7 ms·

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of

by 0des 5y ago

It may be gauche to express this opinion on HN of all places and I hope it doesn't come off as tonedeaf disrespect, but does anybody notice VC is falling out of favor unless absolutely necessary? I am noticing a lot of bootstrappers that are emerging with the ethos that VC isn't what it used to be for some markets, and often a poor choice of the right VC can be a detriment to a project's longevity, with some teams choosing to avoid it at all costs.

claytonjy 5y ago
I've noticed the same though I don't know what the split is; still lots of VC companies, and more companies of all flavors being started right now. I've also seen some late stage cos raise a mix of equity and debt at favorable terms; is that becoming more common as part of the same phenomenon?
- lumost 5y ago
  Rates are low, its preferable to raise debt than a dilutive round for existing investors. Companies that are locked into a prisoners dilemma for spending/market share need to get creative with how they finance their spending.
dangrossman 5y ago
I don't think that's a new sentiment around here. Anything published by 37Signals and its founders used to be mandatory reading on HN, and they were all about small teams eschewing outside investors. Their Getting Real book was published in 2006.
- StriverGuy 5y ago
  Interesting you avoided calling them basecamp given the recent media fallout. Not saying you did it intentionally, but just rare anyone refers to them as 37Signals much anymore.
  - dangrossman 5y ago
    I forgot they had changed their name. They were 37Signals when they were HN's darling. This is the company everyone was in love with: https://37signals.com/manifesto https://37signals.com/manifesto
  - ericd 5y ago
    Eh it’s still how I think of them, fwiw. I haven’t seen as much from them since their name change.
  - 0des 5y ago
    It was my impression Basecamp is more associated with the product of the same name, rather than the group (37signals) associated with it. Correct me if I'm wrong, others may have a different opinion and I'm not the foremost expert on that.
    - atestu 5y ago
      They formerly renamed the company to Basecamp a few years ago and shut down / spun off other products (campfire and highrise).
- tim333 5y ago
  Also the founder of HN wrote an essay on VC suckage http://www.paulgraham.com/venturecapital.html http://www.paulgraham.com/venturecapital.html
- yawnxyz 5y ago
  I was firmly in the Basecamp camp until I found out they were basically given a large "grant" from Jeff Bezos that allowed them to continue bootstrapping
wayoutthere 5y ago
If you look at the most valuable tech companies today, most made it a significant way along the path without outside investment due to the financial position the founders were born into. While there are a few notable exceptions, nearly every one of them relied on early loans from parents to build their fortunes rather than early stage VC.
- robocat 5y ago
  Privileged access to powerful people probably matters more than the $. I recall Bill Gates got trusted access to IBM decision makers. A recent example is Elizabeth Holmes, where the $ amounts were probably low hundreds of thousands: https://arstechnica.com/tech-policy/2021/11/holmes-parents-seeded-theranos-connected-her-with-powerful-investors/ https://arstechnica.com/tech-policy/2021/11/holmes-parents-s... “The family’s wealth, power and political connections date to the 1890s, when Christian Rasmus Holmes, a Danish immigrant and physician, married Bettie Fleischmann, heiress to the namesake yeast fortune and a Cincinnati socialite with a fondness for Chinese bronzes.” - from NYT article: https://archive.vn/aMCpe https://archive.vn/aMCpe The interesting thing is that the future fortune depended on a “yeast fortune”, i.e. while you might not be born into wealth and power, perhaps your grandchildren or descendants can be.
  - wayoutthere 5y ago
    I think people underestimate the cascading effect that avoiding a seed / angel round can have on cap tables in later rounds. It allows the founders to retain control for much longer, which in my opinion is a critical factor for success of a rapid-growth product company. A founder has a clarity of vision that, when it aligns with the market, delivers outsized results and delights customers. You can avoid decision-making by committee for a lot longer, which gives you a much better shot at success. Their companies are more successful as a result (when the vision aligns with the market — things can go to shit just as quickly if the vision is off). And we see this story of parental financial resources reflected in nearly every case. The fact that these were technically “loans” is largely an artifact of tax law.
cle 5y ago
The signal-to-noise ratio is getting lower and the risk is getting higher of choosing the wrong investors, and having the wrong investors pushing your company in undesirable directions to meet LP expectations can be really frustrating, at the least.
