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There's an easy way to avoid that: don't take any outside capital (or very little of it) and maintain a majority share of the company. And no, I'm not just bei

There's an easy way to avoid that: don't take any outside capital (or very little of it) and maintain a majority share of the company. And no, I'm not just being glib in saying that. Not every startup needs to follow the "take a bunch of outside capital, grow really big really fast, and (hopefully) exit" model. Unless you're building something that's genuinely capital intensive (like building a factory to build cars or rockets, or doing drug trials) there's a good chance you can ship a working product, sell said valuable product to actual customers and fund growth from gasp customer revenue gasp. I know, I know... heresy, right? Sounds like an outdated way of doing things? Well, maybe. But if you're really concerned about maintaining control, it might just be worth a shot if it's viable for what you're doing.

SOLAR_FIELDS 3y ago
I think the main fear around that (founded or unfounded) is that someone else can see your nice sustainable business, use infinite stacks of cash to catch up to your moat quickly and make you irrelevant. Sometimes the moat is good enough that they fail to unseat you, but are you willing to risk years of your livelihood around that?
- traceroute66 3y ago
  > use infinite stacks of cash to catch up to your moat quickly and make you irrelevant Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Sadly most businesses who claim to have a moat are infact just doing the same thing a tiny bit differently and just dressing it up in marketing bullshit to make it sound like they have some amazing secret sauce. The old rolling a turd in glitter routine. A real moat is something like ASML. Throw as much cash as you want at it but its going to take you decades to catch up, if you ever do. Less extreme examples than ASML exist, of course. But you get my point.
  - Justsignedup 3y ago
    SpaceX is a great example too. Literally the world is throwing so much money at the problem, and they're still a decade behind at least. Waymo is another example, remember when Uber tried to get into self-driving? Very few heavily capitalized players can even attempt to try to catch up to these guys in a decade.
    - bko 3y ago
      Agree with SpaceX but not sure about waymo. Sure they're the most technically advanced, but I can't use their product and very few people can. And raising hundreds of billions has warped their incentives. The market has to be gigantic to justify the existing cap table. So they keep getting deeper and deeper into a perfect future product and fail to ship simpler intermediaries. Someone like comma ai competes very well because you can buy it today and it'll make your drive somewhat more pleasant.
      - fragmede 3y ago
        Waymo needs ridiculously detailed maps before it can operate somewhere, so its expansion is necessarily slow, along with the legal impediments they face but they're expanding. Phoenix and San Francisco, and now LA and soon Austin. If no one else has the technology to do it as well as they do, that's a pretty strong moat. No one else has access to the same resources they do. Which, since they're owned by Google, we can assume Google is helping them a lot. Unfortunately Waymo can't ship a simpler intermediary because they refuse to do it, because that kills people. A self-driving car that works right up until the moment it disengages and you get into a car crash that kills you isn't a product they want to sell, unlike others in the market. They have a product and it works and a lucky few can use it right now. Unlike other products, they can't just spin up a factory and make 10 million more and just sell them world wide like you can with an iPhone. They're undoubtedly working on a new vehicle platform that won't have a steering wheel or driver's seat.
  - jjav 3y ago
    > Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Well the amount of cash matters. With infinite cash you could take on and surpass pretty much any company you want. But it has to be an amount of cash where the ROI makes sense.
- mindcrime 3y ago
  It's a legit concern, but there are a lot of factors that go into that. And I'd argue that most domains can (and will) support more than one player. There are many ways to segment a market, and not all of them are mostly (or even at all) about the product you're selling. An example would be selling your product on a "lowest cost" basis, with few frills and extras and minimal support, versus selling it as a "luxury" experience with all the bells and whistles and "white glove" support. Same product, but two different segments within the overall market for $FOO.
