5 ms·

Microsoft was a bootstrapped company and at the time, I suspect that some people derided it as a "lifestyle business". They didn't go chasing after VC money and

by credo 16y ago

Microsoft was a bootstrapped company and at the time, I suspect that some people derided it as a "lifestyle business". They didn't go chasing after VC money and didn't use the zero-revenue customer acquisition model to grow. Are you sure that Microsoft didn't impact the world. I'm not sure which "lifestyle business" duped customers into overpaying, but it is absurd to equate the so-called lifestyle business to "duping credulous customers into overpaying for a time-tracking tool styled with this month's CSS trends". I can list far worse cases - corporate fraud and crimes - with large companies Ultimately, the "lifestyle business" is a silly vc-invented label. Running after VC money is also a lifestyle. All businesses aim to impact lifestyles of founders, employees and customers. The difference is that vc-funded business also impact lifestyles of vcs. Bootstrapped companies don't impact vc lifestyles (unless they compete with a VC-funded company :). imo both lifestyles are equally valid, but it is absurd to describe one as a lifestyle company and pretend that the other one (which risks other people's money) is the true and only "risk-taker"

pg 16y ago
The VC industry barely existed when Microsoft was founded in 1975. I don't know if Bill Gates would even have known the word "startup" then. He was starting a business the only way people knew how to at the time. Now founders have more options. That's not bad. In fact, the empirical evidence suggests it's net better, because the company that would be most people's candidate for the "next Microsoft," Google, took advantage of these new options to grow faster than Microsoft did.
- credo 16y ago
  More options are great. I have always said that the bootstrapped model and the vc-funded model are both good legitimate models for businesses. My problem with the parent post was the absurd notion it promoted about companies that didn't run chase vc funding. As mentioned, I also think that "lifestyle business" is a stupid vc-invented label. Incidentally, Google developed great technology and a great monetization strategy before they took in vc funding. Being acquired wasn't Google's goal. The reality of today's VC world is the opposite of Google's approach. VCs make money through the acquisitions of companies they fund.
  - pg 16y ago
    Empirically very few big technology companies do it without taking money from investors. I've never really liked the term "lifestyle business" and I don't know who invented it. But I think it is a useful distinction, even for the people starting them. Is your goal for the company to make yourself a nice living, or do you want it to grow into something bigger than would be needed to achieve that? It's false that VCs want companies to be acquired. They would much prefer that they continued to grow as independent companies, like Google or Facebook. Those are the big successes that generate most of the returns in the VC business.
    - credo 16y ago
      sure, and the average man on the street may prefer that he become a multi-millionaire within a year. However, that sort of preference isn't as important as the realistic outcomes that a VC aims for. Unfortunately, I don't have specific data to back this up, but my sense is that very few VCs get to invest in blockbuster hits like Google (and as I mentioned, Google didn't take VC investment until they had already developed great technology and a great monetization strategy. So investment in Google was at a much higher valuation than what you'd expect for the typical VC deal) Again without specific data, my sense is that most money-making deals (for investors) are deals like the YouTube acquisition or other much smaller acquisitions ........ and I also think that most VC-funded companies make little or no money for the investors (and either crash or go through firesales).
      - pg 16y ago
        Acquisitions are never what VCs aim for. They aim for big, independent companies. They rarely hit that target, but it's always what they're aiming for. Angels are different. Angels are willing to invest in a startup whose only likely good outcome is an acquisition. But VCs will not even consider making a series A investment in a startup that doesn't have a credible plan for getting to the kind of revenues that would support an IPO.
        credo 16y ago
nikcub 16y ago
Microsoft raised $1M in VC in '81 from TVI (went on to become August Capital - at least shared some partners and LP's). they also burnt through a lot of Bill's parents' money (which is why he had a larger share than Allen) for some reason this isn't part of the microsoft history story and most ppl don't know about it - but it took years for microsoft to gring out decent revenues and profits. 'lifestyle business' is meant to mean a small business where the goal is to gain enough revenue to live from. ie. something between ramen profitable and taking a salary from a VC funded business. I can't really think of a top50 tech firm (on market cap) that didn't raise outside capital at some point.
- credo 16y ago
  >>it took years for microsoft to gring out decent revenues and profits. Microsoft's first profitable program was Basic and it was released soon after the company's launch in 1975. 6 years after Microsoft launched, TVI invested and obtained a tiny portion of Microsoft's stock. To answer your question on the history, this sole vc investment played a very small part in Microsoft's history and the tiny VC share is one reason why Microsoft was a founder-run company. Btw to be clear,capital can definitely be useful. Youtube had losses running into hundreds of millions of dollars. Yet, VC money helped them make a big impact on the world. However, after Microsoft's model, my preference would be for the model adopted by companies like Google. Google developed great technology and a great monetization strategy before they took in a single penny of venture funds. Again, it is no coincidence that Google is a founder-run company today. All that said, I have no problem with zero-revenue companies that chase vc funding and hope to get acquired (Acquisition is how most VCs get returns on their investments). I'm just suggesting that it is absurd to create silly labels like "lifestyle business" and pretend that risking other people's money (i.e. vc funds) is the litmus test for a true "risk-taker"
  - nikcub 16y ago
    I agree re: risk taking. I would go as far as to say that when the fundraising environment is frothy, paying yourself $150k p.a as the CEO of a VC backed firm actually isn't 'taking a risk'. There is a class of entrepreneur who don't quit their job, or leave one foot in that door, until they actually raise money and can pay themselves that salary. for eg. I know of a smallish no-revenue VC funded startup where the CEO and founder pays himself $300k. what the board and investors didn't know is that for the first 6 months in the life of the startup while he was 'salary sacrificing' he was actually consulting with a big co. for $30k a month. I wouldn't call that taking a risk, its the opposite, really The guys grinding out on almost nothing and quitting their jobs are the real risk takers - and that happens with self-funded, family funded, friend funded, angel funded, VC funded or zero funded businesses.
chc 16y ago
He's attacking Amy Hoy, a vocal opponent[1] of the hype around startups whose current business is a time-tracking app called Freckle. Freckle's main attraction is that it has a pleasant user interface. I'm not sure how anyone was duped. I guess it's supposed to be dishonest if you're getting people to pay money for functionality they can get free elsewhere. [1]: http://unicornfree.com/2011/follow-the-money/ http://unicornfree.com/2011/follow-the-money/
- jraines 16y ago
  Yeah, that was pretty nasty swipe. Exactly what the article kind of gets at: big shot dismissing with a sniff -- he's "disappointed" with us -- something that's a very nice goal for the little people. There are hordes of people making 6 or 7 figures online that are "duping" people worse than Amy Hoy -- who is duping people none at all.
- ahoyhere 16y ago
  Yes. In the interest of preserving history, he wrote and later deleted a line that went like: "duping credulous customers into paying for [something something] time tracking styled with the latest CSS design site trends" I was not directly named, but if you ask me, it's pretty clear which app he's talking about: my first, Freckle http://letsfreckle.com http://letsfreckle.com . And yup, that's me! I dupe 1,000 paying customers every month! They're so well-duped that they write love letters to our support account. I really can't get over the fact that I've got them so well-fooled they actually believe my software makes them happier and helps them run a better, more profitable business. For the record, though, we have lots of functionality you can't get elsewhere. That's part of the magic of the dupe. EDIT: Hey, look like that line about duping is back in Alex's comment. Either I'm blind and didn't see it the last time (which I concede is possible)… or it returned.
  - graceyang 16y ago
    Also seems childish of al3x to forget that out of amy hoy and thomas fuchs' work came scriptaculous which has probably inspired startup founders wowed by Ajax only less than Ruby on Rails itself. al3x probably leveraged that work early on at Twitter itself. If lifestyle businesses like 37signals and freckle are producing the kind of tools like RoR and scriptaculous, more power to them!

