4 ms·

> The VC connects wealthy investors to nerds. There are few alternatives. You can self-fund by consulting and by setting aside money for your venture. That does

by _vufv 5y ago

> The VC connects wealthy investors to nerds. There are few alternatives. You can self-fund by consulting and by setting aside money for your venture. That doesn't work. It would've been great if an explanation was given for this opinion. Why wouldn't this work? From my limited experience it works fairly well.

jpmattia 5y ago
You have to remember this article was written in 2001, when most "big" ventures were hardware and therefore very capital intensive. Google shattered that idea: Larry and Sergei retained an extraordinary percentage up through the IPO because they didn't "need" the VC money, and they were doing quite well without it. Many of us from the period looked at that result, took it to an extreme, and proceeded to self-bootstrap our next endeavors.
- jasode 5y ago
  >Larry and Sergei retained an extraordinary percentage up through the IPO because they didn't "need" the VC money, and they were doing quite well without it. Fyi... Google got VCs Sequoia Capital & KPCB $25 million around June 1999 which was about ~9 months after they started in Sept 1998. Before the VC funding, they also got a group of seed investments from Stanford professors and other individuals (Andy Bechtolsheim, Jeff Bezos, NBA star Shaq, etc.)
  - jpmattia 5y ago
    Again, the context is important: You need to look at the percentages retained in those funding rounds relative to what was happening at the time. Their low capital needs, which gained them leverage, and the following high return spawned a generation of bootstrapped software startups. And since the VC pot of money is finite, hardware startups (the domain of the article's author) became quite unfashionable by the standards of the 90s.
    - jasode 5y ago
      > Their low capital needs and following high return is what spawned a generation of bootstrapped software startups. I don't see how "$25 million from a VC" would be interpreted by outsiders as inspiration for bootstrapping. Doesn't "bootstrapping" mean self-funding from revenue instead of investors? Google didn't have meaningful revenue & profits until 2002. I think the best way to apply "bootstrapping" (the way most people think of that term) to Larry & Sergei would be the early phase of 1996 to 1998 where they used Stanford's computers & datacenter for $0 cost to build a MVP search engine "Backrub". But a lot of startup founders can't apply that to their situation because they are not in PhD programs with the university providing a "pseudo AWS" for $0. (Stanford did share credit in the pagerank patent so they got license $$$ from Google in return.) EDIT reply to: >, and realized that Google did not actually need the money. What do you mean by they "didn't need the money"? How would the early Google survive for 3+ years with no revenue? Immediately after the June 1999 $25 million, they hired an ex-Grateful Dead celebrity chef to cook free meals for their employees and rent datacenter space. If Google didn't have any revenue, what money is there other than that $25 million to pay salaries of the chef, the employees, food, datacenters? That's the opposite of "bootstrapping". Are you using that word in a different way?
      - jpmattia 5y ago
        > I don't see how "$25 million from a VC" will be interpreted by outsiders as inspiration for bootstrapping. Yes, outsiders might not see it. At the time, insiders saw the percentage the company retained, and realized that Google did not actually need the money. It opened quite a few eyes. Reply to your edit: > How would the early Google survive for 3+ years with no revenue? That was the point: They had revenue, and at a level that they did not need the VCs, which enabled them to negotiate the A round of $25M as well as they did. It would be difficult to pull that off with hardware.
  - CalChris 5y ago
    Yes, they actually started well before Sept 4, 1998. Even their first angel round (August 1, 1998) predates that incorporation date. Various people told me that they didn't need the A round but wanted to get the angel notes off the books, but that might be a backsplanation. https://www.crunchbase.com/organization/google/company_financials https://www.crunchbase.com/organization/google/company_finan... Stanford had functioned as an incubator, and the project had received government (NSF) funding. Indeed the Page Brin page-rank patent was assigned to Stanford. It was filed Jan 8, 1998 with priority to 1997-01-10. Stanford paid for that and Stanford legal was going to defend it. https://patentimages.storage.googleapis.com/37/a9/18/d7c46ea42c4b05/US6285999.pdf https://patentimages.storage.googleapis.com/37/a9/18/d7c46ea... To me the lesson of Google is early profitability gives you immense leverage with VCs. They had $220,000 of revenue in 1999. Revenue is good.
    - jasode 5y ago
