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Sounds like you have an excellent lifestyle business there. Which is great for you, but wouldn't necessarily have done that much for an investor who put in $25

Sounds like you have an excellent lifestyle business there. Which is great for you, but wouldn't necessarily have done that much for an investor who put in $250k. (I'm sure your friends who put in a few grand each will do just fine, relative to the amount they put in.) I don't think it's irrational on the investors' part. People with larger amounts to invest want to see a potential for larger returns. Larger returns require faster growth which requires more money up front. I guess "lifestyle business" is a dirty word to investors, but it needn't be to the rest of us. I think we might see a lot more of them in the coming years, now that it has gotten so cheap to build and operate a Web app. Anyway, kudos on your success. Bootstraps can be quite rewarding, as you see.

angelbob 15y ago
It'd be nice if smaller investors (I could probably invest up to $10k or $15k without too much pain) could reasonably be paired up with small percentages of lifestyle businesses. But nobody is going to get rid of the friction in that market until much, much larger markets have significantly reduced friction. Whoever is de-frictioning needs to make enough money for it to be worth it. And small-to-medium investors willing to tolerate high risk combined with stable, successful businesspeople opening new small businesses has got to be a small total market. At least, compared with startups, VCs and large tech businesses. Still, somebody will eventually make some money by making that market work.
noduerme 15y ago
Thanks, I think. Oddly, I never thought of it as a lifestyle business. The main thing it's done to my lifestyle is to prevent me from getting a good night's sleep for the last 3-4 years of coding, beta testing, launching, and finally managing it. If that's what it is -- ok. But as I understand it, the thing that stops lifestyle businesses from scaling up is that the owner prefers having a business that works around their schedule, suits their lifestyle, and prefers to be hands-on in operation rather than delegating. To the point that it makes little sense to scale, because the person is the business, and vice versa. So if what stops lifestyle businesses from being good investment vehicles is the founder's unwillingness to scale, then I completely understand why larger investors would shy away from them. But if an owner of one -- I mean, it could be a bakery or a doggy daycare or anything -- builds out a framework for growth, wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate? Maybe stretching it here, but why would an investor choose someone who makes great at-home pizza and wants to open 50 restaurants next year, over someone who's run a pizza place for awhile and wants to open two or three more, when the investment needed for the latter is half or a quarter that of the former on a per-restaurant basis? Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground.
- justincormack 15y ago
  Not stooping for pennies is of course a sign of the bubble. If huge returns are available, normal ones are boring.
- joe_the_user 15y ago
  There is a cost in research involved each time an investor "stoops for pennies". In your pizza example, it is possible that the investors have their Fast Food Business formula with their suppliers and management consultants they bring to the table. Someone who made great at-home, with a great personality would add exactly the right "personal touch" and taste to match. This doesn't mean that stooping for pennies is bad or that VC are necessarily justified in scorning it. I think it avoiding it can be perfectly sensible from their perspective (which should leave others to take advantage of the opportunities they scorn).
- creamyhorror 15y ago
  If you have tens of millions of dollars to invest, it's not easy to find enough businesses to invest in. For every business, the investor has to do some research and due diligence, and there's a non-negligible cost associated with that. Finding 10 big-bet companies is easier than finding 50 small-bet ones. It's analogous to how a fund-manager friend has trouble finding enough businesses into which he can put $50m a pop - his bank simply doesn't make smaller investments. > wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate? Wouldn't it be more logical to find one which had the potential to explode, and which they could own more of with a large investment? These guys don't want small bites of a small-to-medium business, they want big bites of a potentially massive one. And they're willing to take big losses on the losers in order to get the big winners. > Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground. Because there's a cost in picking them up, and the value of a penny is too low for many people to bother doing it. I certainly wouldn't stoop for a few pennies on the sidewalk - they just aren't worth the effort. It's the same with VCs, I'd guess.
  - lusr 15y ago

angelbob 15y ago

It'd be nice if smaller investors (I could probably invest up to $10k or $15k without too much pain) could reasonably be paired up with small percentages of lifestyle businesses. But nobody is going to get rid of the friction in that market until much, much larger markets have significantly reduced friction. Whoever is de-frictioning needs to make enough money for it to be worth it. And small-to-medium investors willing to tolerate high risk combined with stable, successful businesspeople opening new small businesses has got to be a small total market. At least, compared with startups, VCs and large tech businesses. Still, somebody will eventually make some money by making that market work.

noduerme 15y ago

Thanks, I think. Oddly, I never thought of it as a lifestyle business. The main thing it's done to my lifestyle is to prevent me from getting a good night's sleep for the last 3-4 years of coding, beta testing, launching, and finally managing it. If that's what it is -- ok. But as I understand it, the thing that stops lifestyle businesses from scaling up is that the owner prefers having a business that works around their schedule, suits their lifestyle, and prefers to be hands-on in operation rather than delegating. To the point that it makes little sense to scale, because the person is the business, and vice versa. So if what stops lifestyle businesses from being good investment vehicles is the founder's unwillingness to scale, then I completely understand why larger investors would shy away from them. But if an owner of one -- I mean, it could be a bakery or a doggy daycare or anything -- builds out a framework for growth, wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate? Maybe stretching it here, but why would an investor choose someone who makes great at-home pizza and wants to open 50 restaurants next year, over someone who's run a pizza place for awhile and wants to open two or three more, when the investment needed for the latter is half or a quarter that of the former on a per-restaurant basis? Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground.

justincormack 15y ago
Not stooping for pennies is of course a sign of the bubble. If huge returns are available, normal ones are boring.
joe_the_user 15y ago
There is a cost in research involved each time an investor "stoops for pennies". In your pizza example, it is possible that the investors have their Fast Food Business formula with their suppliers and management consultants they bring to the table. Someone who made great at-home, with a great personality would add exactly the right "personal touch" and taste to match. This doesn't mean that stooping for pennies is bad or that VC are necessarily justified in scorning it. I think it avoiding it can be perfectly sensible from their perspective (which should leave others to take advantage of the opportunities they scorn).
creamyhorror 15y ago
If you have tens of millions of dollars to invest, it's not easy to find enough businesses to invest in. For every business, the investor has to do some research and due diligence, and there's a non-negligible cost associated with that. Finding 10 big-bet companies is easier than finding 50 small-bet ones. It's analogous to how a fund-manager friend has trouble finding enough businesses into which he can put $50m a pop - his bank simply doesn't make smaller investments. > wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate? Wouldn't it be more logical to find one which had the potential to explode, and which they could own more of with a large investment? These guys don't want small bites of a small-to-medium business, they want big bites of a potentially massive one. And they're willing to take big losses on the losers in order to get the big winners. > Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground. Because there's a cost in picking them up, and the value of a penny is too low for many people to bother doing it. I certainly wouldn't stoop for a few pennies on the sidewalk - they just aren't worth the effort. It's the same with VCs, I'd guess.
- lusr 15y ago