by credo 16y ago

pg 16y ago

The VC industry barely existed when Microsoft was founded in 1975. I don't know if Bill Gates would even have known the word "startup" then. He was starting a business the only way people knew how to at the time. Now founders have more options. That's not bad. In fact, the empirical evidence suggests it's net better, because the company that would be most people's candidate for the "next Microsoft," Google, took advantage of these new options to grow faster than Microsoft did.

credo 16y ago
More options are great. I have always said that the bootstrapped model and the vc-funded model are both good legitimate models for businesses. My problem with the parent post was the absurd notion it promoted about companies that didn't run chase vc funding. As mentioned, I also think that "lifestyle business" is a stupid vc-invented label. Incidentally, Google developed great technology and a great monetization strategy before they took in vc funding. Being acquired wasn't Google's goal. The reality of today's VC world is the opposite of Google's approach. VCs make money through the acquisitions of companies they fund.
- pg 16y ago
  Empirically very few big technology companies do it without taking money from investors. I've never really liked the term "lifestyle business" and I don't know who invented it. But I think it is a useful distinction, even for the people starting them. Is your goal for the company to make yourself a nice living, or do you want it to grow into something bigger than would be needed to achieve that? It's false that VCs want companies to be acquired. They would much prefer that they continued to grow as independent companies, like Google or Facebook. Those are the big successes that generate most of the returns in the VC business.
  - credo 16y ago
    sure, and the average man on the street may prefer that he become a multi-millionaire within a year. However, that sort of preference isn't as important as the realistic outcomes that a VC aims for. Unfortunately, I don't have specific data to back this up, but my sense is that very few VCs get to invest in blockbuster hits like Google (and as I mentioned, Google didn't take VC investment until they had already developed great technology and a great monetization strategy. So investment in Google was at a much higher valuation than what you'd expect for the typical VC deal) Again without specific data, my sense is that most money-making deals (for investors) are deals like the YouTube acquisition or other much smaller acquisitions ........ and I also think that most VC-funded companies make little or no money for the investors (and either crash or go through firesales).
    - pg 16y ago
      Acquisitions are never what VCs aim for. They aim for big, independent companies. They rarely hit that target, but it's always what they're aiming for. Angels are different. Angels are willing to invest in a startup whose only likely good outcome is an acquisition. But VCs will not even consider making a series A investment in a startup that doesn't have a credible plan for getting to the kind of revenues that would support an IPO.
      - credo 16y ago

