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I don't think it's a coincidence that Jetbrains has created a beloved product without the help of VC money. The longer I work in tech the more I see VC money a

I don't think it's a coincidence that Jetbrains has created a beloved product without the help of VC money. The longer I work in tech the more I see VC money as poison to good products. Because VC funded startups are forced to grow fast or die a lot of good, profitable, user focused ideas are trashed because they won't lead to rapid enough expansion. Virtually every VC startup I've worked closely with or learned about in detail is doing something nearly everyone would agree is unethical, and a fairly large amount are doing things that are down right illegal spared only by the fact that they aren't big enough to warrant prosecution or even investigation. Perpetual lip service is always paid to the notion that "we're a user focused company". While the mental gymnastics performed to convince everyone onboard that this is the case are fun to watch, it tragic to see nearly all good projects slowly devolving into ways of tricking the users... and in most cases still losing money. All of the private money companies with no plans of acquisition I've worked for are all amazingly sane by contrast, and create genuinely good products. They have to, because they need to make more money then they spend to survive and are fine if the happy place for that to happen is 30 employees. In some cases, if that product is really amazing, they become companies like Jetbrains.

sillysaurusx 6y ago
pg wrote a rebuttal to this in 2008: http://paulgraham.com/prcmc.html http://paulgraham.com/prcmc.html It seems generally correct, i.e. VC works because the alternative sucks.
- katbyte 6y ago
  Seems jet brains managed so there is an alternative that doesn’t suck?
  - sillysaurusx 6y ago
    That's a bit like saying "This person won the lottery, so therefore..." Sure, it's possible. But having met a few founders, their lifestyle from taking VC money seems far preferable to the bootstrap approach. It's true that you have to grow, but if you have growth, then nothing else matters. And if you don't, then you're one of the most employable people in the entire world. A shocking number of people, somehow, end up in insane amounts of debt by trying to start their own companies. And you're sort of forced to. An example: one of our family members had a lucrative pole barn business. (Apparently in the midwest, lots of people wanted pole barns built, or something.) But in order to pay his employees to go construct the pole barns, he needed loans, leveraged against the future income from the construction project. Then 2008 hit. Poof! Contracts all went poof. And he was left holding the bag. So, if you need employees, and you're bootstrapped, how exactly are you going to pay an engineer roughly $130k per year? (Remember, the fully-loaded cost of an employee is much higher than their salary.) Loans must be so quite tempting. And sure, LLCs are designed to mitigate personal risk. But that implies you can find someone willing to risk loaning to you. I'm not saying that VC is great, just that it fills a need.
    - GVIrish 6y ago
      Yeah but all the successful VC funded startup stories are a form of survivorship bias too. The whole idea of venture capital is to fund many companies that will fail with the hope of finding the one unicorn that will make up for all the losses. A lottery just the same. It's true that if you're taking out loans to fund your bootstrapped company you could be left holding the bag. But it's also true that you can build an IT startup without taking a lot of big loans for capital expenditures. You only grow when you're making money, so it's a slower path, but for some businesses it may make more sense.
    - edoceo 6y ago
      Or, don't start a business with a loan. If you're gonna bootstrap (the "right" way) then step zero is have 12mo runway of your own capital and step one is start a business
      - sillysaurusx 6y ago
        $130k to pay a single employee for one year. I don't know about you, but it's extremely difficult for most people to save up that kind of runway.
        ardy42 6y ago
        > $130k to pay a single employee for one year. I don't know about you, but it's extremely difficult for most people to save up that kind of runway. I think the idea is that step one isn't hiring a subordinate employee; it's having secure enough finances that you (or you and your co-founders) can work for yourself for a time. Step two is actually working on the business, and step three is growing is revenues to the point where it can sustain you, four is growing them further to the point where they can support an employee, and five is actually hiring that employee and paying them $130k a year.
        sillysaurusx 6y ago
        Co-founders? Why are they co-founding? Profit sharing? That's an excellent way to devolve into squabbling about who gets what. VC also protects against that: the money is for the company, and it's illegal to siphon it out of the company. Unfortunately in practice your suggestion tends to become "You're working for yourself, alone." And sure, I love the idea of a one-person company. Lots of talented devs can sell, if they try. But lots of talented devs are also trying to get rich on the iOS app store; few do.