- spamizbad 3y ago
  That fear, especially today, is completely unfounded. Nobody has budget, personnel or appetite for quixotic "Stamp out a tiny would-be competitor" projects. The business climate inside large orgs is now more conservative and financially constrained. There is no infinite stack of cash. Headcounts have been slashed so there's no longer teams or leaders that have the bandwidth to try and spin up a new product/team. To add to that: people forget when you're private and not splashed across the pages of every business magazine nobody really knows how successful your company really is outside your own employees and maybe some savvy industry insiders. And none of them know all the details. A big company seeing slowing growth (or a shrinking market) is going to be reluctant to believe some startup in an adjacent space is seeing enough growth to get a foothold.
- bdw5204 3y ago
  If your business depends upon having a monopoly to be sustainable then it isn't a sustainable business. Competition is good, actually, and is essential for a functioning free market. When you have insufficient competition, you end up with a situation where large companies can exercise tyrannical power over consumers and their own employees by all colluding informally or formally. That doesn't happen if you have a functioning market where a consumer can switch to a competitor or an employee can quickly change jobs if a company is misbehaving.
  - yladiz 3y ago
    You're missing the point. It's not about having a monopoly and isn't really about the "free market" (which I don't think applies here anyway), that's not what the parent comment was about. It was more about that if you don't take on money and grow organically without outside funding, there's a real risk that someone else will take the idea, make their own version of it, but pump a lot of money into development, sales, and marketing and very likely overtake you, regardless of the quality of your product. Of course some companies are able to withstand this or are able to thrive without much outside capital, but given the risk, it's safer to take the VC money.
    - mindcrime 3y ago
      but given the risk, it's safer to take the VC money. I agree that the risk exists, but I don't necessarily by that it's a fait accompli that taking VC money is the safer route. Consider that taking VC money comes with it's own risks, including: 1. VC's who think of themselves as "smart money" and want to be actively involved in running the company, and wind up muddling the vision and taking the company in non-productive directions. 2. The need to adhere to artificial timelines w/r/t spending, fund-raising rounds, etc. which are inherent in the VC model for structural reasons (funds are time-boxed, etc) 3. Taking VC money acts as validation of the idea on a much broader scale, prompting even more competitors to enter the market and so on. Keep in mind, as another commenter mentioned, if you stay private, focus on talking directly to your customers, don't get caught up in the "attract massive attention to yourself at all costs" cycle, and fly under the radar, you can most likely get yourself pretty well entrenched before this hypothetical "idea thief" even becomes aware you exist. I'd also argue that most people - especially the actually talented ones - aren't just sitting out there waiting to steal someone else's idea. If they're talented enough to execute your idea, they most likely have plenty of ideas of their own. That's not to say that "idea thievery" never happens, but I think this notion is over-stated. YMMV, of course.
fcatalan 3y ago
Long time ago I worked at a startup that was making profit from day one, and growing off reinvesting the profit. Zero external investment or debt. The founders finally sold it to a big corp that was on a buying spree. When the accounting people from the big corp started reviewing the finances they looked up surprised and said "These guys are fucking grocers!".
- positr0n 3y ago
  What does the grocer comment mean?
  - fcatalan 3y ago
    Simply that the company had profits. This was pre dotcom crash and these were 20-something flashy MBA dudes that had been told to buy terrible money sinkholes left and right, and were seeing positive cash flow in an acquisition for the very first time. For them it was ludicrous and somewhat quaint, like an old grocery store earning money for the owners every month.

