7 ms·

I don't want to diminish the success that this company is having being run in their own way, but give me a break with these blog posts. VC is a "trend to avoid

by birken 9y ago

I don't want to diminish the success that this company is having being run in their own way, but give me a break with these blog posts. VC is a "trend to avoid"? Avoid "Hypergrowth"? I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up. I mean I could go point by point and give examples that are the opposite of these trends, but that isn't any more meaningful than these suggestions. You can choose to run a company however you want, and you should. If you believe these things are bad, don't do them. Attract employees that agree with you. The market will decide if you are right or not. But enough with the blog posts about it, especially if they are dismissing critical tools that many companies use very successfully. Every company is different, every product is different, every team is different. Use some common sense on what tools make sense for you, and keep an open mind.

mschuster91 9y ago
> I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up. Google and Amazon are hardly the classic 100x-hypergrowth model. Facebook and Twitter DID really mess up, have you seen how much utterly vile stuff you can report to them and it will still be around months later? Have you been at the receiving end of a shitstorm or Nazi trolls? People order SWATs over Twitter, leading to deaths. The president of the US leaves the rest of the world in panic when someone will finally declare war with him after yet another tweet. The reports from former "moderators" all have one thing in common, they're exploited worse than cannon fodder in wars (the soldiers at least were dead, the moderators will have to live with the videos of beheadings and CP the rest of their lives). Airbnb screwed up entire city rental markets and squeezed out thousands of poor people, hardly call that a success. Pinterest? Wtf how on earth is this worth 12 billion dollars? Or Snapchat with 25B $? Where is the actual worth represented in positive effects for society by this?! In the end all that creates this "wealth" is data. Data is volatile, it's intangible - and once it is too much, the noise ratio gets too high to be useful, and then most of the companies you mentioned will have a massive problem with finances because they're only worth as much as the data and eyeballs of their customers is worth. > Attract employees that agree with you and end up like Uber with a reputation of "every one is welcome here, as long he's a white male with tolerance for extremely high alcohol consumption"? > The market will decide if you are right or not. The market is so oversaturated with cash that an app that could literally do nothing more than distribute "Yo" could get 1.5M$ cash at 10M$ valuation. The corrective forces of the market have vanished long since, otherwise the business model of many VCs would have broken years ago. To make stuff worse, the employees are often enough paid with options that may or may not become entirely worthless (and some options even are until an IPO or after years of working for the company!). That's gambling with the future in a really toxic way. And while I'm at gambling: that more and more cash, both from the VC, the institutional financial and the private sector is flowing into ever more "coins" is also something that is dangerous and set up to explode. Yet another consequence of the current cash saturation. Don't get me wrong: VCs as an institution, startups and coins serve an useful purpose. But in current conditions (both political and financial) they and the business model they run have grown extremely toxic on society.
- MichaelGG 9y ago
  > The president of the US leaves the rest of the world in panic when someone will finally declare war with him after yet another tweet. You know if people are actually in panic over him tweeting, maybe the problem is in those people. It's like those folks posting pictures of their kids crying when Trump won, saying "my 6 year old is now scared he'll be murdered". Uh, you did that to yourself.
csallen 9y ago
Counterpoint: Blog posts like this one are useful, because the VC-funded companies you named are so successful at dominating our thoughts, conversations, and news feeds (HN included) that many founders never see any examples of people following an alternative path. It can be inspiring to a lot of people to simply hear about the possibility of building a small, revenue-generating business or side project. I've been running Indie Hackers for the past year and a half, interviewing hundreds of developers about their small businesses[0], and it feels like every day I talk to someone who's never even considered bootstrapping to be an option. Spreading awareness is valuable, especially considering that venture capital is only a viable option for a small minority of companies, and the ways in which it can cause an otherwise healthy business to fail are rarely discussed by VCs themselves. [0] https://www.indiehackers.com/businesses https://www.indiehackers.com/businesses
- birken 9y ago
  I disagree that this blog post is giving an interesting counterpoint. As I said, I'm not diminishing their success, but this blog post isn't about their story, it's about knocking other styles of companies they disagree with. For example, the VC thing: > Therefore, VCs often push companies to grow too quickly, before they’ve nailed down product-market fit and monetization [citation needed] > Staying small keeps you focused on a small number of high-impact features. [citation needed] > This is not just a few bad actors: the behavior is wide-spread, including by many well-known and ultra-wealthy investors [citation needed] ------- I'm not going to get on some high horse here defending VCs, but these aren't original lines of argument and when unsupported I'm not sure what value they are providing. For example, YC is a VC. Do you think these 3 things apply to them? Again, good for this company, I'm really happy they are succeeding and I'm glad they are doing it without VCs or other trends they don't like. This blog post is very shallow marketing though, I don't see how this is adding to the accumulated knowledge of creating a startup.
  - gnicholas 9y ago
    I don't think a citation is needed for the proposition that VCs often push companies to grow too quickly, before they've nailed down product-market fit and monetization. You could argue that VCs want to see product-market fit before they invest, but this is certainly not true of monetization.
bruno22237 9y ago
Even a broken clock is right twice a day! These companies had awesome market fit, and also lots of luck. Thousands we don't remember have tried this and failed. Hypergrowth/VCs have been oversold as 'The one way'; I'm glad to see blog posts showing that there is a whole world out there.
nostrademons 9y ago
