlated, but not the same thing). In the current climate, if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? Put a different way, how good would the terms have to get for you to take the money? In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? How far are the current market conditions from this scenario?

gist 10y ago
The OP hasn't actually said that he turned down funding just that he wasn't looking for it and not sure he (?) wanted it. This is really similar to someone saying they aren't looking for a job. It's implied I guess that if someone offered them a million dollar job (where they had been making $100k) with complete freedom and great working conditions they'd at least consider it. Your point is taken though and very possibly might also mean "I take the high road and would turn it down no matter what". (Which doesn't mean they would of course just that they say they would).
ritchiea 10y ago
Doesn't capital also come with the expectation/pressure you need some sort of liquidity event in the next X years because the VC's fund depends on it?
- coffeemug 10y ago
  Theoretically you could negotiate a deal where you don't have a responsibility of reporting to your first round investors (not far fetched given the current climate). In practice seed investments consist of multiple $100k-$250k checks, which are generally too small for the investors to put any pressure on your startup. Seed investors write dozens or hundreds of these checks, and they don't have the bandwidth (nor desire) to put any pressure on the founders. The pressure kicks in when you raise series A and get partners on your board who only make a few investments per year.
  - dasmoth 10y ago
    Is it really true that you could take a $250k seed round, build something profitable-but-not-huge, then just quietly run the resulting business? I thought that carried a pretty strong expectatation that you'd be hiring employees and looking for series A pretty soon. Definitely interesting if there are other good routes for "slightly-too-big-to-bootstrap" ideas (beyond the obvious "savings" and "transition from consulting")
    - jdoliner 10y ago
      Absolutely, it of course depends on the terms. But in my experience investments for that amount never involve a board seat and normally involve a smallish amount of equity so investors have no means to pressure companies into taking an A later if they don't want to. There is some expectation that you'll do something with this money and normally for early stage companies that means hiring people, but I've never heard of an investor strong arming an entrepreneur into hiring people when they didn't want to. Where does your belief that they do come from?
      - crazy_ant 10y ago
        You must have never heard of situations where a founder gets pushed out of their company by the VC because they are not meeting certain targets.
        runesoerensen 10y ago
        Pretty sure parent has heard of those situations since he explained why this wasn't one of them.
        billmalarky 10y ago
        That situation is not possible in a scenario where the investor has minority control of the company (ie a seed round).
    - daniel_levine 10y ago
      Wufoo did YC then didn't raise a Series A, before eventually selling to SurveyMonkey. Olark raised from YC, then a Seed and that's it. Statuspage did YC and then Seed and then sold to Atlassian. These are just some examples off the top of my head, I'm sure I could come up with a ton more.
erikpukinskis 10y ago
> In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. > if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? You have no idea when or if a liquidity event might happen or how big it might be and you want to make as few promises as possible to keep your options open, including holding no substantial assets at all. You don't want to add another person to the list of people you have to loop in to conversations. You don't want to leak information into the tech establishment. You expect big dilutions later on and you want to keep as much equity as you can initially.
- jdoliner 10y ago
  > There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. Starting a company is filled with social expectations and refusing to raise money is certainly not going to spare you from them. Founding a company is an exercise in setting expectations you're not sure you can fulfill, you'll certainly be setting those expectations with your early customers, by definition you'll be making some sort of agreement with your first customer that you've never fulfilled for someone in the past. You want to manage the expectations of course, but to say that raising money implies expectations and thus the best course is to not consider raising money is foolish. You'll likely just compromise your ability to meet other expectations.
  - mwfunk 10y ago
    This assumes that (a) they need the money and/or (b) they could even do something they want to do with the money that they aren't already doing. I could imagine all sorts of cases where neither of these things are true, and everything's going well and according to plan. If everyone's expectations are already being met, what's the point in putting yourself on the hook to someone else for something more, regardless of how much money it is or how low the additional expectations are? I could see the logic from a VC perspective- VCs aren't going to make any money from companies that don't take funding from them. Companies that don't take funding may as well not exist to them. VC firms themselves are businesses that make money by nurturing other businesses. That just means that all VC firms need startups to nurture, it doesn't mean that all startups must be nurtured by VC firms.
crazy_ant 10y ago
It has nothing to do with morality, it has to do with building a sustainable business while retaining full ownership. The notion that you absolutely need to accept funding is getting tired because it's not supported by facts and grounded in reality. I am currently bootstrapping a business and I have been approached by VCs who asked me to please take their money. I have turned them down because, as I politely told them, I don't need it, AND I am not looking to simply flip the company some day (no sane investor will invest unless the company can be sold in some form and they get their money back). Some people may also wish to avoid having a boss, and if you think your VC is not your boss in some capacity at least, you're in for a rude awakening. Calling someone's decision to avoid raising money irrational and attaching labels (morality?) is presumptuous. There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that.
- exelius 10y ago
  > There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that. Nothing wrong with it at all; but keep in mind you are posting on the message boards of an organization (YCombinator) that is deeply invested in the Silicon Valley venture ecosystem. The "growth at all costs" mentality is bound to be quite prevalent among the posters on here as a result. It's just the audience that HN draws.
  - pop8row9 10y ago
    > It's just the audience that HN draws. The content of this thread seems to contradict this claim.
- onewaystreet 10y ago
  It's irrational for someone running a startup to be categorically against raising money. It's not for someone running a lifestyle business. A lifestyle business is not a startup.
optimiz3 10y ago
Is the million dollar check going to me or the company? In the later case the company might not need it.
metaphorm 10y ago
that's not the limit case. that's an absurd statement, and venture capital isn't differential calculus.
michaelkeenan 10y ago
> You seem to be attaching a moral axis to the decision on whether to raise capital Which part of their comment makes you think that? I don't see it, and I'm curious about how it's coming across differently to others.
Retric 10y ago
There are far more 10 million dollar companies out there than 10 billion dollar companies. Which hints at the fact taking money to grow increases risks of failure. So, if you don't need funding you are better off not taking it.
bootload 10y ago
"Consider that people look at you like you have two heads because you're making an irrational decision." The observer is basing this on imperfect information.