adventured 5y ago
I agree that is happening more often in the initial stages. And with a bit of experience/reputation you can command very favorable terms in the early stages of a start-up, at least in the present climate where seed type funding is relatively very easy to come by. Or let's say you don't have much money and you want to avoid early VC due to loss of control and hefty dilution. In the US market, move to a college town (often quite safe), take a part-time $15 / hr retail job (CVS and Walgreens are both moving to that minimum in 2022; both are better than fast food and easier than Walmart type jobs), get a modest cost apartment ($650-$750), walk/bus/bike to work (no car expenses), keep your bills under $1k-$1.2k per month, build your start-up on Hetzner (new Virginia datacenter). Self-fund, build your thing, don't take early venture capital, maximize your leverage later on. Maybe occasionally do some side contracting work if necessary to fill up the personal treasury (10 hr per month or less). The counter argument to that is primarily the speed angle, get bigger faster or get crushed by the VC funded crowd, and similar arguments. It likely varies by the case as to whether a given approach makes more sense or less (eg depending on what you're building, time to market may not be so much of the essence, or it may be critical).
- VRay 5y ago
  Man, I hear a lot of horror stories about working at Walgreens and the like on Reddit, even among pharmacists I guess that just going there part time as part of a bigger plan will be a lot lower-stress than trying to make a living off it, but that still sounds like a bad idea You might be better off working as an engineer for a year and then saving 3-4 years' worth of minimum wage money instead I had a friend who really regretted using his savings to try and bootstrap businesses though, since he was still working at Amazon in his 60s
  - adventured 5y ago
    If a person has enough experience at contracting to lean on that reliably, or enough skill to earn ~$80k-$100k per year (to build enough savings quickly for a good runway), then it's definitely not the ideal route to pull a part-time $15/hr type job (it'd be a waste of time). And it only works well for younger people without a family, as it'll involve 70-80 hours of work per week (at least in the beginning). It's a poor(er) person's scenario. It's what I might do if I were 19-21 years old again. Back then, circa 1999-2001, I did a lot of web development contracting to fund building things I wanted to build with the rest of my time. It was a quite unreliable path though, as some months were flush and others were bleak. Poor people in that scenario usually don't have degrees from nice universities, they often can't easily get good engineering jobs early on. And if they have an aversion to working for other people/companies, as I always have, then that complicates the context further (CVS & Co are mostly drone jobs; POS, scan bar codes, greet customers, bag items, stock shelves, repeat; and it might help reduce development burnout, as it gets you away from code and out of the house). If you're young'ish, poor'ish and without a ton of experience, it provides a highly workable avenue to go after building a thing you want to build, self-funded, while cutting out the need for early outside capital (the need to give up a piece of your soul to the sharks).
kingcharles 5y ago
I gave up on VCs because I hate the entire experience of raising money and being beholden to someone. It's exhausting, for a start, and takes away so much time from building a product. I just took my idea list and erased everything that needed VC money. All ideas need some money to launch, and sadly some of the best ideas need a ton of money to launch. Ask yourself - do I have a simpler idea I can build first to make enough money to launch the thing I really want to do?
dredmorbius 5y ago
As with much other knowledge and fashion (clothing, software, management, ...), it's cyclical. Old-timers will remember Jerry Kaplan's Start Up, about the failure/betrayal of Go Corporation. https://www.worldcat.org/title/startup-a-silicon-valley-adventure/oclc/50026100 https://www.worldcat.org/title/startup-a-silicon-valley-adve... Or Sandy Lerner and Len Bosack's betrayal having founded Cisco Systems. https://www.npr.org/2021/05/07/994789248/cisco-systems-urban-decay-sandy-lerner-2018 https://www.npr.org/2021/05/07/994789248/cisco-systems-urban...
nazka 5y ago
Maybe also because of that: https://randle.substack.com/p/playing-different-games https://randle.substack.com/p/playing-different-games

by 0des 5y ago

claytonjy 5y ago

I've noticed the same though I don't know what the split is; still lots of VC companies, and more companies of all flavors being started right now. I've also seen some late stage cos raise a mix of equity and debt at favorable terms; is that becoming more common as part of the same phenomenon?

