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It looks like overall a classic mistake of trying to go too fast too soon. The issue with taking on VC capital is that you need to be in control of how you spe
by raiyu 10y ago
It looks like overall a classic mistake of trying to go too fast too soon.
The issue with taking on VC capital is that you need to be in control of how you spend that money, and if you don't need it, then don't take it.
There are also challenges with any business in crossing the chasm. Selling to more customers, or a different set of customers is akin to searching for product market fit a second time and is tricky like the first.
The underlying business fundamentals are also critical.
A great example of a company taking on VC money but growing slowly and methodically is Github. They raised their Series A well after they had established significant revenue and were already profitable for many years.
Though they did get into an extravagent office that was largely unnecessary but they used the extra funds to double down on their own infrastructure and to expand github into the Enterprise. This shift to the enterprise was about finding product market fit with a different set of customers and also about updating the company culture.
But luckily they had revenue, profit, and great advisors to hep them navigate the turbulent waters which allowed them to grow but not crumble under their own weight.
It looks like Nasty Gal just did too many things at once. Moving to manufacturing, warehousing, retail brick and mortar stores, staffing up the company with senior hires that probably weren't a culture and product fit.
One of these errors is costly enough but taken together we now see the results.
Had they instead grown more organically, focused on what was working and double down they could have taken on significantly less money, continued to grow, and still be in business today.
But of course all analysis is easy from the sidelines and the inside story is rarely told.
None the less for a business to be bootstrapped and survive so many years it had to be profitable, then you take on VC money and it falls apart the overall theme is clear.
That's not an indictment on VC money either, because Google, Facebook, Snap, Twitter, Apple, all wouldn't be here without it.
- narrowrail 10y agoI hope it doesn't sound too pedantic, but the 'C' in VC stands for capital, so saying money or capital after VC is redundant. The only reason I was driven to write this is because of how many times it was written.
- adventured 10y agoThat's not necessarily correct. When the parent writes: > A great example of a company taking on VC money VC can stand for "venture capitalist" in that context. So "VC money" equating to venture capitalist money, would in fact be a proper use. Further, venture capital is a specific type of money. One could also correctly say: bond money, debt money, home equity money, (the) bank loan money, among others and they act as an elaboration of the type of money in question as all context of money is not the same. If I say: the bank loan, that's not necessarily the same as: the bank loan money. The same can be true for venture capital. If I say: the venture capital (eg: we need to discuss the venture capital situation), it can mean the broader arrangement (such as the VC terms) or situation of fund raising, rather than being about the venture capital cash specifically.
- narrowrail 10y agoI just happen to disagree, and I believe when one says I took VC that means 'I took venture capital', not 'I took venture capitalist money.' There is a wiki entry[0] for VC, and when referring to venture capitalists it is spelled out, not abbreviated VC. [0]https://en.wikipedia.org/wiki/Venture_capital https://en.wikipedia.org/wiki/Venture_capital
- sirclueless 10y ago"I took VC" probably parses out to "I took venture capital" in this same context, but it's a strange phrase and less common than "I took VC money." I think this is because "VC" is only one type of investment, and for other similar forms of investment the phrase is nonsensical. For example, PE means "Private Equity" but you can't say "I took PE." (Equity means ownership, and taking money from an investor means giving up ownership, not taking it.) "I took VC" is basically abusing the dual meaning of "Capital" as the thing an investor provides in exchange for equity and the thing a business uses to operate.
- narrowrail 10y agoI like your explanation the best and I actually dislike the abundant use of acronyms. It seems use of acronyms on HN is often a kind of signaling rather than a convenience.
- pdog 10y agoThe founder and chief executive had a majority 55% stake. Considering she had final say on all decisions, you can't blame VCs for blowing up the company.
- rhizome 10y agoYou can own a majority of a company, still not know what you're doing, and take bad advice. Advice being a VC stock in trade. By my read they tried to do the kind of high-growth strategy that benefits other kinds of online businesses, but routinely kills retail, what I internalize as "the Boston Market problem." They opened two stores while also ramping up manufacturing, while finding new designs, and having an inexperienced CEO, and so on. $40MM should have been enough to create a decent sustaining business, but maybe they thought they'd get acquired? That part isn't mentioned, natch: "what were the actual goals of all this?"
- ChuckMcM 10y agoThis was how I read it as well. A person feeling their way into this level of business, makes some bad hiring decisions and either chooses advisers poorly or doesn't have the skills to listen well. It's a sad outcome but certainly not unheard of.