gist 10y ago

The OP hasn't actually said that he turned down funding just that he wasn't looking for it and not sure he (?) wanted it. This is really similar to someone saying they aren't looking for a job. It's implied I guess that if someone offered them a million dollar job (where they had been making $100k) with complete freedom and great working conditions they'd at least consider it. Your point is taken though and very possibly might also mean "I take the high road and would turn it down no matter what". (Which doesn't mean they would of course just that they say they would).

ritchiea 10y ago

Doesn't capital also come with the expectation/pressure you need some sort of liquidity event in the next X years because the VC's fund depends on it?

coffeemug 10y ago
Theoretically you could negotiate a deal where you don't have a responsibility of reporting to your first round investors (not far fetched given the current climate). In practice seed investments consist of multiple $100k-$250k checks, which are generally too small for the investors to put any pressure on your startup. Seed investors write dozens or hundreds of these checks, and they don't have the bandwidth (nor desire) to put any pressure on the founders. The pressure kicks in when you raise series A and get partners on your board who only make a few investments per year.
- dasmoth 10y ago
  Is it really true that you could take a $250k seed round, build something profitable-but-not-huge, then just quietly run the resulting business? I thought that carried a pretty strong expectatation that you'd be hiring employees and looking for series A pretty soon. Definitely interesting if there are other good routes for "slightly-too-big-to-bootstrap" ideas (beyond the obvious "savings" and "transition from consulting")
  - jdoliner 10y ago
    Absolutely, it of course depends on the terms. But in my experience investments for that amount never involve a board seat and normally involve a smallish amount of equity so investors have no means to pressure companies into taking an A later if they don't want to. There is some expectation that you'll do something with this money and normally for early stage companies that means hiring people, but I've never heard of an investor strong arming an entrepreneur into hiring people when they didn't want to. Where does your belief that they do come from?
    - crazy_ant 10y ago
      You must have never heard of situations where a founder gets pushed out of their company by the VC because they are not meeting certain targets.
      - runesoerensen 10y ago
        Pretty sure parent has heard of those situations since he explained why this wasn't one of them.
      - billmalarky 10y ago
        That situation is not possible in a scenario where the investor has minority control of the company (ie a seed round).
  - daniel_levine 10y ago
    Wufoo did YC then didn't raise a Series A, before eventually selling to SurveyMonkey. Olark raised from YC, then a Seed and that's it. Statuspage did YC and then Seed and then sold to Atlassian. These are just some examples off the top of my head, I'm sure I could come up with a ton more.