- staticautomatic 6y ago
  Have you entertained the idea that both could suck?
  - klik99 6y ago
    This is probably it. There are some companies that just can't be bootstrapped, the up-front cost is too high. There are some that would suffer from the high-growth demands of VC. If you've got a plan that starts with high-fixed costs that over time becomes low-fixed cost at scale, then VC is probably the best way to go. If you've identified low-hanging fruit to solve problems for people, bootstrapping makes the most sense. Any arguments for or against seem to imply either way is a one-sized fits all solution. It's not.
- UncleMeat 6y ago
  PG is a VC. He isn't a god of entrepreneurship. Why is it that this argument only seems to apply to software and not to all of the other kinds of businesses out there?
  - ganeshkrishnan 6y ago
    Also as humans we are myopic and can only understand everything as a relation to us. His tweet (https://twitter.com/paulg/status/1129897694984646657 https://twitter.com/paulg/status/1129897694984646657) about how you don't need to be rich to run a startup invariably shows that as humans we are poor at judging almost anything out of our current circle of understanding. The major major thing that makes a startup successful in almost all cases is money. With enough wind even chickens can fly. There are millions of brilliant people all over the world whose ideas we never see because they never had their opportunity or funding to bring their ideas to life.
    - sangnoir 6y ago
      > With enough wind even chickens can fly. Off topic: I'm not familiar with this turn of phrase, but as anyone who has ever chased after free range chickens as a child knows - chickens fly fine with no wind at all. The can only fly a short distance though.
    - kid551 6y ago
      > With enough wind even chickens can fly. This metaphor's impact is as strong as Lei Jun's famous saying, who is the CEO and founder of Xiaomi: With enough wind even PIG can fly.
  - bostik 6y ago
    > Why is it that this argument only seems to apply to software? Maybe because software has a unique property: a practically zero marginal ("reproduction") cost. Hence software, and services that depend only on software are suitable for the rocket-fuel injection strategy VCs so heavily rely on. Make no mistake - good software is damn expensive to create, but once it's ready for delivery, creating and selling additional copies (or serving more clients) costs practically nothing.
- blackbrokkoli 6y ago
  I don't see the rebuttal. The article seems to be only about what the best way of selling your company is (whether or not you technically sell). There isn't even anything in it about just running your own company indefinitely. And the article does not mention "user" or "good software" once, staying only within an economical framework ("how to get rich") - which is literally the point of GP.
- vortegne 6y ago
  Well PG also loves the smell of his own proverbial farts.
vonmoltke 6y ago
> Because VC funded startups are forced to grow fast or die a lot of good, profitable, user focused ideas are trashed because they won't lead to rapid enough expansion. I have noticed that, to some people, "VC startup" is almost considered redundant. That is, if your company is not seeking outside investors, not seeking rapid growth, not seeking an "exit", then it isn't a real "startup". So, in addition to what you mention about user focus (or lack thereof), I feel that this hurts ambitious entrepreneurs by making them think the VC/outside investment/grow-or-die treadmill is the only way to get big and escape the "lifestyle business" stigma. Many of them likely could succeed, albeit more slowly, without the treadmill.
- achillean 6y ago
  Completely agree and I experienced much of that on my own journey. Customers would ask whether I'm interested in taking VC or if I wanted to keep it as a "lifestyle business" - not realizing that we were doing more than fine without requiring outside funding. After a while though it nags at you and makes you wonder whether you should take VC because doing so makes building a business formulaic. Bootstrapping a company can feel like you're in uncharted waters in comparison because a lot of articles assume you've taken or want to take VC. And they assume that you want to exit. I wish there were more publicly shared success stories of bootstrapped companies that didn't take funding because there are more of them out there than people realize. And taking things slower can help you validate use cases, flesh out the product and build the type of company that you want. I'm very happy that we never took VC.
- est31 6y ago
  Is this lifestyle business stigma a real thing? Or just something the VC lobby put out there? Personally I think anyone leading a business should deserve respect, as running one is hard.
  - varjag 6y ago
    Yes it's the business-y equivalent of calling one small-minded.