      >To me the lesson of Google is early profitability gives you immense leverage with VCs. But Google didn't have profits in June 1999. They were hoping for VCs Mike Moritz @ Sequoia and John Doerr @ KPCB to bring them revenue because those 2 partners were on the boards of AOL and Yahoo. They wanted to try and sell their tech to those companies. (They eventually did do deals with both of them.) Later interviews with angel Ron Conway and Sequoia said Larry's slidedeck for investment didn't have a revenue plan. The "leverage" that Larry & Sergei had was that their search engine worked better than competitors such as AltaVista and Yahoo. EDIT reply to: >But it's on record that Google had $220,000 in revenue in 1999. But did they have that revenue before June 1999? Maybe everybody's memory is fuzzy but in the books and recollections from interviews of that time period, Google didn't have meaningful revenue so it wasn't a point of leverage. But another leverage they had besides the best-in-class search engine was that angel Ron Conway was willing to quickly assemble a consortium of investors in a few days to bypass Sequoia & KPCB. It was that threat of VCs losing the the deal was what finally got them to pull the trigger. Until then, those 2 VCs were sitting on their hands for weeks. Google's 1999 revenue was never brought up as leverage. Do you have insider information that contradicts that? >Revenue and early profitability is good thing for founders but not VCs. 100% agree about the principle in general -- but I don't think Google situation in 1999 is a case study of that.
- deleted 5y ago
  [deleted]
mathattack 5y ago
Not impossible but not always efficient. Hard to focus on two things. Get cash today usually outweighs the long term building. On a macro level this is why so little software innovation comes from Accenture. All their focus is on billable hours. It’s possible, just hard.
lmeyerov 5y ago
Time and misalignment. It's distracting and hard to scale. Seed money buys time for small team to find product/market fit, and growth money for customer acquisition with a delayed payback period... and the ceiling is how reality-distorting your CEO is. Consulting is limited by your hours, and likely takes away from your experimentation, product refinement, customer success, and marketing $ + hours. In addition, it biases the product/processes towards the service as consulting immediately makes serious money and saas takes months/years to make even $100/mo. The only exception we did was limited consulting around customer success and co-design of features already on our roadmap. Super painful decision, revenue-wise! Despite strong interest, we resisted consulting services for our GPU visual graph intelligence platform for years to avoid the misalignment. Due to the recent demand for graph AI for analyzing problems like security /fraud / customer behavior / digital twins, and our interest in bundling those capabilities into our platform yet realizing we need to learn alongside our users, we flipped that decision. However, we have a base product, are being super picky on projects aligned with graph AI, and our clients also want that product goal realized long-term (vs more consulting.)
- lysecret 5y ago
  hey sounds pretty interesting can you send me your website?
  - lmeyerov 5y ago
    https://github.com/graphistry/pygraphistry https://github.com/graphistry/pygraphistry + https://github.com/rapidsai/cudf https://github.com/rapidsai/cudf if you're coming from the api / ds side, and GNNs side is more of a "let's chat!" thing for figuring out aligned collaborations (slack/email, all good!)
TuringNYC 5y ago
This is a bit circular, but...it doesn't work because others will use VC. Those using VC will make more progress because they wont be hindered by side gigs to bootstrap the company. If they have good metrics, they will also have access to growth capital which can either out-fund or flat out smother unfunded competitors. How do I know? I raised some funding for our startup (3yrs full-time) but bootstrapping further was unsustainable vs competitors who were fundraising. VC funded competitors could hire more, sell more, compensate more. The market becomes skewed. Is it good for the VC-backed competitors? Sort of. They survive. They have longer stories. But they get diluted. Many die as they try to swing for the fences (as VCs want, power law and all...) Some get fired by VC-dominated boards. Some are sent on wild goose chases by outsider funders. This probably happens less-so with better VCs.
CalChris 5y ago
This was written in a pre-SAAS era. The writer was talking about capital intensive startups. It would and it it does work now. Competition with a VC funded adversary is done by developing in stealth.
Aunche 5y ago
This is basically how Microsoft was founded and how Gates got to retain so much of the company.
gorbachev 5y ago
It's in the context of startups that need to grow quickly to make it. It works perfectly fine for startups that aren't like that. There are plenty. Wasn't it Reid Hoffman who wrote a long article or a book about this?