erikpukinskis 10y ago

> In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. > if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? You have no idea when or if a liquidity event might happen or how big it might be and you want to make as few promises as possible to keep your options open, including holding no substantial assets at all. You don't want to add another person to the list of people you have to loop in to conversations. You don't want to leak information into the tech establishment. You expect big dilutions later on and you want to keep as much equity as you can initially.

jdoliner 10y ago
> There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. Starting a company is filled with social expectations and refusing to raise money is certainly not going to spare you from them. Founding a company is an exercise in setting expectations you're not sure you can fulfill, you'll certainly be setting those expectations with your early customers, by definition you'll be making some sort of agreement with your first customer that you've never fulfilled for someone in the past. You want to manage the expectations of course, but to say that raising money implies expectations and thus the best course is to not consider raising money is foolish. You'll likely just compromise your ability to meet other expectations.
- mwfunk 10y ago
  This assumes that (a) they need the money and/or (b) they could even do something they want to do with the money that they aren't already doing. I could imagine all sorts of cases where neither of these things are true, and everything's going well and according to plan. If everyone's expectations are already being met, what's the point in putting yourself on the hook to someone else for something more, regardless of how much money it is or how low the additional expectations are? I could see the logic from a VC perspective- VCs aren't going to make any money from companies that don't take funding from them. Companies that don't take funding may as well not exist to them. VC firms themselves are businesses that make money by nurturing other businesses. That just means that all VC firms need startups to nurture, it doesn't mean that all startups must be nurtured by VC firms.

crazy_ant 10y ago

It has nothing to do with morality, it has to do with building a sustainable business while retaining full ownership. The notion that you absolutely need to accept funding is getting tired because it's not supported by facts and grounded in reality. I am currently bootstrapping a business and I have been approached by VCs who asked me to please take their money. I have turned them down because, as I politely told them, I don't need it, AND I am not looking to simply flip the company some day (no sane investor will invest unless the company can be sold in some form and they get their money back). Some people may also wish to avoid having a boss, and if you think your VC is not your boss in some capacity at least, you're in for a rude awakening. Calling someone's decision to avoid raising money irrational and attaching labels (morality?) is presumptuous. There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that.

exelius 10y ago
> There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that. Nothing wrong with it at all; but keep in mind you are posting on the message boards of an organization (YCombinator) that is deeply invested in the Silicon Valley venture ecosystem. The "growth at all costs" mentality is bound to be quite prevalent among the posters on here as a result. It's just the audience that HN draws.
- pop8row9 10y ago
  > It's just the audience that HN draws. The content of this thread seems to contradict this claim.
onewaystreet 10y ago
It's irrational for someone running a startup to be categorically against raising money. It's not for someone running a lifestyle business. A lifestyle business is not a startup.

optimiz3 10y ago

Is the million dollar check going to me or the company? In the later case the company might not need it.

metaphorm 10y ago

that's not the limit case. that's an absurd statement, and venture capital isn't differential calculus.

michaelkeenan 10y ago

> You seem to be attaching a moral axis to the decision on whether to raise capital Which part of their comment makes you think that? I don't see it, and I'm curious about how it's coming across differently to others.

Retric 10y ago

There are far more 10 million dollar companies out there than 10 billion dollar companies. Which hints at the fact taking money to grow increases risks of failure. So, if you don't need funding you are better off not taking it.

bootload 10y ago

"Consider that people look at you like you have two heads because you're making an irrational decision." The observer is basing this on imperfect information.