6 ms·

“Entrepreneurs get distracted by fundraising, so I just did that part first.”

31 points by frankdenbow 15y ago

asanwal 15y ago
Some folks get funded based on track record and/or reputation. For the vast majority of first-timers (99.9%) who might need to raise money, doing so before having a product or at least fleshed out idea is not going to happen.
- viscanti 15y ago
  Even if that 99.9% could get funding early, it wouldn't be on favorable terms. What gets overlooked a lot, is the cost of selling early equity. If you don't have much traction, or even a prototype, and you do raise money, you're giving up a BIG portion of equity in return. A good analogy is the music industry. Lots of bands just starting out want to be signed to a major record label. They do everything they can to attract the attention of major record execs. A very tiny minority are successful and actually gets a contract, but they end up making almost no money, because they weren't able to negotiate from a position of power. The alternative is the band who sets up their own sales and distribution and builds their audience. Now they can dictate what deals (if any) they take. They don't need the major label anymore, but they're in a position to take advantage of it, if there's a favorable deal there. Suggesting that entrepreneurs raise money early is bad advice almost always. Regardless of the initial deal you might be able to get, having a more developed product with traction will get you a better deal. Just build it, eat ramen noodles and take a second job if you have to. Meet with investors early and often, but not to ask for money. Let them see the trajectory of what you're building, so that when you want/need to raise money, they know you and see how far you've come and what you're capable of. There seems to be way too much focus on raising money early, and articles like this only exacerbate that.
ebaysucks 15y ago
I'm sorry to be that guy but this has bubble written all over it. Mydunks.it, really?
- _chap 15y ago
  Nope, he was joking: "As to what kind of product ideas he wanted to play with, Mr. Lodwick was coy. “It’s called mydunks.it...”
  - ebaysucks 15y ago
    Ah great. English is not my mother tongue and today I learned what coy really means ;)
  - pclark 15y ago
    Coy doesn't mean to imply not being serious or joking.
wilschroter 15y ago
I have a really hard time with this. Yes, he's probably a fantastic founder and will do something great (and I hope like every other entrepreneur, he does). But I hope that aspiring entrepreneurs raising funds realize what an incredible anomaly this type of capital raising is. Heaven forbid we get a whole slew of entrepreneurs saying "I heard that you can raise money without a business". It's bad enough we have people running around trying to raise money for features, not even companies. This takes it back even further, which is probably fine for him, but not for the people I fear are going to take this to heart.
hkarthik 15y ago
This is definitely a sign of a bubble. When I was a college student in Boulder in 2000, one of my roommates worked at a startup as an intern. He told me during his first week, the team all just sat around a table and thought up ideas to pursue for days on end. The only way I can fathom that being possible if they were a pre funded team. I'm pretty sure they split up within a year or so of him working there.
deleted 15y ago
[deleted]
nadam 15y ago
“Entrepreneurs get distracted by fundraising, so I just did that part first." It is like a Hollywood diva saying (after getting into the 'circles'): "Women's hands get ugly because of the lot of washing and cleaning, so I've bought myself people to do that for me. What matters is how great I am: I can do this because I am great." Venture capitalists are a parody of themselves. You have to have social proof, or you have to be already profitable to gain their attention. Basically they give money to people who do not need it.
- deleted 15y ago
  [deleted]
- _delirium 15y ago
  A closer comparison is probably novelists, but yes, the same "only works if you're famous" applies there. If you're Stephen King, you can get a book contract and advance royalties without a manuscript or even a concept, but that's not the common case.
- diego 15y ago
