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As someone that has been working hard in this domain, there is one major problem to this in software. Initial funding. There is a lot of growth non dilutive ca

by di4na 4y ago

As someone that has been working hard in this domain, there is one major problem to this in software. Initial funding. There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. You used to raise that money through other local mittrlelstands. At the Masons lodge. At the local kiwanis or Rotary. But these have closed to young member decades ago when said younguns moved to uni degrees as a path in. There is a lot of money idling out there to do that, but as Indie.vc showed, the usual LP are super frigid to it. I do not have a good answer to this. The current young people simply are too unstable and too close to poverty to take the risks. And there is noone taking a risk on them either. There is a looooot of value to make though. These markets are ripe for productivity enhancement through good software by small teams. But the people that have the domain knowledge and the tech skills do not have the risk taking capability to execute. Whoever find out how to provide them this will unleash massive growth on the world. I advice to look at what calm fund is doing. https://calmfund.com/ https://calmfund.com/ The solution may end up being some kind of crowdfunding from other tech specialists with high income. Like FAANG devs.

engineeringwoke 4y ago
This is an English-speaking board where people have individualistic preferences so it isn't surprising that people default to an answer from private capital, but in Europe the government does this, and it works. Starting a company in the Netherlands was a breeze, and the tax breaks are very generous in the first few years.
- di4na 4y ago
  I am in France, and i can tell you, the government only really support "want to be a unicorn" or companies that are already established or company that generate a ton of local jobs. I went to talk to our local chamber of commerce and industry, which handle navigating the subsidies, and their answer was "how many local jobs are you creating ? Just you for now ? Then we cannot help you, come back when you create a dozen in the region"
TuringNYC 4y ago
>> Initial funding. There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. For two tech founders, the first 500k is literally a year of salary for the two founders. One option here is to bootstrap without outside capital, de-risk, and raise a better round once you've de-risked. For tech founders, the best form of capital can be their own minds and time. (Doesnt work as well if you have a family and if you're a single earner with dependents of course!)
- di4na 4y ago
  As a tech person at a big tech company making 98k per year as a senior with a rent to pay. Maybe reconsider what i said and why. In particular consider that what you said highly limit who can do this and how that limit heavily the kind of company that could grow from this.
  - TuringNYC 4y ago
    Totally considered. I did my bootstrapped startup while working a day job for the first year. The point is the value of your free time is 250k/yr. If you are smart and motivated, your time is incredibly valuable regardless of what your employer is paying you -- because you cannot easily hire that skillset with VC money. In my case, when I was raising in 2012, the typical VC line was "go move to SF/SV and work for ramen-pay", which is ridiculous and only something rich people can do (things have changed now.) So I bootstrapped and built it myself on my spare hours (note, of course the start up should not be competing in the same market with your dayjob which would be a conflict of interest.) Once you have a prototype and de-risking, the tables turn and VCs chase you I mean, what is the alternative? See the GP comment I was replying to: >> There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. If you're not in the circle where VCs are throwing money at you for some juice squeezing appliance, then you just have the option i've presented...or the option of not playing at all. But i'm very interested in the topic, i'd love to hear what your proposal is...because I think "poor people cant found tech startups" is not the world I would want to live in.
snarf21 4y ago
There is a simple solution. It also give middle class an actual shot at an exit even without hitting a unicorn. This is for the groups that went to state schools not the Ivys. Take a group of 4-6 CS grads and maybe a business major. The parents of these kids form a company and bootstrap the kids by having them work from home and just covering legal costs and cloud costs with a focus on keeping costs low. They go find a problem and start finding customers. No salaries are needed as each parent takes care of their own kids. This gets rid of the problem of just giving 22 year olds $10M and hoping they figure it out. The middle class doesn't have that kind of money, they have to be smarter but it is possible. Someone who has the knowledge could make a template that others could just use even without the know how. I wish my parents would have done something like this. I didn't have the chance to mess with a start-up after graduation. I worked 40 hours/week while in college. Graduation was about getting money asap to start digging out. This is the thing that the 1% have over others, a huge backstop and support self in case they fail.
- ttymck 4y ago
  > They go find a problem and start finding customers This is easier said than done, no?
