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As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue

As someone who is interested in one day starting my own business, I have nothing but respect for someone who has the guts to follow through with that and pursue their vision. That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? I'm torn, because I believe that people should absolutely pursue passion projects, and that a passion project should absolutely be monetized... if you have developed a respectable business model and a potential product-market fit. My first thought is that you could get some funding and use this as a platform for fashion retailers to exchange consumer profiles at the B2B level, or as part of the internals of the recommendation system.

AchieveLife 7y ago
"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?" That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies. Fear of missing out is huge right now. I know of a startup that received a multi-million valuation and many more million in funding. They don't even have a prototype!
- timClicks 7y ago
  FOMO has always been present. What's changed is that debt is almost free. That allows VCs to take (very!) speculative bets for relatively low risk. They know that if each of their portfolio companies has a 10% chance to reach 30x returns, investing in 10 companies should pay off.
- RussianCow 7y ago
  This is very real. A friend of mine started a company with over a million in seed funding with what basically amounts to just an idea. Years later, the company isn't doing that well in terms of sales/revenue, but they still manage to raise money because they have a couple obvious acquisition targets. It seems crazy to me to throw millions of dollars at a company with the hopes that one of maybe three or four megacorps in the industry will acquire them, but investors buy into that, and that's all that matters.
  - jassmith87 7y ago
    Seed and Series A is investment in the people always. They assume if the product doesn't work the team will pivot until they find something that does. It sounds to me like your friend failed to pivot when needed.
    - tenpies 7y ago
      Not even. I'm seeing seed and series As/Bs on unproven teams of recent graduates with no experience in the field where the "start up" operates. No business plan, no prototype, huge regulatory walls to climb. It is worst than tulip mania.
      - nikanj 7y ago
        Funds make money on failed investments too. I'd be happy to throw away someone else's money, if I got to keep 20% as a management fee - and a slice of the profits in case one of my lottery tickets is a winner.
        shagbag 7y ago
        Typically they'd get 2% of assets under management, not 20%.
        zhoujianfu 7y ago
        2% a year for 10 years..
        gnaritas 7y ago
        Which is about 18% of the original investment, not 20, assuming no gains or losses.
      - streetcat1 7y ago
        Where? Can you give an example?
- bobloblaw45 7y ago
  I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea? Like if you wanted to open a dry cleaners.
  - Analemma_ 7y ago
    No, because the mania for throwing money at tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs after the initial Big Spend on capex, and hence potentially gigantic returns for investors. Now, how well the current crop of startups is delivering on that promise is an exercise left to the reader, but it's there in theory. A dry cleaner has marginal costs and no economy of scale, and so can't attract unicorn valuations.
    - icedchai 7y ago
      Zero marginal cost in theory. In reality, you often find enormous cloud costs combined with huge marketing spend.
      - btilly 7y ago
        As long as your product is perfectly scalable and generates a profit for money spent that way, it makes perfect sense to take a loan, spend a fortune, make a fortune, then pay off the loan and take in profits. Then turn around and do it again. It isn't the absolute size of the numbers that matters. It is the ability to rapidly scale the business once you have the right business model and product.
        x0x0 7y ago
        And in particular, if you sell low churn saas (like we do), you can comfortably spend the first year's annual contract value on customer acquisition and have an extremely profitable business. Just huge initial marketing costs. And quite possibly huge ongoing marketing costs! But if churn is low, or even negative, you can assume something like 10 year customer lifetimes, with a comfortable 5-ish percent cost increase per year, on sale for the first year's contract value. If you have cheap-ish money available, you should buy as many of those as the world is willing to sell.
- daxorid 7y ago
  Indeed. The flip-side to this is that speculative investment on unprofitable moonshots seems to be where ALL the equity-finance money is. My company reliably earns low-7-figures on high-7-figures revenue, with respectable but not amazing growth, but the only capital "market" open to us is bank loans and merchant financing. Nobody cares about boring profitability.
  - scarface74 7y ago
    Why is that a bad thing? If you are profitable, why would you want to give up equity and control?
  - x0x0 7y ago
    Serious question -- why would you want something besides a bank loan? Because a loan at a couple of percent is way cheaper than VC, who will typically want at least 20% of your company?
    - deleted 7y ago
      [deleted]
- melvinroest 7y ago
  Well, not everyone does that. I applied to YC with my side project [1] and got rejected. I didn't expect to get in, but if I would have, then I would be full-time on it. Now I can't, which is a shame. So in that sense, I wish someone would fund me. I have a lot of "doodling the internet" type of ideas. I use digital note taking extensively myself, so I know what's missing. [1] doodledocs.com