  VCs are more likely to give money to entrepreneurs who are already rich. There's a good reason for it: VCs (unlike angels) need home runs. Over the course of 10 years, a VC must catch a Facebook, a Google or at least a Twitter in order to be successful. A rich founder is less likely to take an early exit, and more likely to want to swing for the fences. Think of @ev refusing to sell Twitter to Google as an example. Also, an already successful entrepreneur is less risky from a VC standpoint. He was able to endure the process of taking a startup from zero to something. He's more likely to have "what it takes" to succeed. That said, this guy is not acting rationally by flaunting his ability to raise money. Like he admits, he doesn't have a team yet. My due diligence in applying for a job as an early employee would uncover this article, and it would be a red flag concerning the personality of a potential boss.
  - anamax 15y ago
    Are "already successful" more or less likely to hit home runs? I don't know the answer. Netflix, redfin, and twitter are 2nd acts by "already successful" folk. Yahoo, HP, Amazon, Google, Disney, Apple, Cisco are by first-timers. (Disney had several failures under his belt.) I don't know about Walmart. Sam Walton had been a regional manager for another chain but I don't know for sure that he hadn't been a "successful entrepreneur".
wgx 15y ago
It's hard for me to see a problem with this. The guy has a track-record (Vimeo, anyone?) and has impressed some investors enough for them to part with their money. Good luck to him.
andrewcross 15y ago
I don't see this as an example of a bubble. With a track record of success with Vimeo, there's a good chance he'll succeed again in the future. Frankly this is probably a safer bet than a group of founders straight out of college that have some decent traction. He'll know the stumbling blocks and the connections to make things happen. The only thing I'd want to know as an investor is what the salary situation is like. Assuming its nothing or very low, I'd say good investment.
- deleted 15y ago
  [deleted]
kayoone 15y ago
“I just don’t think it makes sense to have a product idea, THEN raise money, THEN build a team,” Yeah right, thats what a good founding team is for that actually HAS an idea on what to build. Lets face it, no first time founder or anyone without a big hit like vimeo would ever get a deal like that.
petenixey 15y ago
What a bunch of nonsense. Not necessarily a bad way to attract some good hackers though. Ideas are like babies, no-one wants to feed and change someone else's so I guess the one thing this phenomenon has going for it is that he'll attract developers who think they can sire the company vision. He'll end up with a lot of cooks though - will probably lead to a bit of a frankenstein product
mvkel 15y ago
I'm a huge Jake Lodwick fan and am glad to see he's back into the game. I wish him the best. CollegeHumor, Vimeo, BustedTees; we need more creative entrepreneurs in the world. To everyone thinking he's crazy for raising before coming up with an idea, the idea is irrelevant. Your first raise doesn't validate your idea, it validates how good of a pitch man you are. Your second raise validates your idea as a business.
- antidaily 15y ago
  Have you checked out http://www.pummelvision.com/ http://www.pummelvision.com/?
AdamFernandez 15y ago
It appears the Anti-lean startup movement has begun.
tathagatadg 15y ago
BS.
yangez 15y ago
"It’s called mydunks.it. It’s better than NBA jam. It’s a universal 'like' button for the web, but instead of ‘likes’ it’s 'dunks.'" I just about spat out my coffee until I realized he was joking.
damoncali 15y ago
I think entrepreneurs get distracted by all that marketing, development, sales, and operations, so I just start with profits. Someone call Captain Obvious - he's got some competition.
skadamat 15y ago
Yeah, only someone with enough klout / swag as Jake Lodwick can do this haha
T_S_ 15y ago
New idea for funding strategy: Rent a name-brand entrepreneur for your idea. Or maybe it's an old one.
ytadesse 15y ago
Is it just me or does the absurdity of this story immediately remind me of the "End Fund" story from TechCrunch? http://techcrunch.com/2011/04/01/angel-investors-counter-y-combinator-start-fund-with-new-100-million-early-stage-end-fund/ http://techcrunch.com/2011/04/01/angel-investors-counter-y-c... Except, it's actually real this time...
baconner 15y ago
I feel like this is an elaborate troll...
ezl 15y ago
I thought this was hilarious. Reminds me when @joshu raised and spouted a bunch of jokes for the idea he was pursuing (1). I can't imagine being in that position and NOT using the media as a vehicle for your personal amusement. (1) http://techcrunch.com/2010/08/01/feeding-frenzy-as-delicious-founder-joshua-schachter-raises-round-for-new-startup/ http://techcrunch.com/2010/08/01/feeding-frenzy-as-delicious...

