4 ms·

Sometimes I feel like people who sell their startup for a modest sum (hundreds of thousands to low millions) get put in a box of 'not ambitious enough' and this

Sometimes I feel like people who sell their startup for a modest sum (hundreds of thousands to low millions) get put in a box of 'not ambitious enough' and this makes it hard to get new opportunities later as investors are seemingly all looking for unicorn founders who want to become billionaires and then achieve world domination... I feel like any signal that you are a rational human being with well-defined, limited needs is going to be a huge turn off for investors. I don't think it's rational at all but I guess that's what decades of low interest rates does to them.

satvikpendem 3y ago
Why do they have to take VC? The founder in this article bootstrapped their business and sold, they can always do that again.
- jongjong 3y ago
  The odds of succeeding with a bootstrapped software startup are tiny. Though I don't know maybe it's different in the US.
  - gnicholas 3y ago
    The bar for success is much lower. VCs want a big multiple, so they want you to take risks. If the risks pay off, everyone wins big. But when you're bootstrapping, it can be a 'win' to make a couple hundred grand a year, working part-time. Most people consider that to be a pretty good gig.
  - j7ake 3y ago
    The odds of succeeding with VC is even tinier. It’s just that the media hype up the lottery winners so VC continues to have companies wanting their money.
  - satvikpendem 3y ago
    But they already did it once, which massively raises the odds the next time around, which might not be so for VC, whose odds anyway is still tinier than bootstrapping, because you can just make enough to live off of and call that successful.
vidarh 3y ago
You just have to frame it accordingly. If you go to a VC and boast about an exit of hundreds of thousands as if it's be a success to the., that may give a VC pause, because it's be a failure to them. Failure doesn't bother VCs so much as failure to understand that an exit that size isn't what success looks like to them. It's fine to say it was success to you at that point. But if that is what you want this time too, a VC is wrong for you. If you want a VC investment, you need them to understand you want a big exit this time. I used to work at a VC, and one of the most frequent reasons we didn't take pitches forward was founders who presented a great pitch that fit what you described. We rejected them because while it'd be entirely rational for them to want to take an exit that'd make them happy, those goals are fundamentally incompatible with a VC funds risk profile. Consider that most VC funds invest in high risk startups, and so most of their investments fail. For that reason you need a portion of the survivors to give massive returns. Then it's irrational to cap your potential upside return from the companies that become successful enough to have a shot at providing those returns. This isn't just greed, but survival: most VCs fail to raise a second fund because they either fail to even return the capital or return too low returns to be worth it. You set yourself up for failure if you put your money in a high risk startups where the founder promises you that your best possible return will be, say, 5x. And so if you as a founder want "well defined, limited", VC capital isn't for you, and that's fine. There are other investors.
- earthling8118 3y ago
  So they choose to invest in high risk scenarios and as a result it becomes a matter of survival, and you're claiming that greed isn't involved? Is that not the reason to invest in high risk as opposed to low risk?
gnicholas 3y ago
Part of the reason VC's are more comfortable investing in founders who have had exits already is they know the founder will be less tempted to take a $5M acquisition offer because he already has a decent amount of cash. Founders who have already had one liquidity event are more aligned with the VC's goals: swing for the fences — don't play it safe to make sure you can pay off your house.

satvikpendem 3y ago

Why do they have to take VC? The founder in this article bootstrapped their business and sold, they can always do that again.

jongjong 3y ago
The odds of succeeding with a bootstrapped software startup are tiny. Though I don't know maybe it's different in the US.
- gnicholas 3y ago
  The bar for success is much lower. VCs want a big multiple, so they want you to take risks. If the risks pay off, everyone wins big. But when you're bootstrapping, it can be a 'win' to make a couple hundred grand a year, working part-time. Most people consider that to be a pretty good gig.
- j7ake 3y ago
  The odds of succeeding with VC is even tinier. It’s just that the media hype up the lottery winners so VC continues to have companies wanting their money.
- satvikpendem 3y ago
  But they already did it once, which massively raises the odds the next time around, which might not be so for VC, whose odds anyway is still tinier than bootstrapping, because you can just make enough to live off of and call that successful.

vidarh 3y ago

You just have to frame it accordingly. If you go to a VC and boast about an exit of hundreds of thousands as if it's be a success to the., that may give a VC pause, because it's be a failure to them. Failure doesn't bother VCs so much as failure to understand that an exit that size isn't what success looks like to them. It's fine to say it was success to you at that point. But if that is what you want this time too, a VC is wrong for you. If you want a VC investment, you need them to understand you want a big exit this time. I used to work at a VC, and one of the most frequent reasons we didn't take pitches forward was founders who presented a great pitch that fit what you described. We rejected them because while it'd be entirely rational for them to want to take an exit that'd make them happy, those goals are fundamentally incompatible with a VC funds risk profile. Consider that most VC funds invest in high risk startups, and so most of their investments fail. For that reason you need a portion of the survivors to give massive returns. Then it's irrational to cap your potential upside return from the companies that become successful enough to have a shot at providing those returns. This isn't just greed, but survival: most VCs fail to raise a second fund because they either fail to even return the capital or return too low returns to be worth it. You set yourself up for failure if you put your money in a high risk startups where the founder promises you that your best possible return will be, say, 5x. And so if you as a founder want "well defined, limited", VC capital isn't for you, and that's fine. There are other investors.

earthling8118 3y ago
So they choose to invest in high risk scenarios and as a result it becomes a matter of survival, and you're claiming that greed isn't involved? Is that not the reason to invest in high risk as opposed to low risk?

gnicholas 3y ago

Part of the reason VC's are more comfortable investing in founders who have had exits already is they know the founder will be less tempted to take a $5M acquisition offer because he already has a decent amount of cash. Founders who have already had one liquidity event are more aligned with the VC's goals: swing for the fences — don't play it safe to make sure you can pay off your house.