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Why is it that practically all startups need investors? Particularly web/software startups? Seems that more and more startups could be started with personal f

by dshah 18y ago

Why is it that practically all startups need investors? Particularly web/software startups? Seems that more and more startups could be started with personal funding these days and not really require outside funding.

webwright 18y ago
Dharmesh, I think you overestimate folks' personal funding. Most people don't have cash to both live and pay (even small) startup expenses for 6months - 2 years in might take to hit profitability or early liquidity. That aside, there seems a strong correlation between liquidity and VC investment (even nowadays). The connections, maybe? Of course, there are plenty of examples where you can involve VC at the END, like StumbleUpon did-- Garrett Camp chugged along with it in Calgary for 3 years before heading down to SV and getting it sold (if memory serves)-- once he got investors.
pg 18y ago
Why is it that practically all startups need investors? Particularly web/software startups? To cover the founders' living expenses while they build a product and get the company to profitability. That's going to take a minimum of 6 months. More often a year. The other alternative would be to keep their jobs and do the startup on the side. But taking that route means that (a) the startup happens much slower, which can be dangerous if, as usual, there is someone else working on the same idea, and (b) it's easy to let the startup slide, since it's only a side project, and not the work that's paying your bills. You can also look at the empirical evidence. Make a list of the 100 startups you admire most. What percentage of them did it without investors? The scary thing about that exercise is that startups done as side projects are probably more numerous than those where the founders quit to work full-time on the company. If this much larger pool produces such a tiny fraction of the successes, the attrition rate must be appalling.

by dshah 18y ago

webwright 18y ago

Dharmesh, I think you overestimate folks' personal funding. Most people don't have cash to both live and pay (even small) startup expenses for 6months - 2 years in might take to hit profitability or early liquidity. That aside, there seems a strong correlation between liquidity and VC investment (even nowadays). The connections, maybe? Of course, there are plenty of examples where you can involve VC at the END, like StumbleUpon did-- Garrett Camp chugged along with it in Calgary for 3 years before heading down to SV and getting it sold (if memory serves)-- once he got investors.

pg 18y ago

Why is it that practically all startups need investors? Particularly web/software startups? To cover the founders' living expenses while they build a product and get the company to profitability. That's going to take a minimum of 6 months. More often a year. The other alternative would be to keep their jobs and do the startup on the side. But taking that route means that (a) the startup happens much slower, which can be dangerous if, as usual, there is someone else working on the same idea, and (b) it's easy to let the startup slide, since it's only a side project, and not the work that's paying your bills. You can also look at the empirical evidence. Make a list of the 100 startups you admire most. What percentage of them did it without investors? The scary thing about that exercise is that startups done as side projects are probably more numerous than those where the founders quit to work full-time on the company. If this much larger pool produces such a tiny fraction of the successes, the attrition rate must be appalling.