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A lot of these companies are in the “the only reason it’s a good price is we are burning VC money” and “the only reason we have VC money is our promise to grow”

A lot of these companies are in the “the only reason it’s a good price is we are burning VC money” and “the only reason we have VC money is our promise to grow” zone. Customers can enjoy watching the slow motion train crash.

TeMPOraL 6y ago
That's why I consider startups a Faustian bargain. You get easy access to capital, in exchange for your company's soul. And the devil always comes to collect. The problems start where this deal causes collateral damage on the market - harming customers directly, or indirectly by preventing competitors who aren't looking for an exit from existing.
- pc86 6y ago
  > indirectly by preventing competitors who aren't looking for an exit from existing. This is huge, and definitely hurts in the short term, but could it actually be good in the long term? Let's say the break-even price for Service A is $x/mo/user. Nobody really knows the technical problems underlying A, but startups #1-3 get venture funding and start offering Service A for .75x, for a couple years each, burning a few million in some dentist's or VC's capital each and build a huge staff to figure out the tech. Eventually one of the companies gets acquihired and two of them fail. Bootstrapped Startup #4 opens shop, offers A to 1.15x, and hires engineers from startups 2 and 3 who know the tech inside and out. Consumers get a great product.
  - paledot 6y ago
    And this in capitalism is known as "efficiency".
  - TeMPOraL 6y ago
    I worry that those startups #1-3 burn a good chunk of their money on customer acquisition, not on solving technological problems (though scale creates its own problems too). That money would be unnecessarily wasted. I also doubt a huge staff is needed to figure out the tech part. But I understand your point: startups can be viewed as economy's distributed R&D. Speculative investment makes a lot of sense - it could be that without startups #1-3, #4 wouldn't exist because it couldn't afford the risk of developing an innovative product. But my main gripe is how VC-backed startups repay the investment - they're being pressured into user-hostile and sometimes antisocial business models. It's so common that these business model became accepted as standard these days! So perhaps a way forward isn't to reduce venture funding, but curtail the socially destructive business models directly.
  - fakedang 6y ago
    Imo, bootstrapped startups can only exist feasibly in the B2B space. And definitely not in the B2C space. Would Uber have succeeded if it were bootstrapped (with higher pricing), or would it have spawned enough copycats during its slow growth phase who would soon make it infeasible to scale up and hire the kind of engineers that a venture like ridesharing would need?
    - TeMPOraL 6y ago
      > or would it have spawned enough copycats during its slow growth phase who would soon make it infeasible to scale up and hire the kind of engineers that a venture like ridesharing would need? Would that be a problem? At least from the point of view of a customer, I don't want a single megacorp owning the market (and let's cut the marketing BS: Uber is not a startup, and hasn't been for a while; it's a multinational corporation). More "copycats" is usually better, as they compete (until they start racing to the bottom, but that's another issue entirely).
      - fakedang 6y ago
        I was talking about Uber circa 2009. Were it bootstrapped, we would have seen 5-6 loss making entities competing against each other by 2014 - and Uber wouldn't have likely expanded outside the US.
        TeMPOraL 6y ago
        I understand. But I don't consider Uber's success a good thing - it was a ruthless company that cornered the market through illegal and antisocial behavior, and unfortunately set a path for other startups to follow. I believe we'd be better off if Uber died very early, and allowed one of their above-board competitors to disrupt the taxi space.
- papito 6y ago
  As David Heinemeier Hansson of Basecamp said, paraphrasing: "every time you take someone's [VC] money, you get a new boss."

TeMPOraL 6y ago

That's why I consider startups a Faustian bargain. You get easy access to capital, in exchange for your company's soul. And the devil always comes to collect. The problems start where this deal causes collateral damage on the market - harming customers directly, or indirectly by preventing competitors who aren't looking for an exit from existing.

pc86 6y ago
> indirectly by preventing competitors who aren't looking for an exit from existing. This is huge, and definitely hurts in the short term, but could it actually be good in the long term? Let's say the break-even price for Service A is $x/mo/user. Nobody really knows the technical problems underlying A, but startups #1-3 get venture funding and start offering Service A for .75x, for a couple years each, burning a few million in some dentist's or VC's capital each and build a huge staff to figure out the tech. Eventually one of the companies gets acquihired and two of them fail. Bootstrapped Startup #4 opens shop, offers A to 1.15x, and hires engineers from startups 2 and 3 who know the tech inside and out. Consumers get a great product.
- paledot 6y ago
  And this in capitalism is known as "efficiency".
- TeMPOraL 6y ago
  I worry that those startups #1-3 burn a good chunk of their money on customer acquisition, not on solving technological problems (though scale creates its own problems too). That money would be unnecessarily wasted. I also doubt a huge staff is needed to figure out the tech part. But I understand your point: startups can be viewed as economy's distributed R&D. Speculative investment makes a lot of sense - it could be that without startups #1-3, #4 wouldn't exist because it couldn't afford the risk of developing an innovative product. But my main gripe is how VC-backed startups repay the investment - they're being pressured into user-hostile and sometimes antisocial business models. It's so common that these business model became accepted as standard these days! So perhaps a way forward isn't to reduce venture funding, but curtail the socially destructive business models directly.
- fakedang 6y ago
  Imo, bootstrapped startups can only exist feasibly in the B2B space. And definitely not in the B2C space. Would Uber have succeeded if it were bootstrapped (with higher pricing), or would it have spawned enough copycats during its slow growth phase who would soon make it infeasible to scale up and hire the kind of engineers that a venture like ridesharing would need?
  - TeMPOraL 6y ago
    > or would it have spawned enough copycats during its slow growth phase who would soon make it infeasible to scale up and hire the kind of engineers that a venture like ridesharing would need? Would that be a problem? At least from the point of view of a customer, I don't want a single megacorp owning the market (and let's cut the marketing BS: Uber is not a startup, and hasn't been for a while; it's a multinational corporation). More "copycats" is usually better, as they compete (until they start racing to the bottom, but that's another issue entirely).
    - fakedang 6y ago
      I was talking about Uber circa 2009. Were it bootstrapped, we would have seen 5-6 loss making entities competing against each other by 2014 - and Uber wouldn't have likely expanded outside the US.
      - TeMPOraL 6y ago
        I understand. But I don't consider Uber's success a good thing - it was a ruthless company that cornered the market through illegal and antisocial behavior, and unfortunately set a path for other startups to follow. I believe we'd be better off if Uber died very early, and allowed one of their above-board competitors to disrupt the taxi space.
papito 6y ago
As David Heinemeier Hansson of Basecamp said, paraphrasing: "every time you take someone's [VC] money, you get a new boss."