4 ms·

As someone new to startups, I'd love a clarification if you find the time: what about looking for VC funding instead of traditional bank-based debt is worrying

by bbor 3y ago

As someone new to startups, I'd love a clarification if you find the time: what about looking for VC funding instead of traditional bank-based debt is worrying for Simula's situation? The best I could find is this little passage, which doesn't clear it up for me: Often, the defining characteristic of a scalable company is the ability to replicate, create multiple copies of a similar product or service without substantive modification rather than “one-of-a-kind” items. This can lead to decreasing marginal costs where, as production increases, the resources needed to make the next item or provide the next increment of service go down. As a very unrelated side note: I have faith in Linux, and don't think the patterns of the past necessarily will hold for the future in all cases.

neom 3y ago
VC firms take ownership and work on multiples, a good investment is expected to exit with 16-20x. For that to happen, the space needs to support that type of revenue, and the business needs to support those types of unit economics. Hardware is a very expensive space, you need a lot of capital to set up a supply chain and take a HW product to market, especially something like a VR headset where (according to their blog) they're doing a lot of custom/complex things. This all needs to be made repeatable and then brought to market and then that market needs to have a consumer base to support it. How much money do you figure a startup like Simula needs to bring it's product to market just at the minimum? I was at DigitalOcean in the beginning, so I have a sense of capex heavy business. In the early days, we needed hundreds of millions of dollars to scale up the hardware, this had to come from venture AND banks. Additionally, in the instance of DO, we're talking extremely generic off the shelf hardware, nothing custom, our supply chain wasn't complex. If I was these guys, I wouldn't try to build a scaled business in a space that is emerging in the way this space is. I'd either call it a day or try to no have any investors at all, find something extremely focused, get to a small profit, and enjoy a life style business the founders can live on for the next 60 years. Of course, I'm always happy to be wrong and if they push forward I hope they win!
- bbor 3y ago
  Thanks for the detailed response, I really appreciate it! Very cogent points, I see the logic. My not-even-napkin math makes it seem like the market is plenty big enough (40% of devs + Mac users they can coax over + change) for their vision, but obviously only time will tell. It certainly seems like a good sign that Apple is going all-in despite not coming near to their original XR vision (no pun intended) Also it's always fun to randomly remind myself that I'm talking to people of "at DigitalOcean in the beginning" level of expertise on this site - keeps me humble :)

by bbor 3y ago

neom 3y ago

VC firms take ownership and work on multiples, a good investment is expected to exit with 16-20x. For that to happen, the space needs to support that type of revenue, and the business needs to support those types of unit economics. Hardware is a very expensive space, you need a lot of capital to set up a supply chain and take a HW product to market, especially something like a VR headset where (according to their blog) they're doing a lot of custom/complex things. This all needs to be made repeatable and then brought to market and then that market needs to have a consumer base to support it. How much money do you figure a startup like Simula needs to bring it's product to market just at the minimum? I was at DigitalOcean in the beginning, so I have a sense of capex heavy business. In the early days, we needed hundreds of millions of dollars to scale up the hardware, this had to come from venture AND banks. Additionally, in the instance of DO, we're talking extremely generic off the shelf hardware, nothing custom, our supply chain wasn't complex. If I was these guys, I wouldn't try to build a scaled business in a space that is emerging in the way this space is. I'd either call it a day or try to no have any investors at all, find something extremely focused, get to a small profit, and enjoy a life style business the founders can live on for the next 60 years. Of course, I'm always happy to be wrong and if they push forward I hope they win!

bbor 3y ago
Thanks for the detailed response, I really appreciate it! Very cogent points, I see the logic. My not-even-napkin math makes it seem like the market is plenty big enough (40% of devs + Mac users they can coax over + change) for their vision, but obviously only time will tell. It certainly seems like a good sign that Apple is going all-in despite not coming near to their original XR vision (no pun intended) Also it's always fun to randomly remind myself that I'm talking to people of "at DigitalOcean in the beginning" level of expertise on this site - keeps me humble :)