  - Baeocystin 6y ago
silexia 6y ago
I have seen this firsthand. I was a finance major fifteen years ago and for the last ten years I have run a completely bootstrapped agency. If you have to live off your own revenues, it means you don't do any premature scaling... You have to focus on the needs of your customers to reach the next level. VC backed companies have to reach the VC exit goals which means they are forced to scale immediately even if things are broken. Your business idea could work really well if you were given a few extra months or years to work on it, but with the VC fuse burning you can't wait. VC's generally don't care about your passion, they care about maximizing returns over the shortest time period possible. If you don't do it their way, you will be forced to leave. I have been a member of a tech Vistage group and have seen over half of the VC backed CEO's forced out by their investors. It's really sad.
- everybodyknows 6y ago
  Care to tell us more about your experience with Vistage?
  - silexia 6y ago
    Very expensive. It's only worth it if you have over 50k a month in profit. At that level it is good for a year or two of training and then it gets repetitive.
- drchopchop 6y ago
  From first-hand experience, however, bootstrapped companies often don't have a ton of cash in the bank. They can quickly fail if there's an adverse event (COVID, for example). You can also get crushed by well-funded competitors who can innovate faster than you due to larger team sizes, salaries, etc.
  - rusticpenn 6y ago
    It depends on the type of company. Its hard to out-innovate some companies just by throwing more money.
  - Justsignedup 6y ago
Taek 6y ago
Profitability isn't necessarily important to the strategy of a VC company. Everything is about the exit, and most exits are either acquisitions or IPOs. Neither type of exit mandates profitability, and both care capable of offloading to a greater fool. A strong trend I've personally noticed with VC backed companies and something I'm highly wary of for our own company is the way it inevitably turns companies evil. I would highlight Google and Cloudflare as two examples, but the general trend seems to be that VC pressure inevitably forces you to hire 'better' people who invariably steer the company to being more focused on profit and power rather than on some intrinsic mission. Actual mission focused companies like Mozilla only seem to succeed if they stay private and stay away from VC.
- skybrian 6y ago
  Google went public early and with a share structure that insulated the founders from any pressure from the stock market. Venture capital has nothing to do with what’s happened since.
- vlovich123 6y ago
  Google had limited VC investment - a 25m round before IPO. Arguably they turned evil much later so to me the link to “VC corruption” is more specious. Re cloudflare, can you please help me understand what they’ve been doing that you see as evil? Given how Mozilla constantly struggles to stay afloat (and effectively depends on the generosity of Google as the single revenue source), I don’t know that’s an example to point to, especially since they’ve had their own share of “user-hostile” steps (albeit fewer since it’s a smaller company).
  - Taek 6y ago
    I would argue that being a public company has the same pressure as being VC funded only much stronger. Cloudflare is increasingly pushing their position as the world's biggest man-in-the-middle, and things like their new secure DNS are making the situation worse. They've started taking opinionated stances and making deplatforming decisions instead of being neutral infrastructure and I think this is going to get a lot worse.
malux85 6y ago
I'm curious, what are the illegal (and the highly unethical) ones doing? Dont need to name the companies, but what sort of activities are you seeing?
- thraway2020 6y ago
  I can really relate to the parent comment. I have worked at two VC-funded startups, one which was an "uber of x" and the other is a IoT consumer electronics startup. The former was unethical in the way it treated the workers (I mean independent contractors). The higher ups treated the app/company as a beautiful product that would save the world (or the yuppies at least), but rarely acknowledged the actual workers who made the cogs spin, and was more focused on Growth and branding than actually treating people well. Something I always think about is the dark pattern they had in the app which would only ask you to rate/review on Yelp/app stores if you had given a 5 star rating to the job. They also hacked Yelp to show the Yelp option to people they determined were most likely to leave a good Yelp review. If you have a good product/service that you believe in, you shouldn't need to do this type of thing. Oh, and of course the company was not following the labor/insurance laws in the states where it worked and had several cease and desist orders they ignored. The hardware startup had like 20% RMA rates because of components would fail over and over. They used VC money to subsidize the returns/repairs instead of fixing the problem. They would prefer to ship more crappy products instead