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My partner left a comfy management consulting job to co-found our business and we constantly argued about taking external investment at the beginning. She felt
by garply 16y ago
My partner left a comfy management consulting job to co-found our business and we constantly argued about taking external investment at the beginning. She felt compelled to seek it, even though we didn't need it. I'm convinced it was due to the prestige of receiving investment - instead of telling her old coworkers "I've started a little company," she could say "I've raised half a million dollars for my startup." Thankfully, I talked her out of it.
Now people come knocking on our door looking to invest. When you're solidly profitable and growing, suddenly these people looking to buy a chunk of your business don't seem like such a sweet deal - unless they really have enough capital and connections to safely push you into a much larger market.
- vegashacker 16y agoWhat's your company?
- garply 16y agoSorry, I don't care to reveal that information. I work in an offline sector that is not as carefree with information as Silicon Valley software firms tend to be. My company is actually far more capital intensive (think plumbing or dentistry) than a software firm would be. We had non-trivial fixed startup costs and our costs tend to scale up (slightly sublinearly) alongside our growth, but we still managed to bootstrap via consulting, one-off jobs, favors, and creativity. I often puzzle at why a software startup which has far lower costs than our firm would want to take outside capital. From an entrepreneur's perspective, capital is much more suited to a firm like ours than a software company - when I look at the margins in the software industry and the small amounts of money angels invest in exchange for the equity, I think they must be laughing all the way to the bank.
- ojbyrne 16y agoYou're only seeing the winners. An ill-defined software product (which almost all software startups are), is similar to scientific exploration - you start with an idea, but you have no idea going in how much effort (months, years, decades) it will take to realize that idea, or even if its possible at all. After all that, what you end up producing may be not what customers want at all. In the time you took producing your new innovative software product, the market could have moved on. The immediate example that comes to mind is "Cuil," - a search engine (large market) started by ex-googlers (great team), with $5 million investment (well-funded). It took them forever to launch (because its a hard problem), and partly because of that, they got poor PR and little traction. They've got another $25 million investment since then, and almost nothing to show for it.
- robk 16y agoOnly one founder was ex-Google, Anna.
- ojbyrne 16y agoCrunchbase says: "Husband and wife team Tom Costello and Anna Patterson were joined by Russell Power. Patterson and Power are ex-Google search experts" Anyway I don't want to cast aspersions too much on Cuil, because they may turn out to be successful eventually. My point was that software is a hugely risky business, with massive upfront costs. You can build stuff cheaply of course, but when you do that, you have the problem of dealing with competition - namely if you can build it cheaply, others can too.