  - PeterisP 4y ago
    If they can't do that, then it's not an initial funding problem (which the parent post tries to solve) but that their business just should not get started.
- kcb 4y ago
  The assumption that locking a few fresh CS grads and a business major in room will produce a successful company is pretty wild.
ant6n 4y ago
I dunno. I feel like the first 500K aren’t really the big problem, since growing to, say, a 500M valuation as an upper limit is still quite the upside. Also, non traditional funding options are on the table at that level (some cash from you and family, some equity in your home, perhaps some state funding or loans). I feel like the next rounds may become much more difficult. How can I raise the next 10M, …, 200M if the company is unlikely to grow beyond 500M?
- di4na 4y ago
  You don't need it as much or have that much problems if you make a profit. And sorry but as upper middle class, my family cannot fund 500k. 100k max. And young people do not have a home. Welcome to the real world.
munificent 4y ago
> The current young people simply are too unstable and too close to poverty to take the risks. One piece of the solution that is very clear to me and contains many other upsides is better access to healthcare. The fact that Americans mostly get healthcare through large corporate jobs significantly ratchets up the risk of entrepreneurialism. A better healthcare safety net would make it safer to leave the safe confines of a corporate job that provides health insurance.
- robocat 4y ago
  > better access to healthcare If you are an entrepreneur under say 40, can’t you just roll a D10 and hope you don’t get a 1? Surely most people before middle-age won’t need expensive healthcare?
  - di4na 4y ago
    Break a leg. Catch covid. In my case have a cognitive trouble. Allergy. All kind of disease you can catch. Breaking a tooth while tripping over something. Being young does not isolate you. And the trip to poverty is far faster than getting out of it.
  - munificent 4y ago
    A 10% chance of a million-dollar healthcare bill you can't pay and will spend the rest of your life dealing with is still shitty odds on top of all of the other risks involved in starting a business. Also: parents. Childbirth is expensive and most parents want some reasonable level of certainty that they can afford good healthcare for their kids. Or, to put a finer point on it, when forced to choose between health stability for their children and starting a business, most will sacrifice the latter to get the former.
splitstud 4y ago
keppy 4y ago
This resonates with me. I have close friends who would be great co-founders, 3 out of 4 have moved in to camper trucks or vans. They work easy remote jobs and just enjoy life. We are mostly in our early 30s, worked in startups together over the years as engineers, sometimes as first or second hire. It's going to be quite hard to talk one of them in to being a principal co-founder at this point.
tmp_anon_22 4y ago
Disagree. This is like complaining rent in the big city is $4k/mo and impossible. No, spend a week on craigslist and get a great place with a roommate for $1.8k/mo. The same is true for a medium sized business. Nothing is stopping you from doing it, its just stopping you from doing it from a hammock in the Caribbean.
- di4na 4y ago
  I have a total free time to do non essential things per week of 3h. And i already have insomnia which is the only reason this time is not in the negative. Thank you but no.
  - tmp_anon_22 4y ago
    I think we're mixing two points. "Medium scale/growth/etc startups should be feasible. And "Middle class startups should be feasible for people of all time/energy/financial constraints" --- My point is that medium sized businesses (including startups) have always been feasible. Yeah it takes more effort then coasting on huge financing but thats the price you pay.
robocat 4y ago
> but the first 500k are near impossible to get without a network in old money Four hundred* golden tickets per year winning $500k available here for the low price of $0, although an application is required, and some light strings are attached: https://www.ycombinator.com/deal https://www.ycombinator.com/deal * https://www.ycombinator.com/companies https://www.ycombinator.com/companies
- di4na 4y ago
  A lot of strings attached among other being able to give up your life for 3 months. And a expectation and push to 100x. And a lot of others. YC is simply not shaped for the Mittelstands and honestly really not compelling. At all.
  - robocat 4y ago
    You sound like you are making a lot of excuses, but I actually deeply agree with every negative point that you make. As you are pointing out, the risk of being a founder is just not worth it for you or most people, financially or socially or personally. It rarely makes sense even if you are already wealthy or privileged: even given the advantages you have correctly identified, the expected outcome is failure. Without those advantages the rewards for the risks are even worse. Calculate the median return[1][2][3] implied for the majority of ycombinator founders and it is approximately zero. Selection bias is a bitch. [1] https://jaredheyman.medium.com/on-600b-of-y-combinator-startup-success-fc85b2076d0d https://jaredheyman.medium.com/on-600b-of-y-combinator-start... [2] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... [3] https://80000hours.org/2014/05/how-much-do-y-combinator-founders-earn/ https://80000hours.org/2014/05/how-much-do-y-combinator-foun...