of fewer good products. Not so much illegal (hard to be when selling electronics, yay regulations), but unethical in that they would ship so much garbage despite being "customer obsessed." They operated more like a software company than a hardware company. It's easy to remotely fix software, but hardware is a very different beast and that was something they didn't want to admit. Compared to my current company, a 30 person electronics firm that has already been acquired and never did too much VC nonsense. We are profitable and sell a good product (1% RMA) that customers enjoy. Instead of "moving fast and breaking things" (a slogan I feel the first two companies embody), we work hard to get things just right before shipping the product so that we never get any returned merchandise but get lots of return customers.
- staysaasy 6y ago
  I wonder if this shady/unethical behavior is more focused in consumer startups. In enterprise SaaS, for example, unethical behavior is a low-EV move because your customers will have standing to cancel their contracts or pursue you for damages. It's also harder to be shady under the scrutiny of 500 large recurring-revenue customers than 500,000 tiny ones.
brundolf 6y ago
> I don't think it's a coincidence that Jetbrains has created a beloved product without the help of VC money I don't think the surprise is that they made a good product without VC, I think the surprise is that they made ten figures off the back of nothing but a good product ...which should tell us something about the industry
auganov 6y ago
A company that makes it to a few dozen employees without much financing is already extremely successful. You're very unlikely to ever work for a poorly run company without financing - they can't hire.
- everythingswan 6y ago
  Some SMB's that I have met over the years are great at pretending they don't have money when hiring but are very profitable. I think that fits the "bad company, no financing" and is worth mentioning. This thread is interesting because we're talking about success for different people. Success for the founder? The money? The employees? The answers are relative to the stakeholder we're talking about.
  - auganov 6y ago
    Success as a product company relative to others. I'm talking about simple selection bias. A no-financing company with a decent head count is probably in the top 1 percentile among peers. Chances are they're delivering real value. A VC backed startup hiring a bunch of people is perfectly average. The top 1% for startups would probably be post-IPO/exit/very-late-stage. So it seems perfectly normal to me a VC backed startup in most cases will look like a total trainwreck compared to a bootstrapped company of the same size. The vast majority of bootstrapped companies die before they even had a chance to hire anybody. Unlikely you'd ever have to deal with them.
    - everythingswan 6y ago
      Yea, that's a really insightful take and I didn't take that into account when I was thinking about this earlier. Appreciate your take!
zdragnar 6y ago
>>> Virtually every VC startup I've worked closely with or learned about in detail is doing something nearly everyone would agree is unethical, and a fairly large amount are doing things that are down right illegal spared only by the fact that they aren't big enough to warrant prosecution or even investigation. Perpetual lip service is always paid to the notion that "we're a user focused company". While the mental gymnastics performed to convince everyone onboard that this is the case are fun to watch, it tragic to see nearly all good projects slowly devolving into ways of tricking the users... and in most cases still losing money. <<< As an anecdotal point of one, I can confirm that literally none of that is true for the startup I am working for, and we are doing quite well. Of course, it probably helps that our founders have actual industry and startup experience, and are not pushover adult children like you might find on the Silicon Valley hbo show.
jmondi 6y ago
The more I work in VC backed companies, the more I realize: VC's are not there to add value to a business, they are there to suck all the value out of a business.
- dumbfoundded 6y ago
  Yes, but at least most VCs try to do it with an exit. Private Equity is far worse IMO
ASalazarMX 6y ago
VC is like visiting sports clubs, finding the best candidates, and overdosing them on steroids. VC hopes the ones that survive will become profitable enough to pay for the ones that it killed.
markus_zhang 6y ago
Yep. Most VC, if not all of them, demand quick return, and it's not always good for the products.
nbzso 6y ago
I will go further on VC funded companies. The Culture of Success is simple: If you are a founder, you have to be Perfect Fit, you have to design your idea around what VC's want to hear and this is working model. One of the reasons that I never work with or for startups. Founders are rarely competent to select the right people, in most cases they lack experience in HR or Product Design, etc. Bootstrapping is a detector for true products, you scale on a merit of real customer base not on some Valuable Idea for VC investment.