nikcub 16y ago

Microsoft raised $1M in VC in '81 from TVI (went on to become August Capital - at least shared some partners and LP's). they also burnt through a lot of Bill's parents' money (which is why he had a larger share than Allen) for some reason this isn't part of the microsoft history story and most ppl don't know about it - but it took years for microsoft to gring out decent revenues and profits. 'lifestyle business' is meant to mean a small business where the goal is to gain enough revenue to live from. ie. something between ramen profitable and taking a salary from a VC funded business. I can't really think of a top50 tech firm (on market cap) that didn't raise outside capital at some point.

credo 16y ago
>>it took years for microsoft to gring out decent revenues and profits. Microsoft's first profitable program was Basic and it was released soon after the company's launch in 1975. 6 years after Microsoft launched, TVI invested and obtained a tiny portion of Microsoft's stock. To answer your question on the history, this sole vc investment played a very small part in Microsoft's history and the tiny VC share is one reason why Microsoft was a founder-run company. Btw to be clear,capital can definitely be useful. Youtube had losses running into hundreds of millions of dollars. Yet, VC money helped them make a big impact on the world. However, after Microsoft's model, my preference would be for the model adopted by companies like Google. Google developed great technology and a great monetization strategy before they took in a single penny of venture funds. Again, it is no coincidence that Google is a founder-run company today. All that said, I have no problem with zero-revenue companies that chase vc funding and hope to get acquired (Acquisition is how most VCs get returns on their investments). I'm just suggesting that it is absurd to create silly labels like "lifestyle business" and pretend that risking other people's money (i.e. vc funds) is the litmus test for a true "risk-taker"
- nikcub 16y ago
  I agree re: risk taking. I would go as far as to say that when the fundraising environment is frothy, paying yourself $150k p.a as the CEO of a VC backed firm actually isn't 'taking a risk'. There is a class of entrepreneur who don't quit their job, or leave one foot in that door, until they actually raise money and can pay themselves that salary. for eg. I know of a smallish no-revenue VC funded startup where the CEO and founder pays himself $300k. what the board and investors didn't know is that for the first 6 months in the life of the startup while he was 'salary sacrificing' he was actually consulting with a big co. for $30k a month. I wouldn't call that taking a risk, its the opposite, really The guys grinding out on almost nothing and quitting their jobs are the real risk takers - and that happens with self-funded, family funded, friend funded, angel funded, VC funded or zero funded businesses.

chc 16y ago

He's attacking Amy Hoy, a vocal opponent[1] of the hype around startups whose current business is a time-tracking app called Freckle. Freckle's main attraction is that it has a pleasant user interface. I'm not sure how anyone was duped. I guess it's supposed to be dishonest if you're getting people to pay money for functionality they can get free elsewhere. [1]: http://unicornfree.com/2011/follow-the-money/ http://unicornfree.com/2011/follow-the-money/

jraines 16y ago
Yeah, that was pretty nasty swipe. Exactly what the article kind of gets at: big shot dismissing with a sniff -- he's "disappointed" with us -- something that's a very nice goal for the little people. There are hordes of people making 6 or 7 figures online that are "duping" people worse than Amy Hoy -- who is duping people none at all.
ahoyhere 16y ago
Yes. In the interest of preserving history, he wrote and later deleted a line that went like: "duping credulous customers into paying for [something something] time tracking styled with the latest CSS design site trends" I was not directly named, but if you ask me, it's pretty clear which app he's talking about: my first, Freckle http://letsfreckle.com http://letsfreckle.com . And yup, that's me! I dupe 1,000 paying customers every month! They're so well-duped that they write love letters to our support account. I really can't get over the fact that I've got them so well-fooled they actually believe my software makes them happier and helps them run a better, more profitable business. For the record, though, we have lots of functionality you can't get elsewhere. That's part of the magic of the dupe. EDIT: Hey, look like that line about duping is back in Alex's comment. Either I'm blind and didn't see it the last time (which I concede is possible)… or it returned.
- graceyang 16y ago
  Also seems childish of al3x to forget that out of amy hoy and thomas fuchs' work came scriptaculous which has probably inspired startup founders wowed by Ajax only less than Ruby on Rails itself. al3x probably leveraged that work early on at Twitter itself. If lifestyle businesses like 37signals and freckle are producing the kind of tools like RoR and scriptaculous, more power to them!