  - hazz99 7y ago
    What differentiates you from drawing apps?
  - mikekchar 7y ago
    I'll give you a hint. You should pivot to a collaborative design app. There are a couple around, but very few that have that "doodle feeling". You should be able to pick up a pen, sketch something quickly and then have someone else be able to modify/review it. I'll give you another hint. Add shape recognition and move from capturing and storing pen strokes and generating bitmaps to capturing pen strokes and generating shapes. Add rudimentary grouping and ungrouping functionality, ability to move, stretch, rotate, etc. Allow pasting clip art and letting it grow/shrink/rotate when grouped with other objects, but just with a rough scaling, etc -- it doesn't have to look pretty. It's just for sketching things out. Practically every software/design team needs an application like this and there will be money to pay for it. P.S. I was on a team that built this as a windows application about 20 years ago, but we were ahead of our time. A SaaS webapp would be the bomb here.
  - deleted 7y ago
    [deleted]
vassilyk 7y ago
The real question is who invested, and why? Even though being an investor doesn't mean being smart at it, it's still a signal that those guys are/were onto something and needed the cash to accelerate/deploy. $3.5M for such a small remote team though... I'm not running the numbers but they were cash burning big time, for a long time.
- t222 7y ago
  > The real question is who invested, and why? This always baffles me the most. Who gives money to a startup without a business model? I guess they just have funds to throw at the wall and hope something sticks.
  - nostrademons 7y ago
    Startups with scalable, repeatable business models are basically not startups anymore, since the whole point of a startup is to search for scalable, repeatable business model. And valuations match that: once the startup has actually found a scalable business model and is in its growth phase, expect to pay $100M or more for it, sometimes into the billions.
    - toast0 7y ago
      People aren't necessarily asking for a business. They're asking for a business model: a way, maybe untested, maybe lightly tested, that you might earn more than you spend. Just needs to be semi-plausible, doesn't need to be bulletproof.
      - nostrademons 7y ago
        If you don't care about whether it's tested this startup had a plausible business model: by coming up with an algorithm to identify fashion taste, fashion e-commerce sites could show more relevant recommendations, which leads to more sales, which leads to more revenue. Then they pay this company some fraction of that additional revenue, and both win.
      - 7y ago
nostrademons 7y ago
> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? That's pretty common, and is basically what seed funding is. The paradox behind markets and investment is that logically speaking, if a potential company has a profitable business model, that company should already exist. After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil. So what investors and entrepreneurs do is they agree to take on risk with their capital, for the potential of great reward if it turns out they can come up with a better way of doing things that isn't already being done. The only way to do this is to explore virgin territory: do things that seem plausible but haven't currently been tried by existing companies, and then see if you can create a profitable business model with the results. There's a good chance that you can't, in which case okay, it was an experiment, you spent $3.5M to learn something that had the shot of being worth billions.
- thehappypm 7y ago
  "After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil." This basically amounts to "everything that can be invented has been invented". You sure?
  - alex7o 7y ago
    No, more like you should invent a new way of selling things, otherwise the market would have found a way to sell them already.
  - gowld 7y ago
    Yes. And it's true, statistically. Most inventable things will be invented by someone else before you succeed at it. Statistically, no one wins the lottery, even though someone always does.
t222 7y ago
Asking the real questions. > That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Biggest mistake IMHO. But is quite common these days. Everybody is chasing the unicorn dream.
- chrisgarand 7y ago
  It's important to consider that most businesses that start in new areas/ try re-defining the market don't have business models, as they are too small to build a model from. Sure they can bootstrap from one idea to the next until something takes hold, but unless it's a new paradigm that is on the cusp, you're many years (think 5+) from attaining a scalable model. The funding is to be able to hire people, and iterate quickly to expand the business, and find a scalable business model. Trying to build a business model with out a pre-existing business is like trying to solve for x when the right side of the equation is missing. You'll come up with answers, but they're probably wrong once tested.
  - streetcat1 7y ago
    Startups should not create new markets. Too risky. Do what amazon/google does, just with a twist. You dig where the gold is.
    - lmeyerov 7y ago
      That's sad and I disagree - category creation is amazing. Though indeed, I've observed that almost all VC's are indeed against this until it's been handed to them on a silver platter, despite what they may believe about themselves and their firms. So the tricky part is how to fund it over time :)
      - chrisgarand 7y ago
