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VCs actively dissuade founders from doing professional services.

by Msw242 5y ago

richardw 5y ago
VC’s don’t want you distracted from their one shot at your next 18 months. They’d rather you go for broke and flame out rather than building a 5-year runway that allows you to slowly tune your ideas. Neither is better than the other, but one might be better for a given situation.
mlyle 5y ago
Sure! If you're dumping a bunch of capital into something, you want to see that capital put to work immediately growing something to scale-- not for founders to be worried about stretching the capital by picking up nickels off the street. That is, being capital efficient is good, but being distracted by other non-core things excessively to try and conserve capital is bad. But that doesn't mean that bootstrapping with a consultancy isn't a viable path. It's only when you do it when you have capital sitting around that's not put to good use that it's a problem.
cameron_b 5y ago
Because they don't want you helping near-domain competition with the application of the special sauce they just paid for. They didn't buy your app, they bought your time.
progre 5y ago
I guess it's because VCs are are after the exponential growth that is possible with a hit B2C product but not realisticly possible with B2B. B2B can generate pretty solid incomes though. My previous employer had 15-20 clients, around 2M EUR yearly revenue, a solid 20% margin, with 30 employees. Fintech.
- mlyle 5y ago
  Lots of B2B products sell into huge growing markets that leave a lot of room for a high CAGR for many years (e.g. exponential growth).
groar 5y ago
Although they should not dismiss it at all as it can lead to extremely successful companies. I have Dataiku or UIPath (they did it for years) as good examples. They leveraged their existing customers to test their first product, with success.
GabeIsko 5y ago
There is kind of a conflict of interest here, no? Providing professional services can raise capital very quickly. Connects you to potential buyers. Provides guidance. Sounds like the same thing a VC gives you, but you retain all the ownership of your company.

VCs actively dissuade founders from doing professional services.

by Msw242 5y ago

VCs actively dissuade founders from doing professional services.

VC’s don’t want you distracted from their one shot at your next 18 months. They’d rather you go for broke and flame out rather than building a 5-year runway that allows you to slowly tune your ideas. Neither is better than the other, but one might be better for a given situation.

mlyle 5y ago

Sure! If you're dumping a bunch of capital into something, you want to see that capital put to work immediately growing something to scale-- not for founders to be worried about stretching the capital by picking up nickels off the street. That is, being capital efficient is good, but being distracted by other non-core things excessively to try and conserve capital is bad. But that doesn't mean that bootstrapping with a consultancy isn't a viable path. It's only when you do it when you have capital sitting around that's not put to good use that it's a problem.

cameron_b 5y ago

Because they don't want you helping near-domain competition with the application of the special sauce they just paid for. They didn't buy your app, they bought your time.

progre 5y ago

I guess it's because VCs are are after the exponential growth that is possible with a hit B2C product but not realisticly possible with B2B. B2B can generate pretty solid incomes though. My previous employer had 15-20 clients, around 2M EUR yearly revenue, a solid 20% margin, with 30 employees. Fintech.

mlyle 5y ago
Lots of B2B products sell into huge growing markets that leave a lot of room for a high CAGR for many years (e.g. exponential growth).

groar 5y ago

Although they should not dismiss it at all as it can lead to extremely successful companies. I have Dataiku or UIPath (they did it for years) as good examples. They leveraged their existing customers to test their first product, with success.

GabeIsko 5y ago

There is kind of a conflict of interest here, no? Providing professional services can raise capital very quickly. Connects you to potential buyers. Provides guidance. Sounds like the same thing a VC gives you, but you retain all the ownership of your company.