31 points by frankdenbow 15y ago

Some folks get funded based on track record and/or reputation. For the vast majority of first-timers (99.9%) who might need to raise money, doing so before having a product or at least fleshed out idea is not going to happen.

viscanti 15y ago
Even if that 99.9% could get funding early, it wouldn't be on favorable terms. What gets overlooked a lot, is the cost of selling early equity. If you don't have much traction, or even a prototype, and you do raise money, you're giving up a BIG portion of equity in return. A good analogy is the music industry. Lots of bands just starting out want to be signed to a major record label. They do everything they can to attract the attention of major record execs. A very tiny minority are successful and actually gets a contract, but they end up making almost no money, because they weren't able to negotiate from a position of power. The alternative is the band who sets up their own sales and distribution and builds their audience. Now they can dictate what deals (if any) they take. They don't need the major label anymore, but they're in a position to take advantage of it, if there's a favorable deal there. Suggesting that entrepreneurs raise money early is bad advice almost always. Regardless of the initial deal you might be able to get, having a more developed product with traction will get you a better deal. Just build it, eat ramen noodles and take a second job if you have to. Meet with investors early and often, but not to ask for money. Let them see the trajectory of what you're building, so that when you want/need to raise money, they know you and see how far you've come and what you're capable of. There seems to be way too much focus on raising money early, and articles like this only exacerbate that.

ebaysucks 15y ago

I'm sorry to be that guy but this has bubble written all over it. Mydunks.it, really?

_chap 15y ago
Nope, he was joking: "As to what kind of product ideas he wanted to play with, Mr. Lodwick was coy. “It’s called mydunks.it...”
- ebaysucks 15y ago
  Ah great. English is not my mother tongue and today I learned what coy really means ;)
- pclark 15y ago
  Coy doesn't mean to imply not being serious or joking.

wilschroter 15y ago

I have a really hard time with this. Yes, he's probably a fantastic founder and will do something great (and I hope like every other entrepreneur, he does). But I hope that aspiring entrepreneurs raising funds realize what an incredible anomaly this type of capital raising is. Heaven forbid we get a whole slew of entrepreneurs saying "I heard that you can raise money without a business". It's bad enough we have people running around trying to raise money for features, not even companies. This takes it back even further, which is probably fine for him, but not for the people I fear are going to take this to heart.

hkarthik 15y ago

This is definitely a sign of a bubble. When I was a college student in Boulder in 2000, one of my roommates worked at a startup as an intern. He told me during his first week, the team all just sat around a table and thought up ideas to pursue for days on end. The only way I can fathom that being possible if they were a pre funded team. I'm pretty sure they split up within a year or so of him working there.

deleted 15y ago

[deleted]

nadam 15y ago

“Entrepreneurs get distracted by fundraising, so I just did that part first." It is like a Hollywood diva saying (after getting into the 'circles'): "Women's hands get ugly because of the lot of washing and cleaning, so I've bought myself people to do that for me. What matters is how great I am: I can do this because I am great." Venture capitalists are a parody of themselves. You have to have social proof, or you have to be already profitable to gain their attention. Basically they give money to people who do not need it.

deleted 15y ago
[deleted]
_delirium 15y ago
A closer comparison is probably novelists, but yes, the same "only works if you're famous" applies there. If you're Stephen King, you can get a book contract and advance royalties without a manuscript or even a concept, but that's not the common case.
diego 15y ago
VCs are more likely to give money to entrepreneurs who are already rich. There's a good reason for it: VCs (unlike angels) need home runs. Over the course of 10 years, a VC must catch a Facebook, a Google or at least a Twitter in order to be successful. A rich founder is less likely to take an early exit, and more likely to want to swing for the fences. Think of @ev refusing to sell Twitter to Google as an example. Also, an already successful entrepreneur is less risky from a VC standpoint. He was able to endure the process of taking a startup from zero to something. He's more likely to have "what it takes" to succeed. That said, this guy is not acting rationally by flaunting his ability to raise money. Like he admits, he doesn't have a team yet. My due diligence in applying for a job as an early employee would uncover this article, and it would be a red flag concerning the personality of a potential boss.
- anamax 15y ago
  Are "already successful" more or less likely to hit home runs? I don't know the answer. Netflix, redfin, and twitter are 2nd acts by "already successful" folk. Yahoo, HP, Amazon, Google, Disney, Apple, Cisco are by first-timers. (Disney had several failures under his belt.) I don't know about Walmart. Sam Walton had been a regional manager for another chain but I don't know for sure that he hadn't been a "successful entrepreneur".

