6 ms·

The article pretty much states that it was likely a mistake to take that much funding when they had no idea how much they needed (or if they even needed funding

The article pretty much states that it was likely a mistake to take that much funding when they had no idea how much they needed (or if they even needed funding). It seems like there is this messed up idea that a successful startup is when you get a ton of funding, the founders cash out and then who cares if company goes down the toilet (well, except the investors of course). I suppose that is successful in the sense that the founders get rich, but it seems like it's a selfish, thoughtless strategy. The idea of a lifestyle company is totally unattractive to venture capitalists to the point where you'd think that only total losers would aspire to create a stable company. If it's not a rocketship to the moon, then investors don't want to touch it. But a lifestyle company founder can get equally rich - just not one huge pile of money at one time. They can be paid handsomely though and create a great company that provides a great life for a lot of people instead of burning out and creating a miserable life for everybody except the founder.

jacquesm 15y ago
Vastly many more people get rich with 'lifestyle' companies than get rich with moonshots. They won't be as obscenely rich but several million is definitely nothing strange (Euros or Dollars, pick your poison). VC's won't touch such businesses (and they shouldn't) because the return rate is not worth the hassle for them but that is just a matter of perspective. For founders the life style businesses are typically a safer bet and a life that is more conducive to having a family and a more or less normal life besides the business. For a VC babysitting a small but profitable company is just as much work as one that might hit out of the park. And the chance of a return multiplied by the return itself is way larger than it is for a life-style business. The risk profile of a VC is much different than the risk profile of most business people and they only come out ahead because they make multiple bets, which is something most business people can not do.
- ahoyhere 15y ago
  On top of everything you said, folks should step back and realize that VCs or VC-related interests have historically powered all the most-read startup media (TechCrunch, HN, AVC, etc). This has an influence. According to Dow Jones Venturesource, there were only 522 M&As, buyouts, or IPOs in 2011 among venture-backed companies. 522. By contrast, over 300 people are injured by lightning strikes per year, in the US.
  - coffeemug 15y ago
    522. By contrast, over 300 people are injured by lightning strikes per year, in the US. While I appreciate your point, this is a very flawed analogy. There are only a few thousand people in a position to shoot for an M&A each year, and a few hundred million people in a position to get hit by lightning. Relative to the number of adults in the U.S., very few people start companies that could potentially be scalable each year, and out of the ones that do, very few scratch the surface of basic competence. So if you do start one, and you're reasonably competent, your odds are actually pretty good. I also disagree with the assertion that a lifestyle business is easier than a moonshot. In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary. If you work that much, might as well make it a moonshot.
    - ahoyhere 15y ago
      You and I agree that there are only "a few thousand" people in the US in a given year who are "in a position to shoot for an M&A." There are, however, at least 10x those numbers in hopefuls… people who believe that they could do it, even though they never will be able to, and many of those people get funding and end up with nothing to show for it but a few wasted years of life. Meanwhile because of the 522 M&As etc we hear about one just about every day, making it seem so much more likely than it really is. Let's be clear: It is vanishingly unlikely. In addition: "In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary." For a talk I gave at Lessconf a few days ago, I broke down the numbers. Assuming 25% ownership in a startup which reached an $8 million dollar sale (which is much higher than most, as I'm sure you know), that results in less than $2 million post-tax. I ran the numbers in the talk to demonstrate how much my business, Freckle Time Tracking, a most boring SaaS, would make in the same time period and beyond the 5 & 1/2 years of leisure post-3-year-lock-in. (Assuming a not immoderate spend of $10k/mo and savings of $5k/mo -- remember, if you get lock-in -- and most do -- you will have to work out of the Valley, where everything is expensive.) My time tracking product alone