lumost 5y ago
Rates are low, its preferable to raise debt than a dilutive round for existing investors. Companies that are locked into a prisoners dilemma for spending/market share need to get creative with how they finance their spending.

dangrossman 5y ago

I don't think that's a new sentiment around here. Anything published by 37Signals and its founders used to be mandatory reading on HN, and they were all about small teams eschewing outside investors. Their Getting Real book was published in 2006.

StriverGuy 5y ago
Interesting you avoided calling them basecamp given the recent media fallout. Not saying you did it intentionally, but just rare anyone refers to them as 37Signals much anymore.
- dangrossman 5y ago
  I forgot they had changed their name. They were 37Signals when they were HN's darling. This is the company everyone was in love with: https://37signals.com/manifesto https://37signals.com/manifesto
- ericd 5y ago
  Eh it’s still how I think of them, fwiw. I haven’t seen as much from them since their name change.
- 0des 5y ago
  It was my impression Basecamp is more associated with the product of the same name, rather than the group (37signals) associated with it. Correct me if I'm wrong, others may have a different opinion and I'm not the foremost expert on that.
  - atestu 5y ago
    They formerly renamed the company to Basecamp a few years ago and shut down / spun off other products (campfire and highrise).
tim333 5y ago
Also the founder of HN wrote an essay on VC suckage http://www.paulgraham.com/venturecapital.html http://www.paulgraham.com/venturecapital.html
yawnxyz 5y ago
I was firmly in the Basecamp camp until I found out they were basically given a large "grant" from Jeff Bezos that allowed them to continue bootstrapping

wayoutthere 5y ago

If you look at the most valuable tech companies today, most made it a significant way along the path without outside investment due to the financial position the founders were born into. While there are a few notable exceptions, nearly every one of them relied on early loans from parents to build their fortunes rather than early stage VC.

robocat 5y ago
Privileged access to powerful people probably matters more than the $. I recall Bill Gates got trusted access to IBM decision makers. A recent example is Elizabeth Holmes, where the $ amounts were probably low hundreds of thousands: https://arstechnica.com/tech-policy/2021/11/holmes-parents-seeded-theranos-connected-her-with-powerful-investors/ https://arstechnica.com/tech-policy/2021/11/holmes-parents-s... “The family’s wealth, power and political connections date to the 1890s, when Christian Rasmus Holmes, a Danish immigrant and physician, married Bettie Fleischmann, heiress to the namesake yeast fortune and a Cincinnati socialite with a fondness for Chinese bronzes.” - from NYT article: https://archive.vn/aMCpe https://archive.vn/aMCpe The interesting thing is that the future fortune depended on a “yeast fortune”, i.e. while you might not be born into wealth and power, perhaps your grandchildren or descendants can be.
- wayoutthere 5y ago
  I think people underestimate the cascading effect that avoiding a seed / angel round can have on cap tables in later rounds. It allows the founders to retain control for much longer, which in my opinion is a critical factor for success of a rapid-growth product company. A founder has a clarity of vision that, when it aligns with the market, delivers outsized results and delights customers. You can avoid decision-making by committee for a lot longer, which gives you a much better shot at success. Their companies are more successful as a result (when the vision aligns with the market — things can go to shit just as quickly if the vision is off). And we see this story of parental financial resources reflected in nearly every case. The fact that these were technically “loans” is largely an artifact of tax law.

cle 5y ago

The signal-to-noise ratio is getting lower and the risk is getting higher of choosing the wrong investors, and having the wrong investors pushing your company in undesirable directions to meet LP expectations can be really frustrating, at the least.