sillysaurusx 6y ago

pg wrote a rebuttal to this in 2008: http://paulgraham.com/prcmc.html http://paulgraham.com/prcmc.html It seems generally correct, i.e. VC works because the alternative sucks.

katbyte 6y ago
Seems jet brains managed so there is an alternative that doesn’t suck?
- sillysaurusx 6y ago
  That's a bit like saying "This person won the lottery, so therefore..." Sure, it's possible. But having met a few founders, their lifestyle from taking VC money seems far preferable to the bootstrap approach. It's true that you have to grow, but if you have growth, then nothing else matters. And if you don't, then you're one of the most employable people in the entire world. A shocking number of people, somehow, end up in insane amounts of debt by trying to start their own companies. And you're sort of forced to. An example: one of our family members had a lucrative pole barn business. (Apparently in the midwest, lots of people wanted pole barns built, or something.) But in order to pay his employees to go construct the pole barns, he needed loans, leveraged against the future income from the construction project. Then 2008 hit. Poof! Contracts all went poof. And he was left holding the bag. So, if you need employees, and you're bootstrapped, how exactly are you going to pay an engineer roughly $130k per year? (Remember, the fully-loaded cost of an employee is much higher than their salary.) Loans must be so quite tempting. And sure, LLCs are designed to mitigate personal risk. But that implies you can find someone willing to risk loaning to you. I'm not saying that VC is great, just that it fills a need.
  - GVIrish 6y ago
    Yeah but all the successful VC funded startup stories are a form of survivorship bias too. The whole idea of venture capital is to fund many companies that will fail with the hope of finding the one unicorn that will make up for all the losses. A lottery just the same. It's true that if you're taking out loans to fund your bootstrapped company you could be left holding the bag. But it's also true that you can build an IT startup without taking a lot of big loans for capital expenditures. You only grow when you're making money, so it's a slower path, but for some businesses it may make more sense.
  - edoceo 6y ago
    Or, don't start a business with a loan. If you're gonna bootstrap (the "right" way) then step zero is have 12mo runway of your own capital and step one is start a business
    - sillysaurusx 6y ago
      $130k to pay a single employee for one year. I don't know about you, but it's extremely difficult for most people to save up that kind of runway.
      - ardy42 6y ago
        > $130k to pay a single employee for one year. I don't know about you, but it's extremely difficult for most people to save up that kind of runway. I think the idea is that step one isn't hiring a subordinate employee; it's having secure enough finances that you (or you and your co-founders) can work for yourself for a time. Step two is actually working on the business, and step three is growing is revenues to the point where it can sustain you, four is growing them further to the point where they can support an employee, and five is actually hiring that employee and paying them $130k a year.
        sillysaurusx 6y ago
        Co-founders? Why are they co-founding? Profit sharing? That's an excellent way to devolve into squabbling about who gets what. VC also protects against that: the money is for the company, and it's illegal to siphon it out of the company. Unfortunately in practice your suggestion tends to become "You're working for yourself, alone." And sure, I love the idea of a one-person company. Lots of talented devs can sell, if they try. But lots of talented devs are also trying to get rich on the iOS app store; few do.
staticautomatic 6y ago
Have you entertained the idea that both could suck?
- klik99 6y ago
  This is probably it. There are some companies that just can't be bootstrapped, the up-front cost is too high. There are some that would suffer from the high-growth demands of VC. If you've got a plan that starts with high-fixed costs that over time becomes low-fixed cost at scale, then VC is probably the best way to go. If you've identified low-hanging fruit to solve problems for people, bootstrapping makes the most sense. Any arguments for or against seem to imply either way is a one-sized fits all solution. It's not.
UncleMeat 6y ago
PG is a VC. He isn't a god of entrepreneurship. Why is it that this argument only seems to apply to software and not to all of the other kinds of businesses out there?
- ganeshkrishnan 6y ago
  Also as humans we are myopic and can only understand everything as a relation to us. His tweet (https://twitter.com/paulg/status/1129897694984646657 https://twitter.com/paulg/status/1129897694984646657) about how you don't need to be rich to run a startup invariably shows that as humans we are poor at judging almost anything out of our current circle of understanding. The major major thing that makes a startup successful in almost all cases is money. With enough wind even chickens can fly. There are millions of brilliant people all over the world whose ideas we never see because they never had their opportunity or funding to bring their ideas to life.
  - sangnoir 6y ago
    > With enough wind even chickens can fly. Off topic: I'm not familiar with this turn of phrase, but as anyone who has ever chased after free range chickens as a child knows - chickens fly fine with no wind at all. The can only fly a short distance though.
  - kid551 6y ago
    > With enough wind even chickens can fly. This metaphor's impact is as strong as Lei Jun's famous saying, who is the CEO and founder of Xiaomi: With enough wind even PIG can fly.
- bostik 6y ago
  > Why is it that this argument only seems to apply to software? Maybe because software has a unique property: a practically zero marginal ("reproduction") cost. Hence software, and services that depend only on software are suitable for the rocket-fuel injection strategy VCs so heavily rely on. Make no mistake - good software is damn expensive to create, but once it's ready for delivery, creating and selling additional copies (or serving more clients) costs practically nothing.
blackbrokkoli 6y ago
I don't see the rebuttal. The article seems to be only about what the best way of selling your company is (whether or not you technically sell). There isn't even anything in it about just running your own company indefinitely. And the article does not mention "user" or "good software" once, staying only within an economical framework ("how to get rich") - which is literally the point of GP.
vortegne 6y ago
Well PG also loves the smell of his own proverbial farts.