It was interesting reading this, because those 5 points basically describe Google to a T. It's an aborted Ph.D thesis that took VC, hired lots of Ph.Ds with a culture "like a family", and then embarked on a hypergrowth trajectory. The irony is that when Google was young, there was a different set of "destructive trends". They still included taking VC, but it was also common knowledge that: 1. You had to sell a physical product for money. 2. You had to build out all your infrastructure before you could bring a product to market. 3. Sales & marketing were more important than engineering. 4. (When they were hiring on their hypergrowth trajectory, 2001-2004:) The web is dead, and programming is a terrible career because it's all about to be outsourced to India. Perhaps the meta-lesson is to do what other people are not doing. The point of markets is that they reward unexpected successes, where an entrepreneur serves a population with little competition, and that necessarily means thinking for yourself and ignoring the common wisdom. Fast.ai does an admirable job at that - their deep learning course is excellent - but taking their advice at face value is just as dumb as cargo-culting Google.
- jacques_chester 9y ago
  > Perhaps the meta-lesson is to do what other people are not doing. A better lesson might be: stumble upon a phenomenal river of gold and dive in head-first. Unfortunately, rivers of gold are rare. Which is why the rest of us are stuck with mundane stuff like marketing units of product or service to sell at a profit.
- dboreham 9y ago
  Taking on VC money is ok when you are making money (because you can demand decent terms). Google and Facebook are good examples.
- bolololo1 9y ago
  Isn't still Sales & marketing more important than engineering? You can build whatever you want but if you don't tell anybody you'll fail. There are hundreds of successful companies with rubbish products but great business connections and marketing.
  - 9y ago
JumpCrisscross 9y ago
All advice is an older person talking to their younger self.
curun1r 9y ago
> VC is a "trend to avoid"? Avoid "Hypergrowth"? I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up I'm not going to say that VC isn't ever or usually the right move, but this comment is the height of survivorship bias. Not every business idea should be a VC-funded startup and trying to shoehorn every team and every business model into that path is a mistake. Whether to take VC capital is situational and depends on the team, market, product idea and all other factors of that specific startup. The businesses you listed were all the proverbial winning lottery tickets. There's plenty of losing lottery tickets too, and many of those had great ideas that would have been better served with a bootstrapped model that looked for slower, more sustainable growth and increased founder control. A great startup is like a great food recipe. You have to mix the right ingredients in the right amounts to make it taste good. Almost every ingredient works in some dish, but many ingredients don't work in combination. Dishes can be appetizers, mains or desserts, and you'll want to add different ingredients depending on which one you're making. VC is like sugar. It can make your startup fat in a hurry, but if you're growing very quickly, all those calories can keep you from starving. It tastes great in almost anything, but it's put into way to much of what we eat today and causes a lot of premature deaths.
- hugs 9y ago
  Another useful metaphor is that venture capital is rocket fuel. It's not useful if you're not building a rocket. And VCs only really want to give rocket fuel to rocket builders, anyway. VCs will be angry if you end up building a car or a plane instead of a rocket, no matter how awesome the car or plane that you built is, because they promised their investors (LPs) that they would only invest in rockets. But if you've clearly already built a rocket (perhaps after years of bootstrapping, and it's now obvious you can reach orbit -- if only you had enough fuel -- then venture capital, err rocket fuel, might make sense.)
daveguy 9y ago
I feel like the expectation after getting VC money is "do it fast" to the detriment of "do it right". We may have had the wrong VCs or CEOs where I have been, or maybe I brought my own bias, but that definitely felt like the push.
- jjeaff 9y ago
  Part of the m.o. for many VCs is to push for really high burn rates. Which has two reasons, one is to accelerate growth as you mentioned. Another is to cause you to spend the funds you raised and require more investment sooner. This giving the VC the option to own a larger and larger share of your company by the time that liquidity event hits.
peterjlee 9y ago
I think VC-funded hypergrowth raise your company's chance of failure. However, it also raises the chance of a big exit. Hence, high risk, high return. VCs are in the business of investing in high risk, high return companies. So it's natural they want their portfolio companies to optimize for high return than survival. If any one of the VC's 50 portfolio company makes a big exit, the VC profits. For founders and employees, you can't work for 50 different high risk, high return companies at the same time, so that might not be what they want.
jjeaff 9y ago
The problem with VC money is that you are likely taking on powerful investors / co owners that are unlikely to have the same goals that you have (or should have). VC money comes from those that have already become successful. So they are pushing for a strategy that will cause the majority of companies to fail but with the small chance that one will become the next Google, fb, etc. Most founders can't afford that methodology. They should be looking to build a good company with good cashflow that can earn them a healthy nest egg and make them wealthy. When was the last time you heard of a VC that wanted good dividends from their portfolio companies? So yes, if your goal as a founder is to build the next unicorn and you are willing to risk everything on that small chance to make it super big, then you should go the VC route. Problem is, you have one company and one life, so you better hope your company is the one in 10 that have a profitable exit. Or maybe save yourself some time and just go buy lottery tickets.
- hugs 9y ago
  "When was the last time you heard of a VC that wanted good dividends from their portfolio companies?" Indie.vc (Bryce Roberts)
  - jjeaff 9y ago
    Cool, I'll take a look. There are always exceptions to the extreme norm, of course.
CM30 9y ago
To be honest, Twitter seems like exactly the kind of company that this advice was made for. It had a neat idea that could have been made them a steady profit as a small to medium sized company, but took on billions of dollars in funding, hired thousands of employees and hired a bunch of scientists and high end engineers for a project that arguably didn't need most of that stuff to begin with. Hence what could have been a decent company making a cool few million a year is instead one making huge losses on the assumption it's the next Facebook.
srean 9y ago
> I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up. This reeks of selection bias.