adventured 5y ago

I agree that is happening more often in the initial stages. And with a bit of experience/reputation you can command very favorable terms in the early stages of a start-up, at least in the present climate where seed type funding is relatively very easy to come by. Or let's say you don't have much money and you want to avoid early VC due to loss of control and hefty dilution. In the US market, move to a college town (often quite safe), take a part-time $15 / hr retail job (CVS and Walgreens are both moving to that minimum in 2022; both are better than fast food and easier than Walmart type jobs), get a modest cost apartment ($650-$750), walk/bus/bike to work (no car expenses), keep your bills under $1k-$1.2k per month, build your start-up on Hetzner (new Virginia datacenter). Self-fund, build your thing, don't take early venture capital, maximize your leverage later on. Maybe occasionally do some side contracting work if necessary to fill up the personal treasury (10 hr per month or less). The counter argument to that is primarily the speed angle, get bigger faster or get crushed by the VC funded crowd, and similar arguments. It likely varies by the case as to whether a given approach makes more sense or less (eg depending on what you're building, time to market may not be so much of the essence, or it may be critical).

VRay 5y ago
Man, I hear a lot of horror stories about working at Walgreens and the like on Reddit, even among pharmacists I guess that just going there part time as part of a bigger plan will be a lot lower-stress than trying to make a living off it, but that still sounds like a bad idea You might be better off working as an engineer for a year and then saving 3-4 years' worth of minimum wage money instead I had a friend who really regretted using his savings to try and bootstrap businesses though, since he was still working at Amazon in his 60s
- adventured 5y ago
  If a person has enough experience at contracting to lean on that reliably, or enough skill to earn ~$80k-$100k per year (to build enough savings quickly for a good runway), then it's definitely not the ideal route to pull a part-time $15/hr type job (it'd be a waste of time). And it only works well for younger people without a family, as it'll involve 70-80 hours of work per week (at least in the beginning). It's a poor(er) person's scenario. It's what I might do if I were 19-21 years old again. Back then, circa 1999-2001, I did a lot of web development contracting to fund building things I wanted to build with the rest of my time. It was a quite unreliable path though, as some months were flush and others were bleak. Poor people in that scenario usually don't have degrees from nice universities, they often can't easily get good engineering jobs early on. And if they have an aversion to working for other people/companies, as I always have, then that complicates the context further (CVS & Co are mostly drone jobs; POS, scan bar codes, greet customers, bag items, stock shelves, repeat; and it might help reduce development burnout, as it gets you away from code and out of the house). If you're young'ish, poor'ish and without a ton of experience, it provides a highly workable avenue to go after building a thing you want to build, self-funded, while cutting out the need for early outside capital (the need to give up a piece of your soul to the sharks).

kingcharles 5y ago

I gave up on VCs because I hate the entire experience of raising money and being beholden to someone. It's exhausting, for a start, and takes away so much time from building a product. I just took my idea list and erased everything that needed VC money. All ideas need some money to launch, and sadly some of the best ideas need a ton of money to launch. Ask yourself - do I have a simpler idea I can build first to make enough money to launch the thing I really want to do?

dredmorbius 5y ago

As with much other knowledge and fashion (clothing, software, management, ...), it's cyclical. Old-timers will remember Jerry Kaplan's Start Up, about the failure/betrayal of Go Corporation. https://www.worldcat.org/title/startup-a-silicon-valley-adventure/oclc/50026100 https://www.worldcat.org/title/startup-a-silicon-valley-adve... Or Sandy Lerner and Len Bosack's betrayal having founded Cisco Systems. https://www.npr.org/2021/05/07/994789248/cisco-systems-urban-decay-sandy-lerner-2018 https://www.npr.org/2021/05/07/994789248/cisco-systems-urban...

nazka 5y ago

Maybe also because of that: https://randle.substack.com/p/playing-different-games https://randle.substack.com/p/playing-different-games