        They're people as well, the good ones use it as a way to test the conviction of the founding team. If they can't take a few verbal licks, why would they be able to acquire enough customers to gain traction? Not a perfect test, but it has proven to be a workable process where the ones with the most conviction always get _something_. Sometimes it's too late, and sometimes it doesn't work out. That's life.
pmichaud 7y ago
I think a lot of the time the idea of funding is: From the startup's side: We don't actually know the business yet, so we need resources to fund our runway while we figure it out (ie. interact with the market enough to make smart pivots toward profitability). The the funder's side: We basically don't give a shit what the business turns out to be, we want to fund talented teams that we believe can pull off profitability.
a_band 7y ago
> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? Not exactly. A lot of startups can function as R&D for larger tech companies: Big tech companies have lots of money but aren't great at innovation. They might spend 10s of millions of dollars just to get a lesser quality version of what they could own if they just bought the best startup in the space. This is why companies with $0.00 revenue get acquired all the time. It's a simple calculation: will it be cheaper to buy or build this tech? For many companies it's cheaper to buy. That being said, Chicisimo is in a very tough situation. The problem with their strategy is: 1. They have to be acquired or they'll go out of business. This is a terrible negotiating position to start from. There is no walk away power. If I was an interested buyer, why wouldn't I offer an insultingly low price? How does $100k to cover legal costs and a nice signing bonus to your employees sound? Do you have a better option? 2. They need a buyer who needs their experimental technology. This is what's called a "strategic acquisition". And they are almost impossible to engineer from the startup's position. The chances of a finding company with a lot of cash with an exec who wants experimental tech enough to spend a decent amount of money on it are almost certainly zero. If they haven't attracted the attention of a buyer by now, it's unlikely that they'll become more attractive now that they're about to fail. Having been in this situation myself, it is so helpful to have some revenue to fall back on. That way you can demonstrate that the business is worth something. I wish them the best of luck. Hopefully they pull something out here but the chances are low.
- sokoloff 7y ago
  There’s one other sub-angle: that a company may be interested in buying to prevent their competition from buying the tech. Buy and bury is a valid worst case acquisition outcome for some acquirers.
rolltiide 7y ago
The business of selling securities is a business. Tapping into the sentiment steered by macroeconomic trends is wise. Limiting that to the consumer product model is unwise.
dwild 7y ago
> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? I offer you 3.5M to start a business, without needing a business model, why wouldn't you take it? The real question is, how did they were able to raise 3.5M and why haven't they made sure that they had a strong business model.
jkuria 7y ago
Google didn't have a business model when they started but they were sure they were building something useful. I don't know much about fashion and I don't know if what they have is truly useful, but I respect them a lot and will see if I have contacts I could introduce them to.
- aeturnum 7y ago
  Google's initial funding, when they did not have a business model, was around 1 million dollars. By the time they got a significant chunk they had decided to use ads to try to monetize. Not all useful things make sense as income generating businesses.
  - jkuria 7y ago
    Not according to In the Plex. They had raised money from Sequoia and Kleiner Perkins and John Doerr was almost losing his mind on how much cash they were burning through with no business model. Finally, in an act of desperation, they copied Overture's model. The rest is history!
  - sokoloff 7y ago
    $1MM in 1988 is about $2.15MM today, hardly different from what these folk raised.
coldtea 7y ago
>That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? If you can raise them why would it be crazy? It's only crazy for those that give the money (and for them they could be spare change)
scarface74 7y ago
I’m no fan of the startup and HN definition of success being valuation, revenue, or market cap while ignoring (the lack of) profitability. But from a cynical standpoint, why not take VC money if you can get it? It seems like you should take VC money if you don’t have a business model that would lead to being a profitable ongoing concern. If I can see profitability, why would I give up equity? You let other people take the downside risk. Why use your own money instead of other people’s money.
- whateveracct 7y ago
  Yep, worst case you get lil nice wealth transfer from VCs to the people in the company, all for being an entrepreneur!
- inventtheday 7y ago
  its not taking the money thats the problem. spending it is the problem because it accelerates your burn rate
tomlagier 7y ago
My first thought: It's could be very difficult to build a product to a stage where product-market fit can be assessed without external financial assistance. I think most products can be brought to this point in a year or two with a team of 2 or 3 people, but that's a pretty sizable chunk of living expenses and possibly salary that needs to get paid. If the only people who can start companies are the ones that have at least a few hundred thousand dollars in the bank, that really limits the field. I think VC probably plays a beneficial role here, opening it up to people who otherwise would have no freedom to spend a year or two pursuing an idea that may or may not convert into a profitable business.