wgx 15y ago

It's hard for me to see a problem with this. The guy has a track-record (Vimeo, anyone?) and has impressed some investors enough for them to part with their money. Good luck to him.

andrewcross 15y ago

I don't see this as an example of a bubble. With a track record of success with Vimeo, there's a good chance he'll succeed again in the future. Frankly this is probably a safer bet than a group of founders straight out of college that have some decent traction. He'll know the stumbling blocks and the connections to make things happen. The only thing I'd want to know as an investor is what the salary situation is like. Assuming its nothing or very low, I'd say good investment.

deleted 15y ago
[deleted]

kayoone 15y ago

“I just don’t think it makes sense to have a product idea, THEN raise money, THEN build a team,” Yeah right, thats what a good founding team is for that actually HAS an idea on what to build. Lets face it, no first time founder or anyone without a big hit like vimeo would ever get a deal like that.

petenixey 15y ago

What a bunch of nonsense. Not necessarily a bad way to attract some good hackers though. Ideas are like babies, no-one wants to feed and change someone else's so I guess the one thing this phenomenon has going for it is that he'll attract developers who think they can sire the company vision. He'll end up with a lot of cooks though - will probably lead to a bit of a frankenstein product

mvkel 15y ago

I'm a huge Jake Lodwick fan and am glad to see he's back into the game. I wish him the best. CollegeHumor, Vimeo, BustedTees; we need more creative entrepreneurs in the world. To everyone thinking he's crazy for raising before coming up with an idea, the idea is irrelevant. Your first raise doesn't validate your idea, it validates how good of a pitch man you are. Your second raise validates your idea as a business.

antidaily 15y ago
Have you checked out http://www.pummelvision.com/ http://www.pummelvision.com/?

AdamFernandez 15y ago

It appears the Anti-lean startup movement has begun.

tathagatadg 15y ago

BS.

yangez 15y ago

"It’s called mydunks.it. It’s better than NBA jam. It’s a universal 'like' button for the web, but instead of ‘likes’ it’s 'dunks.'" I just about spat out my coffee until I realized he was joking.

damoncali 15y ago

I think entrepreneurs get distracted by all that marketing, development, sales, and operations, so I just start with profits. Someone call Captain Obvious - he's got some competition.

skadamat 15y ago

Yeah, only someone with enough klout / swag as Jake Lodwick can do this haha

T_S_ 15y ago

New idea for funding strategy: Rent a name-brand entrepreneur for your idea. Or maybe it's an old one.

ytadesse 15y ago

Is it just me or does the absurdity of this story immediately remind me of the "End Fund" story from TechCrunch? http://techcrunch.com/2011/04/01/angel-investors-counter-y-combinator-start-fund-with-new-100-million-early-stage-end-fund/ http://techcrunch.com/2011/04/01/angel-investors-counter-y-c... Except, it's actually real this time...

baconner 15y ago

I feel like this is an elaborate troll...

ezl 15y ago

I thought this was hilarious. Reminds me when @joshu raised and spouted a bunch of jokes for the idea he was pursuing (1). I can't imagine being in that position and NOT using the media as a vehicle for your personal amusement. (1) http://techcrunch.com/2010/08/01/feeding-frenzy-as-delicious-founder-joshua-schachter-raises-round-for-new-startup/ http://techcrunch.com/2010/08/01/feeding-frenzy-as-delicious...