by birken 9y ago

mschuster91 9y ago

> I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up. Google and Amazon are hardly the classic 100x-hypergrowth model. Facebook and Twitter DID really mess up, have you seen how much utterly vile stuff you can report to them and it will still be around months later? Have you been at the receiving end of a shitstorm or Nazi trolls? People order SWATs over Twitter, leading to deaths. The president of the US leaves the rest of the world in panic when someone will finally declare war with him after yet another tweet. The reports from former "moderators" all have one thing in common, they're exploited worse than cannon fodder in wars (the soldiers at least were dead, the moderators will have to live with the videos of beheadings and CP the rest of their lives). Airbnb screwed up entire city rental markets and squeezed out thousands of poor people, hardly call that a success. Pinterest? Wtf how on earth is this worth 12 billion dollars? Or Snapchat with 25B $? Where is the actual worth represented in positive effects for society by this?! In the end all that creates this "wealth" is data. Data is volatile, it's intangible - and once it is too much, the noise ratio gets too high to be useful, and then most of the companies you mentioned will have a massive problem with finances because they're only worth as much as the data and eyeballs of their customers is worth. > Attract employees that agree with you and end up like Uber with a reputation of "every one is welcome here, as long he's a white male with tolerance for extremely high alcohol consumption"? > The market will decide if you are right or not. The market is so oversaturated with cash that an app that could literally do nothing more than distribute "Yo" could get 1.5M$ cash at 10M$ valuation. The corrective forces of the market have vanished long since, otherwise the business model of many VCs would have broken years ago. To make stuff worse, the employees are often enough paid with options that may or may not become entirely worthless (and some options even are until an IPO or after years of working for the company!). That's gambling with the future in a really toxic way. And while I'm at gambling: that more and more cash, both from the VC, the institutional financial and the private sector is flowing into ever more "coins" is also something that is dangerous and set up to explode. Yet another consequence of the current cash saturation. Don't get me wrong: VCs as an institution, startups and coins serve an useful purpose. But in current conditions (both political and financial) they and the business model they run have grown extremely toxic on society.

