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>Raising money is a failure mode. If you're trying to build a lifestyle business, yes. That's correct. Incrementally building your recurring revenue is rewardi

by ABCLAW 8y ago

>Raising money is a failure mode. If you're trying to build a lifestyle business, yes. That's correct. Incrementally building your recurring revenue is rewarding and doesn't require outside investment and comes with no strings, which keeps the cognitive and administrative overhead of the enterprise low. If you're making a play to win in an emerging market against seriously capitalized contenders, you might not fare so well. In software, most of the product development is fairly bespoke, but in many other industries you require access to capital assets to do anything. Having a portfolio of well placed leases is critical for a retail play. Having capital or leverageable equity is essential for an industry consolidation play. One wouldn't pretend that the founder of a junior mining company 'lacks skills' for issuing a raise on public markets to develop a mining site. By extension, where the value add in an enterprise is not generated from the value of a software product, but by the integration of tech with some other vertical, obtaining serious cash infusions may be the only way for the business plan to succeed.

AndrewKemendo 8y ago
I agree with the OP here, and I think it's an interpretation of terms. If a company is "raising money" that means, in almost all cases, that they are actively soliciting or courting investors. They are doing the "Sand Hill Run" or some other such intense, grueling process which attempts to "pitch" the startup to investors in a gamified way. I agree with the OP that this is a failure mode because in almost every case I've seen the company can't survive without it in the short-mid term. If VC are literally hunting you down like Sequoia did with Whatsapp, I wouldn't consider that "Raising Money." They could have done without VC and been perfectly fine - probably better off long term.
- mdorazio 8y ago
  This is pretty narrow thinking. The #1 reason founders should be raising VC money is to grow faster than they possibly could without it. Could Uber have grown organically without raising millions of dollars? Yes, probably. Would they have been outcompeted by competitors with significantly more money to throw at driver and user acquisition? Absolutely. You have to look at the high-growth startup market as an exercise in game theory rather than as a single-company market. It matters a large amount what other companies could and would do if you don't take funding and grow as quickly as possible.
usrusr 8y ago
> If you're making a play to win in an emerging market against seriously capitalized contenders, you might not fare so well. Then it's a slightly more contrived case of race to the bottom, usually nobody wins. Except that in the case of race to overfunding, there is a parallel game of last-to-hold-the-bag going on, which some VC can win even on a failing company if they time their entry and exit right. If "Incrementally building your recurring revenue" is a lifestyle business, then lifestyle business must be a good thing. Acting as the vehicle of valuation inflation games played by VC however, I'm not even sure if that should qualify as business at all (slightly exaggerating, but "theatre troupe" is borderline applicable if earning money, now or in the future, is secondary to presenting a convincing "story" to future investors for the benefit of, and as demanded by, current investors).

by ABCLAW 8y ago

AndrewKemendo 8y ago

I agree with the OP here, and I think it's an interpretation of terms. If a company is "raising money" that means, in almost all cases, that they are actively soliciting or courting investors. They are doing the "Sand Hill Run" or some other such intense, grueling process which attempts to "pitch" the startup to investors in a gamified way. I agree with the OP that this is a failure mode because in almost every case I've seen the company can't survive without it in the short-mid term. If VC are literally hunting you down like Sequoia did with Whatsapp, I wouldn't consider that "Raising Money." They could have done without VC and been perfectly fine - probably better off long term.

mdorazio 8y ago
This is pretty narrow thinking. The #1 reason founders should be raising VC money is to grow faster than they possibly could without it. Could Uber have grown organically without raising millions of dollars? Yes, probably. Would they have been outcompeted by competitors with significantly more money to throw at driver and user acquisition? Absolutely. You have to look at the high-growth startup market as an exercise in game theory rather than as a single-company market. It matters a large amount what other companies could and would do if you don't take funding and grow as quickly as possible.

usrusr 8y ago

> If you're making a play to win in an emerging market against seriously capitalized contenders, you might not fare so well. Then it's a slightly more contrived case of race to the bottom, usually nobody wins. Except that in the case of race to overfunding, there is a parallel game of last-to-hold-the-bag going on, which some VC can win even on a failing company if they time their entry and exit right. If "Incrementally building your recurring revenue" is a lifestyle business, then lifestyle business must be a good thing. Acting as the vehicle of valuation inflation games played by VC however, I'm not even sure if that should qualify as business at all (slightly exaggerating, but "theatre troupe" is borderline applicable if earning money, now or in the future, is secondary to presenting a convincing "story" to future investors for the benefit of, and as demanded by, current investors).