4 ms·

"Forced to survive on revenue" that's a bad thing?

by lima 9y ago

carlosdp 9y ago
I understand the sentiment behind it, but that also stuck out as a strange way to frame it to me =P
akharris 9y ago
No, it's great. However, if you're building a seed deck with which to pitch investors, it probably isn't what you're going for.
CharlesMerriam2 9y ago
The basis of venture capital is the simple statement: "For every buck you give us, we will give at least two bucks back next year." You take this extortion because the benefits are ludicrous. "If we get EBay into every country before anyone else, we make silly money" or "We need want <mumble> million to make <mumble> billion in the next few years." The hardest part to get investors to understand that exiting in two years with only a 3x return is still a win.
- chrisweekly 9y ago
  >"exiting in two years with only a 3x return is still a win" Not for traditional VCs it isn't. As a rule of thumb, 90% of the startups they bet on will fail outright, and simply burn through the investment. If you're looking to raise, you need to convince them not only that you are in that remaining 10% (ie, those that will generate any revenue at all, let alone profits), but that you're going to generate massive returns to way more than subsidize and justify all the other losses. Pitching VCs with "3x in 2 yrs" is saying you are not what they're looking for. (That said, it'd be a huge success from a business mgmt perspective.)
  - gowld 9y ago
    Close, but it's impossible to say whether "3x in 2 yrs" is a win, because portfolios win, not single investments. Would you take a risk-free 70%/yr return? Of course you would. Every damn time. But you can't know if the investment is risk-free.
  - dctoedt 9y ago
    > As a rule of thumb, 90% of the startups they bet on will fail outright, and simply burn through the investment. I recently heard a VC say that this was true back in the 90s but not so much today — that they're looking for singles, doubles, and triples as much as they are for grand-slam home runs.
  - dustingetz 9y ago
    Philly VCs want 3x, I pressed this q on a panel in Philly, they literally spelled out that they want founders to show them a validated formula where they insert $10mm into adwords or something, press Scale button, wait a couple years, $100mm IPO of which they get 30%. It just didn't really jive with what I know about tech and hypergrowth startups.
aresant 9y ago
Taking the YC Seed Deck as advice means you are building a startup which is "a company designed to grow fast." AKA that is likely to be highly unprofitable, insanely stressful, and only more capital intensive for potentially years to come. I think that PG does an outstanding job outlining this model for growth in his "Startup = Growth" essay: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html

"Forced to survive on revenue" that's a bad thing?

by lima 9y ago

"Forced to survive on revenue" that's a bad thing?

carlosdp 9y ago

I understand the sentiment behind it, but that also stuck out as a strange way to frame it to me =P

akharris 9y ago

No, it's great. However, if you're building a seed deck with which to pitch investors, it probably isn't what you're going for.

CharlesMerriam2 9y ago

The basis of venture capital is the simple statement: "For every buck you give us, we will give at least two bucks back next year." You take this extortion because the benefits are ludicrous. "If we get EBay into every country before anyone else, we make silly money" or "We need want <mumble> million to make <mumble> billion in the next few years." The hardest part to get investors to understand that exiting in two years with only a 3x return is still a win.

chrisweekly 9y ago
>"exiting in two years with only a 3x return is still a win" Not for traditional VCs it isn't. As a rule of thumb, 90% of the startups they bet on will fail outright, and simply burn through the investment. If you're looking to raise, you need to convince them not only that you are in that remaining 10% (ie, those that will generate any revenue at all, let alone profits), but that you're going to generate massive returns to way more than subsidize and justify all the other losses. Pitching VCs with "3x in 2 yrs" is saying you are not what they're looking for. (That said, it'd be a huge success from a business mgmt perspective.)
- gowld 9y ago
  Close, but it's impossible to say whether "3x in 2 yrs" is a win, because portfolios win, not single investments. Would you take a risk-free 70%/yr return? Of course you would. Every damn time. But you can't know if the investment is risk-free.
- dctoedt 9y ago
  > As a rule of thumb, 90% of the startups they bet on will fail outright, and simply burn through the investment. I recently heard a VC say that this was true back in the 90s but not so much today — that they're looking for singles, doubles, and triples as much as they are for grand-slam home runs.
- dustingetz 9y ago
  Philly VCs want 3x, I pressed this q on a panel in Philly, they literally spelled out that they want founders to show them a validated formula where they insert $10mm into adwords or something, press Scale button, wait a couple years, $100mm IPO of which they get 30%. It just didn't really jive with what I know about tech and hypergrowth startups.

aresant 9y ago

Taking the YC Seed Deck as advice means you are building a startup which is "a company designed to grow fast." AKA that is likely to be highly unprofitable, insanely stressful, and only more capital intensive for potentially years to come. I think that PG does an outstanding job outlining this model for growth in his "Startup = Growth" essay: http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html