MichaelGG 9y ago
> The president of the US leaves the rest of the world in panic when someone will finally declare war with him after yet another tweet. You know if people are actually in panic over him tweeting, maybe the problem is in those people. It's like those folks posting pictures of their kids crying when Trump won, saying "my 6 year old is now scared he'll be murdered". Uh, you did that to yourself.

csallen 9y ago

Counterpoint: Blog posts like this one are useful, because the VC-funded companies you named are so successful at dominating our thoughts, conversations, and news feeds (HN included) that many founders never see any examples of people following an alternative path. It can be inspiring to a lot of people to simply hear about the possibility of building a small, revenue-generating business or side project. I've been running Indie Hackers for the past year and a half, interviewing hundreds of developers about their small businesses[0], and it feels like every day I talk to someone who's never even considered bootstrapping to be an option. Spreading awareness is valuable, especially considering that venture capital is only a viable option for a small minority of companies, and the ways in which it can cause an otherwise healthy business to fail are rarely discussed by VCs themselves. [0] https://www.indiehackers.com/businesses https://www.indiehackers.com/businesses

birken 9y ago
I disagree that this blog post is giving an interesting counterpoint. As I said, I'm not diminishing their success, but this blog post isn't about their story, it's about knocking other styles of companies they disagree with. For example, the VC thing: > Therefore, VCs often push companies to grow too quickly, before they’ve nailed down product-market fit and monetization [citation needed] > Staying small keeps you focused on a small number of high-impact features. [citation needed] > This is not just a few bad actors: the behavior is wide-spread, including by many well-known and ultra-wealthy investors [citation needed] ------- I'm not going to get on some high horse here defending VCs, but these aren't original lines of argument and when unsupported I'm not sure what value they are providing. For example, YC is a VC. Do you think these 3 things apply to them? Again, good for this company, I'm really happy they are succeeding and I'm glad they are doing it without VCs or other trends they don't like. This blog post is very shallow marketing though, I don't see how this is adding to the accumulated knowledge of creating a startup.
- gnicholas 9y ago
  I don't think a citation is needed for the proposition that VCs often push companies to grow too quickly, before they've nailed down product-market fit and monetization. You could argue that VCs want to see product-market fit before they invest, but this is certainly not true of monetization.

bruno22237 9y ago

Even a broken clock is right twice a day! These companies had awesome market fit, and also lots of luck. Thousands we don't remember have tried this and failed. Hypergrowth/VCs have been oversold as 'The one way'; I'm glad to see blog posts showing that there is a whole world out there.

nostrademons 9y ago

It was interesting reading this, because those 5 points basically describe Google to a T. It's an aborted Ph.D thesis that took VC, hired lots of Ph.Ds with a culture "like a family", and then embarked on a hypergrowth trajectory. The irony is that when Google was young, there was a different set of "destructive trends". They still included taking VC, but it was also common knowledge that: 1. You had to sell a physical product for money. 2. You had to build out all your infrastructure before you could bring a product to market. 3. Sales & marketing were more important than engineering. 4. (When they were hiring on their hypergrowth trajectory, 2001-2004:) The web is dead, and programming is a terrible career because it's all about to be outsourced to India. Perhaps the meta-lesson is to do what other people are not doing. The point of markets is that they reward unexpected successes, where an entrepreneur serves a population with little competition, and that necessarily means thinking for yourself and ignoring the common wisdom. Fast.ai does an admirable job at that - their deep learning course is excellent - but taking their advice at face value is just as dumb as cargo-culting Google.

jacques_chester 9y ago
> Perhaps the meta-lesson is to do what other people are not doing. A better lesson might be: stumble upon a phenomenal river of gold and dive in head-first. Unfortunately, rivers of gold are rare. Which is why the rest of us are stuck with mundane stuff like marketing units of product or service to sell at a profit.
dboreham 9y ago
Taking on VC money is ok when you are making money (because you can demand decent terms). Google and Facebook are good examples.
bolololo1 9y ago
Isn't still Sales & marketing more important than engineering? You can build whatever you want but if you don't tell anybody you'll fail. There are hundreds of successful companies with rubbish products but great business connections and marketing.
- 9y ago