vonmoltke 6y ago

> Because VC funded startups are forced to grow fast or die a lot of good, profitable, user focused ideas are trashed because they won't lead to rapid enough expansion. I have noticed that, to some people, "VC startup" is almost considered redundant. That is, if your company is not seeking outside investors, not seeking rapid growth, not seeking an "exit", then it isn't a real "startup". So, in addition to what you mention about user focus (or lack thereof), I feel that this hurts ambitious entrepreneurs by making them think the VC/outside investment/grow-or-die treadmill is the only way to get big and escape the "lifestyle business" stigma. Many of them likely could succeed, albeit more slowly, without the treadmill.

achillean 6y ago
Completely agree and I experienced much of that on my own journey. Customers would ask whether I'm interested in taking VC or if I wanted to keep it as a "lifestyle business" - not realizing that we were doing more than fine without requiring outside funding. After a while though it nags at you and makes you wonder whether you should take VC because doing so makes building a business formulaic. Bootstrapping a company can feel like you're in uncharted waters in comparison because a lot of articles assume you've taken or want to take VC. And they assume that you want to exit. I wish there were more publicly shared success stories of bootstrapped companies that didn't take funding because there are more of them out there than people realize. And taking things slower can help you validate use cases, flesh out the product and build the type of company that you want. I'm very happy that we never took VC.
est31 6y ago
Is this lifestyle business stigma a real thing? Or just something the VC lobby put out there? Personally I think anyone leading a business should deserve respect, as running one is hard.
- varjag 6y ago
  Yes it's the business-y equivalent of calling one small-minded.
- Baeocystin 6y ago

silexia 6y ago

I have seen this firsthand. I was a finance major fifteen years ago and for the last ten years I have run a completely bootstrapped agency. If you have to live off your own revenues, it means you don't do any premature scaling... You have to focus on the needs of your customers to reach the next level. VC backed companies have to reach the VC exit goals which means they are forced to scale immediately even if things are broken. Your business idea could work really well if you were given a few extra months or years to work on it, but with the VC fuse burning you can't wait. VC's generally don't care about your passion, they care about maximizing returns over the shortest time period possible. If you don't do it their way, you will be forced to leave. I have been a member of a tech Vistage group and have seen over half of the VC backed CEO's forced out by their investors. It's really sad.