by _vufv 5y ago

jpmattia 5y ago

You have to remember this article was written in 2001, when most "big" ventures were hardware and therefore very capital intensive. Google shattered that idea: Larry and Sergei retained an extraordinary percentage up through the IPO because they didn't "need" the VC money, and they were doing quite well without it. Many of us from the period looked at that result, took it to an extreme, and proceeded to self-bootstrap our next endeavors.

jasode 5y ago
>Larry and Sergei retained an extraordinary percentage up through the IPO because they didn't "need" the VC money, and they were doing quite well without it. Fyi... Google got VCs Sequoia Capital & KPCB $25 million around June 1999 which was about ~9 months after they started in Sept 1998. Before the VC funding, they also got a group of seed investments from Stanford professors and other individuals (Andy Bechtolsheim, Jeff Bezos, NBA star Shaq, etc.)
- jpmattia 5y ago
  Again, the context is important: You need to look at the percentages retained in those funding rounds relative to what was happening at the time. Their low capital needs, which gained them leverage, and the following high return spawned a generation of bootstrapped software startups. And since the VC pot of money is finite, hardware startups (the domain of the article's author) became quite unfashionable by the standards of the 90s.
  - jasode 5y ago
    > Their low capital needs and following high return is what spawned a generation of bootstrapped software startups. I don't see how "$25 million from a VC" would be interpreted by outsiders as inspiration for bootstrapping. Doesn't "bootstrapping" mean self-funding from revenue instead of investors? Google didn't have meaningful revenue & profits until 2002. I think the best way to apply "bootstrapping" (the way most people think of that term) to Larry & Sergei would be the early phase of 1996 to 1998 where they used Stanford's computers & datacenter for $0 cost to build a MVP search engine "Backrub". But a lot of startup founders can't apply that to their situation because they are not in PhD programs with the university providing a "pseudo AWS" for $0. (Stanford did share credit in the pagerank patent so they got license $$$ from Google in return.) EDIT reply to: >, and realized that Google did not actually need the money. What do you mean by they "didn't need the money"? How would the early Google survive for 3+ years with no revenue? Immediately after the June 1999 $25 million, they hired an ex-Grateful Dead celebrity chef to cook free meals for their employees and rent datacenter space. If Google didn't have any revenue, what money is there other than that $25 million to pay salaries of the chef, the employees, food, datacenters? That's the opposite of "bootstrapping". Are you using that word in a different way?
    - jpmattia 5y ago
      > I don't see how "$25 million from a VC" will be interpreted by outsiders as inspiration for bootstrapping. Yes, outsiders might not see it. At the time, insiders saw the percentage the company retained, and realized that Google did not actually need the money. It opened quite a few eyes. Reply to your edit: > How would the early Google survive for 3+ years with no revenue? That was the point: They had revenue, and at a level that they did not need the VCs, which enabled them to negotiate the A round of $25M as well as they did. It would be difficult to pull that off with hardware.
- CalChris 5y ago
  Yes, they actually started well before Sept 4, 1998. Even their first angel round (August 1, 1998) predates that incorporation date. Various people told me that they didn't need the A round but wanted to get the angel notes off the books, but that might be a backsplanation. https://www.crunchbase.com/organization/google/company_financials https://www.crunchbase.com/organization/google/company_finan... Stanford had functioned as an incubator, and the project had received government (NSF) funding. Indeed the Page Brin page-rank patent was assigned to Stanford. It was filed Jan 8, 1998 with priority to 1997-01-10. Stanford paid for that and Stanford legal was going to defend it. https://patentimages.storage.googleapis.com/37/a9/18/d7c46ea42c4b05/US6285999.pdf https://patentimages.storage.googleapis.com/37/a9/18/d7c46ea... To me the lesson of Google is early profitability gives you immense leverage with VCs. They had $220,000 of revenue in 1999. Revenue is good.
  - jasode 5y ago
    >To me the lesson of Google is early profitability gives you immense leverage with VCs. But Google didn't have profits in June 1999. They were hoping for VCs Mike Moritz @ Sequoia and John Doerr @ KPCB to bring them revenue because those 2 partners were on the boards of AOL and Yahoo. They wanted to try and sell their tech to those companies. (They eventually did do deals with both of them.) Later interviews with angel Ron Conway and Sequoia said Larry's slidedeck for investment didn't have a revenue plan. The "leverage" that Larry & Sergei had was that their search engine worked better than competitors such as AltaVista and Yahoo. EDIT reply to: >But it's on record that Google had $220,000 in revenue in 1999. But did they have that revenue before June 1999? Maybe everybody's memory is fuzzy but in the books and recollections from interviews of that time period, Google didn't have meaningful revenue so it wasn't a point of leverage. But another leverage they had besides the best-in-class search engine was that angel Ron Conway was willing to quickly assemble a consortium of investors in a few days to bypass Sequoia & KPCB. It was that threat of VCs losing the the deal was what finally got them to pull the trigger. Until then, those 2 VCs were sitting on their hands for weeks. Google's 1999 revenue was never brought up as leverage. Do you have insider information that contradicts that? >Revenue and early profitability is good thing for founders but not VCs. 100% agree about the principle in general -- but I don't think Google situation in 1999 is a case study of that.
deleted 5y ago
[deleted]