AchieveLife 7y ago

"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?" That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies. Fear of missing out is huge right now. I know of a startup that received a multi-million valuation and many more million in funding. They don't even have a prototype!

timClicks 7y ago
FOMO has always been present. What's changed is that debt is almost free. That allows VCs to take (very!) speculative bets for relatively low risk. They know that if each of their portfolio companies has a 10% chance to reach 30x returns, investing in 10 companies should pay off.
RussianCow 7y ago
This is very real. A friend of mine started a company with over a million in seed funding with what basically amounts to just an idea. Years later, the company isn't doing that well in terms of sales/revenue, but they still manage to raise money because they have a couple obvious acquisition targets. It seems crazy to me to throw millions of dollars at a company with the hopes that one of maybe three or four megacorps in the industry will acquire them, but investors buy into that, and that's all that matters.
- jassmith87 7y ago
  Seed and Series A is investment in the people always. They assume if the product doesn't work the team will pivot until they find something that does. It sounds to me like your friend failed to pivot when needed.
  - tenpies 7y ago
    Not even. I'm seeing seed and series As/Bs on unproven teams of recent graduates with no experience in the field where the "start up" operates. No business plan, no prototype, huge regulatory walls to climb. It is worst than tulip mania.
    - nikanj 7y ago
      Funds make money on failed investments too. I'd be happy to throw away someone else's money, if I got to keep 20% as a management fee - and a slice of the profits in case one of my lottery tickets is a winner.
      - shagbag 7y ago
        Typically they'd get 2% of assets under management, not 20%.
        zhoujianfu 7y ago
        2% a year for 10 years..
        gnaritas 7y ago
        Which is about 18% of the original investment, not 20, assuming no gains or losses.
    - streetcat1 7y ago
      Where? Can you give an example?
bobloblaw45 7y ago
I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea? Like if you wanted to open a dry cleaners.
- Analemma_ 7y ago
  No, because the mania for throwing money at tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs after the initial Big Spend on capex, and hence potentially gigantic returns for investors. Now, how well the current crop of startups is delivering on that promise is an exercise left to the reader, but it's there in theory. A dry cleaner has marginal costs and no economy of scale, and so can't attract unicorn valuations.
  - icedchai 7y ago
    Zero marginal cost in theory. In reality, you often find enormous cloud costs combined with huge marketing spend.
    - btilly 7y ago
      As long as your product is perfectly scalable and generates a profit for money spent that way, it makes perfect sense to take a loan, spend a fortune, make a fortune, then pay off the loan and take in profits. Then turn around and do it again. It isn't the absolute size of the numbers that matters. It is the ability to rapidly scale the business once you have the right business model and product.
      - x0x0 7y ago
        And in particular, if you sell low churn saas (like we do), you can comfortably spend the first year's annual contract value on customer acquisition and have an extremely profitable business. Just huge initial marketing costs. And quite possibly huge ongoing marketing costs! But if churn is low, or even negative, you can assume something like 10 year customer lifetimes, with a comfortable 5-ish percent cost increase per year, on sale for the first year's contract value. If you have cheap-ish money available, you should buy as many of those as the world is willing to sell.
daxorid 7y ago
Indeed. The flip-side to this is that speculative investment on unprofitable moonshots seems to be where ALL the equity-finance money is. My company reliably earns low-7-figures on high-7-figures revenue, with respectable but not amazing growth, but the only capital "market" open to us is bank loans and merchant financing. Nobody cares about boring profitability.
- scarface74 7y ago
  Why is that a bad thing? If you are profitable, why would you want to give up equity and control?
- x0x0 7y ago
  Serious question -- why would you want something besides a bank loan? Because a loan at a couple of percent is way cheaper than VC, who will typically want at least 20% of your company?
  - deleted 7y ago
    [deleted]
melvinroest 7y ago
Well, not everyone does that. I applied to YC with my side project [1] and got rejected. I didn't expect to get in, but if I would have, then I would be full-time on it. Now I can't, which is a shame. So in that sense, I wish someone would fund me. I have a lot of "doodling the internet" type of ideas. I use digital note taking extensively myself, so I know what's missing. [1] doodledocs.com
- hazz99 7y ago
  What differentiates you from drawing apps?
- mikekchar 7y ago
  I'll give you a hint. You should pivot to a collaborative design app. There are a couple around, but very few that have that "doodle feeling". You should be able to pick up a pen, sketch something quickly and then have someone else be able to modify/review it. I'll give you another hint. Add shape recognition and move from capturing and storing pen strokes and generating bitmaps to capturing pen strokes and generating shapes. Add rudimentary grouping and ungrouping functionality, ability to move, stretch, rotate, etc. Allow pasting clip art and letting it grow/shrink/rotate when grouped with other objects, but just with a rough scaling, etc -- it doesn't have to look pretty. It's just for sketching things out. Practically every software/design team needs an application like this and there will be money to pay for it. P.S. I was on a team that built this as a windows application about 20 years ago, but we were ahead of our time. A SaaS webapp would be the bomb here.
- deleted 7y ago
  [deleted]