everybodyknows 6y ago
Care to tell us more about your experience with Vistage?
- silexia 6y ago
  Very expensive. It's only worth it if you have over 50k a month in profit. At that level it is good for a year or two of training and then it gets repetitive.
drchopchop 6y ago
From first-hand experience, however, bootstrapped companies often don't have a ton of cash in the bank. They can quickly fail if there's an adverse event (COVID, for example). You can also get crushed by well-funded competitors who can innovate faster than you due to larger team sizes, salaries, etc.
- rusticpenn 6y ago
  It depends on the type of company. Its hard to out-innovate some companies just by throwing more money.
- Justsignedup 6y ago

Taek 6y ago

Profitability isn't necessarily important to the strategy of a VC company. Everything is about the exit, and most exits are either acquisitions or IPOs. Neither type of exit mandates profitability, and both care capable of offloading to a greater fool. A strong trend I've personally noticed with VC backed companies and something I'm highly wary of for our own company is the way it inevitably turns companies evil. I would highlight Google and Cloudflare as two examples, but the general trend seems to be that VC pressure inevitably forces you to hire 'better' people who invariably steer the company to being more focused on profit and power rather than on some intrinsic mission. Actual mission focused companies like Mozilla only seem to succeed if they stay private and stay away from VC.

skybrian 6y ago
Google went public early and with a share structure that insulated the founders from any pressure from the stock market. Venture capital has nothing to do with what’s happened since.
vlovich123 6y ago
Google had limited VC investment - a 25m round before IPO. Arguably they turned evil much later so to me the link to “VC corruption” is more specious. Re cloudflare, can you please help me understand what they’ve been doing that you see as evil? Given how Mozilla constantly struggles to stay afloat (and effectively depends on the generosity of Google as the single revenue source), I don’t know that’s an example to point to, especially since they’ve had their own share of “user-hostile” steps (albeit fewer since it’s a smaller company).
- Taek 6y ago
  I would argue that being a public company has the same pressure as being VC funded only much stronger. Cloudflare is increasingly pushing their position as the world's biggest man-in-the-middle, and things like their new secure DNS are making the situation worse. They've started taking opinionated stances and making deplatforming decisions instead of being neutral infrastructure and I think this is going to get a lot worse.

malux85 6y ago

I'm curious, what are the illegal (and the highly unethical) ones doing? Dont need to name the companies, but what sort of activities are you seeing?

thraway2020 6y ago
I can really relate to the parent comment. I have worked at two VC-funded startups, one which was an "uber of x" and the other is a IoT consumer electronics startup. The former was unethical in the way it treated the workers (I mean independent contractors). The higher ups treated the app/company as a beautiful product that would save the world (or the yuppies at least), but rarely acknowledged the actual workers who made the cogs spin, and was more focused on Growth and branding than actually treating people well. Something I always think about is the dark pattern they had in the app which would only ask you to rate/review on Yelp/app stores if you had given a 5 star rating to the job. They also hacked Yelp to show the Yelp option to people they determined were most likely to leave a good Yelp review. If you have a good product/service that you believe in, you shouldn't need to do this type of thing. Oh, and of course the company was not following the labor/insurance laws in the states where it worked and had several cease and desist orders they ignored. The hardware startup had like 20% RMA rates because of components would fail over and over. They used VC money to subsidize the returns/repairs instead of fixing the problem. They would prefer to ship more crappy products instead of fewer good products. Not so much illegal (hard to be when selling electronics, yay regulations), but unethical in that they would ship so much garbage despite being "customer obsessed." They operated more like a software company than a hardware company. It's easy to remotely fix software, but hardware is a very different beast and that was something they didn't want to admit. Compared to my current company, a 30 person electronics firm that has already been acquired and never did too much VC nonsense. We are profitable and sell a good product (1% RMA) that customers enjoy. Instead of "moving fast and breaking things" (a slogan I feel the first two companies embody), we work hard to get things just right before shipping the product so that we never get any returned merchandise but get lots of return customers.
staysaasy 6y ago
I wonder if this shady/unethical behavior is more focused in consumer startups. In enterprise SaaS, for example, unethical behavior is a low-EV move because your customers will have standing to cancel their contracts or pursue you for damages. It's also harder to be shady under the scrutiny of 500 large recurring-revenue customers than 500,000 tiny ones.