will bring in significantly more than the buyout after 6 years, nearly triple what an $8 million dollar buyout would over a period of 9 years. And what's more, it keeps earning. That's just one of the little "lifestyle" businesses my husband & I have going. We don't work 16-hour days. We don't even work 40-hour weeks. We did for about a year, year and a half, but we also took weeks and weeks off in the same time period. Time tracking, let me repeat. Boring, "saturated," blah blah blah. Time tracking alone will make me us millionaires by the time I'm 30 -- on the side, and better yet, with 100% ownership. :) And, as I said, we've got other things going as well. Making an actual business with actual profit is different than what everyone calls a "startup" these days. You don't have to work your ass off. You just have to serve a market which needs serving, and provide more value than you're charging. These are different skill sets than hunting down VC and viral growth. More useful, in the end, and with a higher rate of return for the many instead of a few.
- temphn 15y ago
  > Vastly many more people get rich with 'lifestyle' companies than get rich with moonshots. Not being combative, but can you justify that statement with data? It just seems implausible to me, given that the moonshot companies tend to employ a lot more people. Yes, relatively few companies become "big deals", but those companies (Adobe, MS, Google, Facebook, Apple) are the ones that actually employ most of the people in the industry. Aside from 37Signals, what lifestyle businesses are (a) less stressful and (b) more lucrative than a shoot-for-the-moon startup? If it's a technology business, it's something that will be obsolesced rapidly unless you keep moving (e.g Yousendit being obsolesced by Dropbox), so where's the "lifestyle" in that? It seems that your best options are either (a) join a startup or (b) work for a large company. The no man's land in between seems to be the highest stress and worst returns, with no prospect of your ship ever really coming in.
  - ahoyhere 15y ago
    They are all around you. My business. Gravity Forms. Campaign Monitor. Harvest. Peepcode. Marc-André Cournoyer. WooThemes. Tick. Envato. Beanstalk & Postmark. And on and on and on. These are just some of the folks I know personally, in our space. I could name so many more in other industries. There are so many more, everywhere. You're soaking in it. Most of these people are too busy making bank to blog about it (or they simply don't care to be recognized as business experts). Why do you equate headcount with riches? As one of the richest people to ever write a business book, Felix Dennis says "Overhead walks on two legs." It was an important enough statement for him to include it at least 3 times in one little book. That should tell us something. Employing people isn't a correlation to riches. Employees cost a lot of money. As for "tech businesses"… Harvest has been virtually the same for years and years. So has my "competitor" to Harvest, Freckle. It doesn't matter. Your model of "tech biz obsolescence" is dependent on a winner-take-all scenario. Real business -- what you call "lifestyle business" -- doesn't operate that way.
    - chc 15y ago
      To offer another example that occurred to me when I was reading this: HN's Jason Kester has frequently written about how his simple, little app S3Stat allows him to travel the world, rock-climbing and working when he wants to, with S3Stat itself requiring next to no maintenance. See, for example, http://news.ycombinator.com/item?id=1925214 http://news.ycombinator.com/item?id=1925214
ahoyhere 15y ago
"But a lifestyle company founder can get equally rich - just not one huge pile of money at one time." True. Especially when you consider that investment isn't income. When an investor gives you one huge pile of money at one time, it's not for you, it's for the business.
- encoderer 15y ago
  Somebody forgot to tell that to Groupon.
  - paulhauggis 15y ago
    I heard an interview with the guys from Groupon and they mentioned paying $14,000 for a paper weight and paying $5K to a guy to stand in a clown-suit all day in their office just because they could. It's this sort of wasteful spending that kind of makes me want them to fail.
    - ahoyhere 15y ago
      Ooh, wow. Do you have a link by any chance? That's enough to make it worth it to create a new Fucked Company. That's new heights (depths?).
      - paulhauggis 15y ago
        It's the mixergy interview. You can find it there.
  - ahoyhere 15y ago
    I thought about mentioning Groupon but thought it would make my argument sound weak. Thank YOU for bringing it up. Seriously, I don't know how they could get away with that. Surely it's some kind of financial malfeasance?