by di4na 4y ago

engineeringwoke 4y ago

This is an English-speaking board where people have individualistic preferences so it isn't surprising that people default to an answer from private capital, but in Europe the government does this, and it works. Starting a company in the Netherlands was a breeze, and the tax breaks are very generous in the first few years.

di4na 4y ago
I am in France, and i can tell you, the government only really support "want to be a unicorn" or companies that are already established or company that generate a ton of local jobs. I went to talk to our local chamber of commerce and industry, which handle navigating the subsidies, and their answer was "how many local jobs are you creating ? Just you for now ? Then we cannot help you, come back when you create a dozen in the region"

TuringNYC 4y ago

>> Initial funding. There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. For two tech founders, the first 500k is literally a year of salary for the two founders. One option here is to bootstrap without outside capital, de-risk, and raise a better round once you've de-risked. For tech founders, the best form of capital can be their own minds and time. (Doesnt work as well if you have a family and if you're a single earner with dependents of course!)

di4na 4y ago
As a tech person at a big tech company making 98k per year as a senior with a rent to pay. Maybe reconsider what i said and why. In particular consider that what you said highly limit who can do this and how that limit heavily the kind of company that could grow from this.
- TuringNYC 4y ago
  Totally considered. I did my bootstrapped startup while working a day job for the first year. The point is the value of your free time is 250k/yr. If you are smart and motivated, your time is incredibly valuable regardless of what your employer is paying you -- because you cannot easily hire that skillset with VC money. In my case, when I was raising in 2012, the typical VC line was "go move to SF/SV and work for ramen-pay", which is ridiculous and only something rich people can do (things have changed now.) So I bootstrapped and built it myself on my spare hours (note, of course the start up should not be competing in the same market with your dayjob which would be a conflict of interest.) Once you have a prototype and de-risking, the tables turn and VCs chase you I mean, what is the alternative? See the GP comment I was replying to: >> There is a lot of growth non dilutive capital available but the first 500k are near impossible to get without a network in old money. If you're not in the circle where VCs are throwing money at you for some juice squeezing appliance, then you just have the option i've presented...or the option of not playing at all. But i'm very interested in the topic, i'd love to hear what your proposal is...because I think "poor people cant found tech startups" is not the world I would want to live in.

snarf21 4y ago

There is a simple solution. It also give middle class an actual shot at an exit even without hitting a unicorn. This is for the groups that went to state schools not the Ivys. Take a group of 4-6 CS grads and maybe a business major. The parents of these kids form a company and bootstrap the kids by having them work from home and just covering legal costs and cloud costs with a focus on keeping costs low. They go find a problem and start finding customers. No salaries are needed as each parent takes care of their own kids. This gets rid of the problem of just giving 22 year olds $10M and hoping they figure it out. The middle class doesn't have that kind of money, they have to be smarter but it is possible. Someone who has the knowledge could make a template that others could just use even without the know how. I wish my parents would have done something like this. I didn't have the chance to mess with a start-up after graduation. I worked 40 hours/week while in college. Graduation was about getting money asap to start digging out. This is the thing that the 1% have over others, a huge backstop and support self in case they fail.

ttymck 4y ago
> They go find a problem and start finding customers This is easier said than done, no?
- PeterisP 4y ago
  If they can't do that, then it's not an initial funding problem (which the parent post tries to solve) but that their business just should not get started.
kcb 4y ago
The assumption that locking a few fresh CS grads and a business major in room will produce a successful company is pretty wild.