brundolf 6y ago

> I don't think it's a coincidence that Jetbrains has created a beloved product without the help of VC money I don't think the surprise is that they made a good product without VC, I think the surprise is that they made ten figures off the back of nothing but a good product ...which should tell us something about the industry

auganov 6y ago

A company that makes it to a few dozen employees without much financing is already extremely successful. You're very unlikely to ever work for a poorly run company without financing - they can't hire.

everythingswan 6y ago
Some SMB's that I have met over the years are great at pretending they don't have money when hiring but are very profitable. I think that fits the "bad company, no financing" and is worth mentioning. This thread is interesting because we're talking about success for different people. Success for the founder? The money? The employees? The answers are relative to the stakeholder we're talking about.
- auganov 6y ago
  Success as a product company relative to others. I'm talking about simple selection bias. A no-financing company with a decent head count is probably in the top 1 percentile among peers. Chances are they're delivering real value. A VC backed startup hiring a bunch of people is perfectly average. The top 1% for startups would probably be post-IPO/exit/very-late-stage. So it seems perfectly normal to me a VC backed startup in most cases will look like a total trainwreck compared to a bootstrapped company of the same size. The vast majority of bootstrapped companies die before they even had a chance to hire anybody. Unlikely you'd ever have to deal with them.
  - everythingswan 6y ago
    Yea, that's a really insightful take and I didn't take that into account when I was thinking about this earlier. Appreciate your take!

zdragnar 6y ago

>>> Virtually every VC startup I've worked closely with or learned about in detail is doing something nearly everyone would agree is unethical, and a fairly large amount are doing things that are down right illegal spared only by the fact that they aren't big enough to warrant prosecution or even investigation. Perpetual lip service is always paid to the notion that "we're a user focused company". While the mental gymnastics performed to convince everyone onboard that this is the case are fun to watch, it tragic to see nearly all good projects slowly devolving into ways of tricking the users... and in most cases still losing money. <<< As an anecdotal point of one, I can confirm that literally none of that is true for the startup I am working for, and we are doing quite well. Of course, it probably helps that our founders have actual industry and startup experience, and are not pushover adult children like you might find on the Silicon Valley hbo show.

jmondi 6y ago

The more I work in VC backed companies, the more I realize: VC's are not there to add value to a business, they are there to suck all the value out of a business.

dumbfoundded 6y ago
Yes, but at least most VCs try to do it with an exit. Private Equity is far worse IMO

ASalazarMX 6y ago

VC is like visiting sports clubs, finding the best candidates, and overdosing them on steroids. VC hopes the ones that survive will become profitable enough to pay for the ones that it killed.

markus_zhang 6y ago

Yep. Most VC, if not all of them, demand quick return, and it's not always good for the products.

nbzso 6y ago

I will go further on VC funded companies. The Culture of Success is simple: If you are a founder, you have to be Perfect Fit, you have to design your idea around what VC's want to hear and this is working model. One of the reasons that I never work with or for startups. Founders are rarely competent to select the right people, in most cases they lack experience in HR or Product Design, etc. Bootstrapping is a detector for true products, you scale on a merit of real customer base not on some Valuable Idea for VC investment.