SOLAR_FIELDS 3y ago

I think the main fear around that (founded or unfounded) is that someone else can see your nice sustainable business, use infinite stacks of cash to catch up to your moat quickly and make you irrelevant. Sometimes the moat is good enough that they fail to unseat you, but are you willing to risk years of your livelihood around that?

traceroute66 3y ago
> use infinite stacks of cash to catch up to your moat quickly and make you irrelevant Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Sadly most businesses who claim to have a moat are infact just doing the same thing a tiny bit differently and just dressing it up in marketing bullshit to make it sound like they have some amazing secret sauce. The old rolling a turd in glitter routine. A real moat is something like ASML. Throw as much cash as you want at it but its going to take you decades to catch up, if you ever do. Less extreme examples than ASML exist, of course. But you get my point.
- Justsignedup 3y ago
  SpaceX is a great example too. Literally the world is throwing so much money at the problem, and they're still a decade behind at least. Waymo is another example, remember when Uber tried to get into self-driving? Very few heavily capitalized players can even attempt to try to catch up to these guys in a decade.
  - bko 3y ago
    Agree with SpaceX but not sure about waymo. Sure they're the most technically advanced, but I can't use their product and very few people can. And raising hundreds of billions has warped their incentives. The market has to be gigantic to justify the existing cap table. So they keep getting deeper and deeper into a perfect future product and fail to ship simpler intermediaries. Someone like comma ai competes very well because you can buy it today and it'll make your drive somewhat more pleasant.
    - fragmede 3y ago
      Waymo needs ridiculously detailed maps before it can operate somewhere, so its expansion is necessarily slow, along with the legal impediments they face but they're expanding. Phoenix and San Francisco, and now LA and soon Austin. If no one else has the technology to do it as well as they do, that's a pretty strong moat. No one else has access to the same resources they do. Which, since they're owned by Google, we can assume Google is helping them a lot. Unfortunately Waymo can't ship a simpler intermediary because they refuse to do it, because that kills people. A self-driving car that works right up until the moment it disengages and you get into a car crash that kills you isn't a product they want to sell, unlike others in the market. They have a product and it works and a lucky few can use it right now. Unlike other products, they can't just spin up a factory and make 10 million more and just sell them world wide like you can with an iPhone. They're undoubtedly working on a new vehicle platform that won't have a steering wheel or driver's seat.
- jjav 3y ago
  > Some might say that if all it takes is cash to catch up your moat then you don't have a moat. Well the amount of cash matters. With infinite cash you could take on and surpass pretty much any company you want. But it has to be an amount of cash where the ROI makes sense.
mindcrime 3y ago
It's a legit concern, but there are a lot of factors that go into that. And I'd argue that most domains can (and will) support more than one player. There are many ways to segment a market, and not all of them are mostly (or even at all) about the product you're selling. An example would be selling your product on a "lowest cost" basis, with few frills and extras and minimal support, versus selling it as a "luxury" experience with all the bells and whistles and "white glove" support. Same product, but two different segments within the overall market for $FOO.
spamizbad 3y ago
That fear, especially today, is completely unfounded. Nobody has budget, personnel or appetite for quixotic "Stamp out a tiny would-be competitor" projects. The business climate inside large orgs is now more conservative and financially constrained. There is no infinite stack of cash. Headcounts have been slashed so there's no longer teams or leaders that have the bandwidth to try and spin up a new product/team. To add to that: people forget when you're private and not splashed across the pages of every business magazine nobody really knows how successful your company really is outside your own employees and maybe some savvy industry insiders. And none of them know all the details. A big company seeing slowing growth (or a shrinking market) is going to be reluctant to believe some startup in an adjacent space is seeing enough growth to get a foothold.
bdw5204 3y ago
If your business depends upon having a monopoly to be sustainable then it isn't a sustainable business. Competition is good, actually, and is essential for a functioning free market. When you have insufficient competition, you end up with a situation where large companies can exercise tyrannical power over consumers and their own employees by all colluding informally or formally. That doesn't happen if you have a functioning market where a consumer can switch to a competitor or an employee can quickly change jobs if a company is misbehaving.
- yladiz 3y ago
  You're missing the point. It's not about having a monopoly and isn't really about the "free market" (which I don't think applies here anyway), that's not what the parent comment was about. It was more about that if you don't take on money and grow organically without outside funding, there's a real risk that someone else will take the idea, make their own version of it, but pump a lot of money into development, sales, and marketing and very likely overtake you, regardless of the quality of your product. Of course some companies are able to withstand this or are able to thrive without much outside capital, but given the risk, it's safer to take the VC money.
  - mindcrime 3y ago
    but given the risk, it's safer to take the VC money. I agree that the risk exists, but I don't necessarily by that it's a fait accompli that taking VC money is the safer route. Consider that taking VC money comes with it's own risks, including: 1. VC's who think of themselves as "smart money" and want to be actively involved in running the company, and wind up muddling the vision and taking the company in non-productive directions. 2. The need to adhere to artificial timelines w/r/t spending, fund-raising rounds, etc. which are inherent in the VC model for structural reasons (funds are time-boxed, etc) 3. Taking VC money acts as validation of the idea on a much broader scale, prompting even more competitors to enter the market and so on. Keep in mind, as another commenter mentioned, if you stay private, focus on talking directly to your customers, don't get caught up in the "attract massive attention to yourself at all costs" cycle, and fly under the radar, you can most likely get yourself pretty well entrenched before this hypothetical "idea thief" even becomes aware you exist. I'd also argue that most people - especially the actually talented ones - aren't just sitting out there waiting to steal someone else's idea. If they're talented enough to execute your idea, they most likely have plenty of ideas of their own. That's not to say that "idea thievery" never happens, but I think this notion is over-stated. YMMV, of course.

fcatalan 3y ago

Long time ago I worked at a startup that was making profit from day one, and growing off reinvesting the profit. Zero external investment or debt. The founders finally sold it to a big corp that was on a buying spree. When the accounting people from the big corp started reviewing the finances they looked up surprised and said "These guys are fucking grocers!".

positr0n 3y ago
What does the grocer comment mean?
- fcatalan 3y ago
  Simply that the company had profits. This was pre dotcom crash and these were 20-something flashy MBA dudes that had been told to buy terrible money sinkholes left and right, and were seeing positive cash flow in an acquisition for the very first time. For them it was ludicrous and somewhat quaint, like an old grocery store earning money for the owners every month.