vassilyk 7y ago

The real question is who invested, and why? Even though being an investor doesn't mean being smart at it, it's still a signal that those guys are/were onto something and needed the cash to accelerate/deploy. $3.5M for such a small remote team though... I'm not running the numbers but they were cash burning big time, for a long time.

t222 7y ago
> The real question is who invested, and why? This always baffles me the most. Who gives money to a startup without a business model? I guess they just have funds to throw at the wall and hope something sticks.
- nostrademons 7y ago
  Startups with scalable, repeatable business models are basically not startups anymore, since the whole point of a startup is to search for scalable, repeatable business model. And valuations match that: once the startup has actually found a scalable business model and is in its growth phase, expect to pay $100M or more for it, sometimes into the billions.
  - toast0 7y ago
    People aren't necessarily asking for a business. They're asking for a business model: a way, maybe untested, maybe lightly tested, that you might earn more than you spend. Just needs to be semi-plausible, doesn't need to be bulletproof.
    - nostrademons 7y ago
      If you don't care about whether it's tested this startup had a plausible business model: by coming up with an algorithm to identify fashion taste, fashion e-commerce sites could show more relevant recommendations, which leads to more sales, which leads to more revenue. Then they pay this company some fraction of that additional revenue, and both win.
    - 7y ago

nostrademons 7y ago

> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? That's pretty common, and is basically what seed funding is. The paradox behind markets and investment is that logically speaking, if a potential company has a profitable business model, that company should already exist. After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil. So what investors and entrepreneurs do is they agree to take on risk with their capital, for the potential of great reward if it turns out they can come up with a better way of doing things that isn't already being done. The only way to do this is to explore virgin territory: do things that seem plausible but haven't currently been tried by existing companies, and then see if you can create a profitable business model with the results. There's a good chance that you can't, in which case okay, it was an experiment, you spent $3.5M to learn something that had the shot of being worth billions.

thehappypm 7y ago
"After all, with millions of potential entrepreneurs across the globe and trillions in funding chasing them, the chance that an obviously profitable business model hasn't already been dreamed up and implemented by an entrepreneur is basically nil." This basically amounts to "everything that can be invented has been invented". You sure?
- alex7o 7y ago
  No, more like you should invent a new way of selling things, otherwise the market would have found a way to sell them already.
- gowld 7y ago
  Yes. And it's true, statistically. Most inventable things will be invented by someone else before you succeed at it. Statistically, no one wins the lottery, even though someone always does.

t222 7y ago

Asking the real questions. > That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Biggest mistake IMHO. But is quite common these days. Everybody is chasing the unicorn dream.

chrisgarand 7y ago
It's important to consider that most businesses that start in new areas/ try re-defining the market don't have business models, as they are too small to build a model from. Sure they can bootstrap from one idea to the next until something takes hold, but unless it's a new paradigm that is on the cusp, you're many years (think 5+) from attaining a scalable model. The funding is to be able to hire people, and iterate quickly to expand the business, and find a scalable business model. Trying to build a business model with out a pre-existing business is like trying to solve for x when the right side of the equation is missing. You'll come up with answers, but they're probably wrong once tested.
- streetcat1 7y ago
  Startups should not create new markets. Too risky. Do what amazon/google does, just with a twist. You dig where the gold is.
  - lmeyerov 7y ago
    That's sad and I disagree - category creation is amazing. Though indeed, I've observed that almost all VC's are indeed against this until it's been handed to them on a silver platter, despite what they may believe about themselves and their firms. So the tricky part is how to fund it over time :)
    - chrisgarand 7y ago
      They're people as well, the good ones use it as a way to test the conviction of the founding team. If they can't take a few verbal licks, why would they be able to acquire enough customers to gain traction? Not a perfect test, but it has proven to be a workable process where the ones with the most conviction always get _something_. Sometimes it's too late, and sometimes it doesn't work out. That's life.