JumpCrisscross 9y ago

All advice is an older person talking to their younger self.

curun1r 9y ago

> VC is a "trend to avoid"? Avoid "Hypergrowth"? I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up I'm not going to say that VC isn't ever or usually the right move, but this comment is the height of survivorship bias. Not every business idea should be a VC-funded startup and trying to shoehorn every team and every business model into that path is a mistake. Whether to take VC capital is situational and depends on the team, market, product idea and all other factors of that specific startup. The businesses you listed were all the proverbial winning lottery tickets. There's plenty of losing lottery tickets too, and many of those had great ideas that would have been better served with a bootstrapped model that looked for slower, more sustainable growth and increased founder control. A great startup is like a great food recipe. You have to mix the right ingredients in the right amounts to make it taste good. Almost every ingredient works in some dish, but many ingredients don't work in combination. Dishes can be appetizers, mains or desserts, and you'll want to add different ingredients depending on which one you're making. VC is like sugar. It can make your startup fat in a hurry, but if you're growing very quickly, all those calories can keep you from starving. It tastes great in almost anything, but it's put into way to much of what we eat today and causes a lot of premature deaths.

hugs 9y ago
Another useful metaphor is that venture capital is rocket fuel. It's not useful if you're not building a rocket. And VCs only really want to give rocket fuel to rocket builders, anyway. VCs will be angry if you end up building a car or a plane instead of a rocket, no matter how awesome the car or plane that you built is, because they promised their investors (LPs) that they would only invest in rockets. But if you've clearly already built a rocket (perhaps after years of bootstrapping, and it's now obvious you can reach orbit -- if only you had enough fuel -- then venture capital, err rocket fuel, might make sense.)

daveguy 9y ago

I feel like the expectation after getting VC money is "do it fast" to the detriment of "do it right". We may have had the wrong VCs or CEOs where I have been, or maybe I brought my own bias, but that definitely felt like the push.

jjeaff 9y ago
Part of the m.o. for many VCs is to push for really high burn rates. Which has two reasons, one is to accelerate growth as you mentioned. Another is to cause you to spend the funds you raised and require more investment sooner. This giving the VC the option to own a larger and larger share of your company by the time that liquidity event hits.

peterjlee 9y ago

I think VC-funded hypergrowth raise your company's chance of failure. However, it also raises the chance of a big exit. Hence, high risk, high return. VCs are in the business of investing in high risk, high return companies. So it's natural they want their portfolio companies to optimize for high return than survival. If any one of the VC's 50 portfolio company makes a big exit, the VC profits. For founders and employees, you can't work for 50 different high risk, high return companies at the same time, so that might not be what they want.

jjeaff 9y ago

The problem with VC money is that you are likely taking on powerful investors / co owners that are unlikely to have the same goals that you have (or should have). VC money comes from those that have already become successful. So they are pushing for a strategy that will cause the majority of companies to fail but with the small chance that one will become the next Google, fb, etc. Most founders can't afford that methodology. They should be looking to build a good company with good cashflow that can earn them a healthy nest egg and make them wealthy. When was the last time you heard of a VC that wanted good dividends from their portfolio companies? So yes, if your goal as a founder is to build the next unicorn and you are willing to risk everything on that small chance to make it super big, then you should go the VC route. Problem is, you have one company and one life, so you better hope your company is the one in 10 that have a profitable exit. Or maybe save yourself some time and just go buy lottery tickets.

hugs 9y ago
"When was the last time you heard of a VC that wanted good dividends from their portfolio companies?" Indie.vc (Bryce Roberts)
- jjeaff 9y ago
  Cool, I'll take a look. There are always exceptions to the extreme norm, of course.

CM30 9y ago

To be honest, Twitter seems like exactly the kind of company that this advice was made for. It had a neat idea that could have been made them a steady profit as a small to medium sized company, but took on billions of dollars in funding, hired thousands of employees and hired a bunch of scientists and high end engineers for a project that arguably didn't need most of that stuff to begin with. Hence what could have been a decent company making a cool few million a year is instead one making huge losses on the assumption it's the next Facebook.

srean 9y ago

> I guess companies like Google, Facebook, Twitter, Amazon, Stripe, Airbnb, Dropbox, Pinterest and a hundred others all really messed up. This reeks of selection bias.