mathattack 5y ago

Not impossible but not always efficient. Hard to focus on two things. Get cash today usually outweighs the long term building. On a macro level this is why so little software innovation comes from Accenture. All their focus is on billable hours. It’s possible, just hard.

lmeyerov 5y ago

Time and misalignment. It's distracting and hard to scale. Seed money buys time for small team to find product/market fit, and growth money for customer acquisition with a delayed payback period... and the ceiling is how reality-distorting your CEO is. Consulting is limited by your hours, and likely takes away from your experimentation, product refinement, customer success, and marketing $ + hours. In addition, it biases the product/processes towards the service as consulting immediately makes serious money and saas takes months/years to make even $100/mo. The only exception we did was limited consulting around customer success and co-design of features already on our roadmap. Super painful decision, revenue-wise! Despite strong interest, we resisted consulting services for our GPU visual graph intelligence platform for years to avoid the misalignment. Due to the recent demand for graph AI for analyzing problems like security /fraud / customer behavior / digital twins, and our interest in bundling those capabilities into our platform yet realizing we need to learn alongside our users, we flipped that decision. However, we have a base product, are being super picky on projects aligned with graph AI, and our clients also want that product goal realized long-term (vs more consulting.)

lysecret 5y ago
hey sounds pretty interesting can you send me your website?
- lmeyerov 5y ago
  https://github.com/graphistry/pygraphistry https://github.com/graphistry/pygraphistry + https://github.com/rapidsai/cudf https://github.com/rapidsai/cudf if you're coming from the api / ds side, and GNNs side is more of a "let's chat!" thing for figuring out aligned collaborations (slack/email, all good!)

TuringNYC 5y ago

This is a bit circular, but...it doesn't work because others will use VC. Those using VC will make more progress because they wont be hindered by side gigs to bootstrap the company. If they have good metrics, they will also have access to growth capital which can either out-fund or flat out smother unfunded competitors. How do I know? I raised some funding for our startup (3yrs full-time) but bootstrapping further was unsustainable vs competitors who were fundraising. VC funded competitors could hire more, sell more, compensate more. The market becomes skewed. Is it good for the VC-backed competitors? Sort of. They survive. They have longer stories. But they get diluted. Many die as they try to swing for the fences (as VCs want, power law and all...) Some get fired by VC-dominated boards. Some are sent on wild goose chases by outsider funders. This probably happens less-so with better VCs.

CalChris 5y ago

This was written in a pre-SAAS era. The writer was talking about capital intensive startups. It would and it it does work now. Competition with a VC funded adversary is done by developing in stealth.

Aunche 5y ago

This is basically how Microsoft was founded and how Gates got to retain so much of the company.

gorbachev 5y ago

It's in the context of startups that need to grow quickly to make it. It works perfectly fine for startups that aren't like that. There are plenty. Wasn't it Reid Hoffman who wrote a long article or a book about this?