pmichaud 7y ago

I think a lot of the time the idea of funding is: From the startup's side: We don't actually know the business yet, so we need resources to fund our runway while we figure it out (ie. interact with the market enough to make smart pivots toward profitability). The the funder's side: We basically don't give a shit what the business turns out to be, we want to fund talented teams that we believe can pull off profitability.

a_band 7y ago

> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? Not exactly. A lot of startups can function as R&D for larger tech companies: Big tech companies have lots of money but aren't great at innovation. They might spend 10s of millions of dollars just to get a lesser quality version of what they could own if they just bought the best startup in the space. This is why companies with $0.00 revenue get acquired all the time. It's a simple calculation: will it be cheaper to buy or build this tech? For many companies it's cheaper to buy. That being said, Chicisimo is in a very tough situation. The problem with their strategy is: 1. They have to be acquired or they'll go out of business. This is a terrible negotiating position to start from. There is no walk away power. If I was an interested buyer, why wouldn't I offer an insultingly low price? How does $100k to cover legal costs and a nice signing bonus to your employees sound? Do you have a better option? 2. They need a buyer who needs their experimental technology. This is what's called a "strategic acquisition". And they are almost impossible to engineer from the startup's position. The chances of a finding company with a lot of cash with an exec who wants experimental tech enough to spend a decent amount of money on it are almost certainly zero. If they haven't attracted the attention of a buyer by now, it's unlikely that they'll become more attractive now that they're about to fail. Having been in this situation myself, it is so helpful to have some revenue to fall back on. That way you can demonstrate that the business is worth something. I wish them the best of luck. Hopefully they pull something out here but the chances are low.

sokoloff 7y ago
There’s one other sub-angle: that a company may be interested in buying to prevent their competition from buying the tech. Buy and bury is a valid worst case acquisition outcome for some acquirers.

rolltiide 7y ago

The business of selling securities is a business. Tapping into the sentiment steered by macroeconomic trends is wise. Limiting that to the consumer product model is unwise.

dwild 7y ago

> Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? I offer you 3.5M to start a business, without needing a business model, why wouldn't you take it? The real question is, how did they were able to raise 3.5M and why haven't they made sure that they had a strong business model.

jkuria 7y ago

Google didn't have a business model when they started but they were sure they were building something useful. I don't know much about fashion and I don't know if what they have is truly useful, but I respect them a lot and will see if I have contacts I could introduce them to.

aeturnum 7y ago
Google's initial funding, when they did not have a business model, was around 1 million dollars. By the time they got a significant chunk they had decided to use ads to try to monetize. Not all useful things make sense as income generating businesses.
- jkuria 7y ago
  Not according to In the Plex. They had raised money from Sequoia and Kleiner Perkins and John Doerr was almost losing his mind on how much cash they were burning through with no business model. Finally, in an act of desperation, they copied Overture's model. The rest is history!
- sokoloff 7y ago
  $1MM in 1988 is about $2.15MM today, hardly different from what these folk raised.

coldtea 7y ago

>That being said... why did you (or if anyone else can chip in) decide to chase funding when you didn't have a business model? Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else? If you can raise them why would it be crazy? It's only crazy for those that give the money (and for them they could be spare change)

scarface74 7y ago

I’m no fan of the startup and HN definition of success being valuation, revenue, or market cap while ignoring (the lack of) profitability. But from a cynical standpoint, why not take VC money if you can get it? It seems like you should take VC money if you don’t have a business model that would lead to being a profitable ongoing concern. If I can see profitability, why would I give up equity? You let other people take the downside risk. Why use your own money instead of other people’s money.

whateveracct 7y ago
Yep, worst case you get lil nice wealth transfer from VCs to the people in the company, all for being an entrepreneur!
inventtheday 7y ago
its not taking the money thats the problem. spending it is the problem because it accelerates your burn rate

tomlagier 7y ago

My first thought: It's could be very difficult to build a product to a stage where product-market fit can be assessed without external financial assistance. I think most products can be brought to this point in a year or two with a team of 2 or 3 people, but that's a pretty sizable chunk of living expenses and possibly salary that needs to get paid. If the only people who can start companies are the ones that have at least a few hundred thousand dollars in the bank, that really limits the field. I think VC probably plays a beneficial role here, opening it up to people who otherwise would have no freedom to spend a year or two pursuing an idea that may or may not convert into a profitable business.