ant6n 4y ago

I dunno. I feel like the first 500K aren’t really the big problem, since growing to, say, a 500M valuation as an upper limit is still quite the upside. Also, non traditional funding options are on the table at that level (some cash from you and family, some equity in your home, perhaps some state funding or loans). I feel like the next rounds may become much more difficult. How can I raise the next 10M, …, 200M if the company is unlikely to grow beyond 500M?

di4na 4y ago
You don't need it as much or have that much problems if you make a profit. And sorry but as upper middle class, my family cannot fund 500k. 100k max. And young people do not have a home. Welcome to the real world.

munificent 4y ago

> The current young people simply are too unstable and too close to poverty to take the risks. One piece of the solution that is very clear to me and contains many other upsides is better access to healthcare. The fact that Americans mostly get healthcare through large corporate jobs significantly ratchets up the risk of entrepreneurialism. A better healthcare safety net would make it safer to leave the safe confines of a corporate job that provides health insurance.

robocat 4y ago
> better access to healthcare If you are an entrepreneur under say 40, can’t you just roll a D10 and hope you don’t get a 1? Surely most people before middle-age won’t need expensive healthcare?
- di4na 4y ago
  Break a leg. Catch covid. In my case have a cognitive trouble. Allergy. All kind of disease you can catch. Breaking a tooth while tripping over something. Being young does not isolate you. And the trip to poverty is far faster than getting out of it.
- munificent 4y ago
  A 10% chance of a million-dollar healthcare bill you can't pay and will spend the rest of your life dealing with is still shitty odds on top of all of the other risks involved in starting a business. Also: parents. Childbirth is expensive and most parents want some reasonable level of certainty that they can afford good healthcare for their kids. Or, to put a finer point on it, when forced to choose between health stability for their children and starting a business, most will sacrifice the latter to get the former.

splitstud 4y ago

keppy 4y ago

This resonates with me. I have close friends who would be great co-founders, 3 out of 4 have moved in to camper trucks or vans. They work easy remote jobs and just enjoy life. We are mostly in our early 30s, worked in startups together over the years as engineers, sometimes as first or second hire. It's going to be quite hard to talk one of them in to being a principal co-founder at this point.

tmp_anon_22 4y ago

Disagree. This is like complaining rent in the big city is $4k/mo and impossible. No, spend a week on craigslist and get a great place with a roommate for $1.8k/mo. The same is true for a medium sized business. Nothing is stopping you from doing it, its just stopping you from doing it from a hammock in the Caribbean.

di4na 4y ago
I have a total free time to do non essential things per week of 3h. And i already have insomnia which is the only reason this time is not in the negative. Thank you but no.
- tmp_anon_22 4y ago
  I think we're mixing two points. "Medium scale/growth/etc startups should be feasible. And "Middle class startups should be feasible for people of all time/energy/financial constraints" --- My point is that medium sized businesses (including startups) have always been feasible. Yeah it takes more effort then coasting on huge financing but thats the price you pay.

robocat 4y ago

> but the first 500k are near impossible to get without a network in old money Four hundred* golden tickets per year winning $500k available here for the low price of $0, although an application is required, and some light strings are attached: https://www.ycombinator.com/deal https://www.ycombinator.com/deal * https://www.ycombinator.com/companies https://www.ycombinator.com/companies

di4na 4y ago
A lot of strings attached among other being able to give up your life for 3 months. And a expectation and push to 100x. And a lot of others. YC is simply not shaped for the Mittelstands and honestly really not compelling. At all.
- robocat 4y ago
  You sound like you are making a lot of excuses, but I actually deeply agree with every negative point that you make. As you are pointing out, the risk of being a founder is just not worth it for you or most people, financially or socially or personally. It rarely makes sense even if you are already wealthy or privileged: even given the advantages you have correctly identified, the expected outcome is failure. Without those advantages the rewards for the risks are even worse. Calculate the median return[1][2][3] implied for the majority of ycombinator founders and it is approximately zero. Selection bias is a bitch. [1] https://jaredheyman.medium.com/on-600b-of-y-combinator-startup-success-fc85b2076d0d https://jaredheyman.medium.com/on-600b-of-y-combinator-start... [2] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... [3] https://80000hours.org/2014/05/how-much-do-y-combinator-founders-earn/ https://80000hours.org/2014/05/how-much-do-y-combinator-foun...