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ArsDigita: From Startup to Bust-Up (2001)

32 points by webmaven 6y ago

pinewurst 6y ago
Also note: https://web.archive.org/web/20130115123445/http://michael.yoon.org/arsdigita.php https://web.archive.org/web/20130115123445/http://michael.yo...
- merricksb 6y ago
  And https://bazaarmodel.net/phorum/read.php?1,9 https://bazaarmodel.net/phorum/read.php?1,9
  - ignoramous 6y ago
    This was a surprisingly good read. > What can we learn from this? Be clear about control. Don't assume that people with MBAs know a thing about business, let alone technology. Don't throw out your prime source of revenue before another one is in place. Fashionable programming languages don't equal useful software. Don't lie. And steer clear of General Atlantic Partners and Greylock The last bit... What are some VC firms to steer clear of today? Asking for a friend.
    - ackbar03 6y ago
      Softbank? If they invest in you than you probably know you have a flawed business model
      - fakedang 6y ago
        I don't think it's that you have a flawed business model. If you look at it, Softbank invests in monopoly-reliant businesses, usually at a later stage. For an investor, monopolies are good in the software space, but they turn sour once you go into the real world, where overheads and incumbent competition are much more significant.
meddlepal 6y ago
I think the lesson here is: 1. Don't get involved with VC's unless you want to take on all the problems VC's bring as they force you to chase hypergrowth. 2. VC's frame success as hypergrowth and 10-100x multiplier exits. 3. Hypergrowth is not the pinnacle of success.
justiceforsaas 6y ago
Why is there such a big difference in lingo between VC-funded startups and bootstrapped founders? Every time I read about a funded startup, I heard words like "VCs", "valuations", "pitch decks", "exit strategy". I always see a lack of words like "growth channels", "getting users", and most importantly, "paying customers". If you compare forums like IndieHackers vs. StartupGrind, you'd think they're in totally different industries. Although in reality the goal is same: Make the startup "successful". Though it seems they define "success" differently, and the problem starts from there. Would appreciate if anyone enlightens me on this issue.
- doctor_eval 6y ago
  As I see it VC is about funding a company in advance, so you can afford to build your business, while bootstrapping is about funding the company operationally (“organically”), building it as you go. Not all companies can be bootstrapped because they can have high capital costs (eg building a new fab, hiring experts), timing pressure (eg first mover advantage) or other reasons. One bad reason for getting VC funding is that some people think VC funding is cool or necessary to start a business, which is not true - but that’s beside the point. So VC is really like a layer above bootstrapping. In a bootstrapped company you’ve already sorted your seed capital (maybe you pitched in 10k for AWS hosting) and you’re not looking for more. So you focus on operational issues like growth channels and customer acquisition. In a VC company you need to focus on funding issues first - this much investment will yield this much profit, the company is worth $Valuation, so investors putting in $Investment should get S% (=I/V) of shares. The phrases you’ve highlighted like “pitch deck” are just the ways that a company communicates the how the operational aspects of the business will lead to growth of $V over time (resulting in growth of $I since S% remains fixed). The pitch deck might include things like CAC - customer acquisition cost - but the VCs are looking for a financial return, which they get when they “exit” (ie, sell their shares). The exit strategy suggests who investors might sell to, in order to “liquidate” the increased value of S%. So in effect the two kinds of startup do indeed define success differently. If you have a successful bootstrap business then you just end up doing all the same things later, if you want to sell your business. So it’s the order of things that’s different but you end up worrying about the same basic data. I want to add that not all VC funded companies have “problems”. I mean most name brand companies that we use daily were backed by VCs. The problems start when your VCs are bad partners, or inexperienced, or you raise capital you don’t need, or you make promises you can’t deliver. Plenty of organic non VC companies also have huge management problems. In fact I read the article and nodded my head to many things I’ve experienced in an organic company (I used to say that some people I worked with “would rather be right than rich” because they put ego above numbers) VCs are one of several solitons to the problem of fundraising. HTH Edited for clarity
known 6y ago
"Who's right doesn't matter, who has the power does" --Thucydides (b. 400 BC)
carlosf 6y ago
Thanks for sharing, I've watched a few ArsDigita University classes online but had no idea of the history behind it.