jacquesm 15y ago

Vastly many more people get rich with 'lifestyle' companies than get rich with moonshots. They won't be as obscenely rich but several million is definitely nothing strange (Euros or Dollars, pick your poison). VC's won't touch such businesses (and they shouldn't) because the return rate is not worth the hassle for them but that is just a matter of perspective. For founders the life style businesses are typically a safer bet and a life that is more conducive to having a family and a more or less normal life besides the business. For a VC babysitting a small but profitable company is just as much work as one that might hit out of the park. And the chance of a return multiplied by the return itself is way larger than it is for a life-style business. The risk profile of a VC is much different than the risk profile of most business people and they only come out ahead because they make multiple bets, which is something most business people can not do.

ahoyhere 15y ago
On top of everything you said, folks should step back and realize that VCs or VC-related interests have historically powered all the most-read startup media (TechCrunch, HN, AVC, etc). This has an influence. According to Dow Jones Venturesource, there were only 522 M&As, buyouts, or IPOs in 2011 among venture-backed companies. 522. By contrast, over 300 people are injured by lightning strikes per year, in the US.
- coffeemug 15y ago
  522. By contrast, over 300 people are injured by lightning strikes per year, in the US. While I appreciate your point, this is a very flawed analogy. There are only a few thousand people in a position to shoot for an M&A each year, and a few hundred million people in a position to get hit by lightning. Relative to the number of adults in the U.S., very few people start companies that could potentially be scalable each year, and out of the ones that do, very few scratch the surface of basic competence. So if you do start one, and you're reasonably competent, your odds are actually pretty good. I also disagree with the assertion that a lifestyle business is easier than a moonshot. In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary. If you work that much, might as well make it a moonshot.
  - ahoyhere 15y ago
    You and I agree that there are only "a few thousand" people in the US in a given year who are "in a position to shoot for an M&A." There are, however, at least 10x those numbers in hopefuls… people who believe that they could do it, even though they never will be able to, and many of those people get funding and end up with nothing to show for it but a few wasted years of life. Meanwhile because of the 522 M&As etc we hear about one just about every day, making it seem so much more likely than it really is. Let's be clear: It is vanishingly unlikely. In addition: "In my experience, both take a roughly similar toll on your life, but a lifestyle business doesn't have the upside to make the whole thing worth it. In a software development industry, a family where both partners are professional can bring in > $250k in salary each year working regular full time jobs, which is a very cushy lifestyle. I see no sense in working 16 hour days for a shot at the same salary." For a talk I gave at Lessconf a few days ago, I broke down the numbers. Assuming 25% ownership in a startup which reached an $8 million dollar sale (which is much higher than most, as I'm sure you know), that results in less than $2 million post-tax. I ran the numbers in the talk to demonstrate how much my business, Freckle Time Tracking, a most boring SaaS, would make in the same time period and beyond the 5 & 1/2 years of leisure post-3-year-lock-in. (Assuming a not immoderate spend of $10k/mo and savings of $5k/mo -- remember, if you get lock-in -- and most do -- you will have to work out of the Valley, where everything is expensive.) My time tracking product alone will bring in significantly more than the buyout after 6 years, nearly triple what an $8 million dollar buyout would over a period of 9 years. And what's more, it keeps earning. That's just one of the little "lifestyle" businesses my husband & I have going. We don't work 16-hour days. We don't even work 40-hour weeks. We did for about a year, year and a half, but we also took weeks and weeks off in the same time period. Time tracking, let me repeat. Boring, "saturated," blah blah blah. Time tracking alone will make me us millionaires by the time I'm 30 -- on the side, and better yet, with 100% ownership. :) And, as I said, we've got other things going as well. Making an actual business with actual profit is different than what everyone calls a "startup" these days. You don't have to work your ass off. You just have to serve a market which needs serving, and provide more value than you're charging. These are different skill sets than hunting down VC and viral growth. More useful, in the end, and with a higher rate of return for the many instead of a few.
temphn 15y ago
> Vastly many more people get rich with 'lifestyle' companies than get rich with moonshots. Not being combative, but can you justify that statement with data? It just seems implausible to me, given that the moonshot companies tend to employ a lot more people. Yes, relatively few companies become "big deals", but those companies (Adobe, MS, Google, Facebook, Apple) are the ones that actually employ most of the people in the industry. Aside from 37Signals, what lifestyle businesses are (a) less stressful and (b) more lucrative than a shoot-for-the-moon startup? If it's a technology business, it's something that will be obsolesced rapidly unless you keep moving (e.g Yousendit being obsolesced by Dropbox), so where's the "lifestyle" in that? It seems that your best options are either (a) join a startup or (b) work for a large company. The no man's land in between seems to be the highest stress and worst returns, with no prospect of your ship ever really coming in.
- ahoyhere 15y ago
  They are all around you. My business. Gravity Forms. Campaign Monitor. Harvest. Peepcode. Marc-André Cournoyer. WooThemes. Tick. Envato. Beanstalk & Postmark. And on and on and on. These are just some of the folks I know personally, in our space. I could name so many more in other industries. There are so many more, everywhere. You're soaking in it. Most of these people are too busy making bank to blog about it (or they simply don't care to be recognized as business experts). Why do you equate headcount with riches? As one of the richest people to ever write a business book, Felix Dennis says "Overhead walks on two legs." It was an important enough statement for him to include it at least 3 times in one little book. That should tell us something. Employing people isn't a correlation to riches. Employees cost a lot of money. As for "tech businesses"… Harvest has been virtually the same for years and years. So has my "competitor" to Harvest, Freckle. It doesn't matter. Your model of "tech biz obsolescence" is dependent on a winner-take-all scenario. Real business -- what you call "lifestyle business" -- doesn't operate that way.
  - chc 15y ago
    To offer another example that occurred to me when I was reading this: HN's Jason Kester has frequently written about how his simple, little app S3Stat allows him to travel the world, rock-climbing and working when he wants to, with S3Stat itself requiring next to no maintenance. See, for example, http://news.ycombinator.com/item?id=1925214 http://news.ycombinator.com/item?id=1925214

ahoyhere 15y ago

"But a lifestyle company founder can get equally rich - just not one huge pile of money at one time." True. Especially when you consider that investment isn't income. When an investor gives you one huge pile of money at one time, it's not for you, it's for the business.

encoderer 15y ago
Somebody forgot to tell that to Groupon.
- paulhauggis 15y ago
  I heard an interview with the guys from Groupon and they mentioned paying $14,000 for a paper weight and paying $5K to a guy to stand in a clown-suit all day in their office just because they could. It's this sort of wasteful spending that kind of makes me want them to fail.
  - ahoyhere 15y ago
    Ooh, wow. Do you have a link by any chance? That's enough to make it worth it to create a new Fucked Company. That's new heights (depths?).
    - paulhauggis 15y ago
      It's the mixergy interview. You can find it there.
- ahoyhere 15y ago
  I thought about mentioning Groupon but thought it would make my argument sound weak. Thank YOU for bringing it up. Seriously, I don't know how they could get away with that. Surely it's some kind of financial malfeasance?