32 points by webmaven 6y ago

Also note: https://web.archive.org/web/20130115123445/http://michael.yoon.org/arsdigita.php https://web.archive.org/web/20130115123445/http://michael.yo...

merricksb 6y ago
And https://bazaarmodel.net/phorum/read.php?1,9 https://bazaarmodel.net/phorum/read.php?1,9
- ignoramous 6y ago
  This was a surprisingly good read. > What can we learn from this? Be clear about control. Don't assume that people with MBAs know a thing about business, let alone technology. Don't throw out your prime source of revenue before another one is in place. Fashionable programming languages don't equal useful software. Don't lie. And steer clear of General Atlantic Partners and Greylock The last bit... What are some VC firms to steer clear of today? Asking for a friend.
  - ackbar03 6y ago
    Softbank? If they invest in you than you probably know you have a flawed business model
    - fakedang 6y ago
      I don't think it's that you have a flawed business model. If you look at it, Softbank invests in monopoly-reliant businesses, usually at a later stage. For an investor, monopolies are good in the software space, but they turn sour once you go into the real world, where overheads and incumbent competition are much more significant.

meddlepal 6y ago

I think the lesson here is: 1. Don't get involved with VC's unless you want to take on all the problems VC's bring as they force you to chase hypergrowth. 2. VC's frame success as hypergrowth and 10-100x multiplier exits. 3. Hypergrowth is not the pinnacle of success.

justiceforsaas 6y ago

Why is there such a big difference in lingo between VC-funded startups and bootstrapped founders? Every time I read about a funded startup, I heard words like "VCs", "valuations", "pitch decks", "exit strategy". I always see a lack of words like "growth channels", "getting users", and most importantly, "paying customers". If you compare forums like IndieHackers vs. StartupGrind, you'd think they're in totally different industries. Although in reality the goal is same: Make the startup "successful". Though it seems they define "success" differently, and the problem starts from there. Would appreciate if anyone enlightens me on this issue.

doctor_eval 6y ago
As I see it VC is about funding a company in advance, so you can afford to build your business, while bootstrapping is about funding the company operationally (“organically”), building it as you go. Not all companies can be bootstrapped because they can have high capital costs (eg building a new fab, hiring experts), timing pressure (eg first mover advantage) or other reasons. One bad reason for getting VC funding is that some people think VC funding is cool or necessary to start a business, which is not true - but that’s beside the point. So VC is really like a layer above bootstrapping. In a bootstrapped company you’ve already sorted your seed capital (maybe you pitched in 10k for AWS hosting) and you’re not looking for more. So you focus on operational issues like growth channels and customer acquisition. In a VC company you need to focus on funding issues first - this much investment will yield this much profit, the company is worth $Valuation, so investors putting in $Investment should get S% (=I/V) of shares. The phrases you’ve highlighted like “pitch deck” are just the ways that a company communicates the how the operational aspects of the business will lead to growth of $V over time (resulting in growth of $I since S% remains fixed). The pitch deck might include things like CAC - customer acquisition cost - but the VCs are looking for a financial return, which they get when they “exit” (ie, sell their shares). The exit strategy suggests who investors might sell to, in order to “liquidate” the increased value of S%. So in effect the two kinds of startup do indeed define success differently. If you have a successful bootstrap business then you just end up doing all the same things later, if you want to sell your business. So it’s the order of things that’s different but you end up worrying about the same basic data. I want to add that not all VC funded companies have “problems”. I mean most name brand companies that we use daily were backed by VCs. The problems start when your VCs are bad partners, or inexperienced, or you raise capital you don’t need, or you make promises you can’t deliver. Plenty of organic non VC companies also have huge management problems. In fact I read the article and nodded my head to many things I’ve experienced in an organic company (I used to say that some people I worked with “would rather be right than rich” because they put ego above numbers) VCs are one of several solitons to the problem of fundraising. HTH Edited for clarity

known 6y ago

"Who's right doesn't matter, who has the power does" --Thucydides (b. 400 BC)

carlosf 6y ago

Thanks for sharing, I've watched a few ArsDigita University classes online but had no idea of the history behind it.