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A startup doesn't need to be a unicorn
- atemerev 1y ago"In fact, if you pitched this pathway to a VC, I’m sure they’d ghost you quicker than their last Hinge date." — oh they will, fr
- ilrwbwrkhv 1y agoAlso the other thing that I realised after working with a bunch of VCs is that they are all incredibly dumb. Few VCs are founders themselves and you will have better luck with them but the majority of VCs have simply no idea about product and technology and they are simply pattern matching. What that means is that they will cargo cult everything and if your startup doesn't fit the mold they will not respond to you favorably and the sad part is that the actual 10x, 100x returns that their VC firm needs comes from those type of investments but they simply cannot see them.
- rvz 1y agoThis.
- caseyy 1y agoWe also have a problem with VCs that want start-ups to scale quickly, even though this often builds incapable teams. We then say, "Oh, it's because they stopped being in founder's mode," whereas in reality, the team is so malcomposed and mismanaged that it could not build even a simple product. This has happened a lot in games. Now, VCs have almost stopped pre-seed and seed funding in this industry. The global annual VC funding in games is about $1B, about 1.5 Call of Dutys. This is down from around 12B in 2022. One could say they threw the baby out with the bathwater because while many executives were abusing the found-scale-exit business model and taking investors' money, many were also not. It's pattern-matching through and through, very little due diligence.
- DrScientist 1y agoA long time ago - our director of research at a startup used to call VC's carnivoruous sheep ( dumb, flocking, but will eat you alive ). Ironically he is now a VC - but a very successful one.
- morgante 1y agoThis is way too broad of a statement. The smartest person and the dumbest person I've met professionally are both investors.
- deleted 1y ago[deleted]
- bitlad 1y agoYes, this is so true. I hope all our competitors follow this advice.
- mg 1y agoHopefully, over time, we will get better and better in creating the world of software from small interoperable pieces that can be maintained by small teams or even solo entrepreneurs.
- mschuster91 1y agoYuck, we already got enough OpenSSL and other foundational projects that have a bus factor approaching (or being) 1. Just today I learned that the unzip program hasn't had an official release since 2009 (!) and everyone ships a different set of patches for it. Relevant xkcd 2347 [1]. [1] https://xkcd.com/2347/ https://xkcd.com/2347/ [2] https://news.ycombinator.com/item?id=43608052 https://news.ycombinator.com/item?id=43608052
- Etheryte 1y agoWell yes, that's called a regular company. Not sure if I'm missing something here?
- cjs_ac 1y ago'Be a normal person/company and do normal person/company things,' isn't talked about very often, and it can be useful to be reminded that it is a pathway that can lead to success.
- muzani 1y agoIt depends very much on your definition of success. Many who grew up upper middle class would define survival as failure.
- CharlieDigital 1y agoLife is too short and the works is to big for that kind of mindset.
- palata 1y agoWho talked about survival? If you think that anything other than becoming as rich as Mark Zuckerberg is "survival", then you're in for a treat.
- deleted 1y ago[deleted]
- aloner 1y agolifestyle businesses provide far more than "survival"
- foobahify 1y agoA million investment doesn't sound regular. Basically if you raise a mill for 33% you value yourself at $2m. That is without PMF or revenue! This seems like pulling a fast one on VCs if you then pivot to bootstrapping a nice family business. That ain't why they threw $1m at your PowerPoint. In "dragons den" style traditional business they'd offer you $50k for 50% at that stage. Maybe.
- summarity 1y agoHere's a model that exists in Germany, which I like: You can present a business plan to the state's investment bank and apply for several financial aides, including: * 1.5 years of universal basic income for you plus up to 2 other people. It's a tiny amount of money, but the point is to free you up to invest your actual time an money into the business. You do not have to pay this back. * up to 20k EUR in "consulting fees", for which the bank will contribute up to 50%. Again, you don't have to pay it back, but obviously you need money for them to match. * discounted loans, amount depends on business plan outlook I've worked with an accelerator that helps founders write the required pitches and plans for this program. And while the majority don't make it (because they mostly realize their idea won't actually hold up to business planning scrutiny), some do. And those don't become hyperscaling unicorns, they become normal companies, growing organically as stable, solvent employers in the region. Every once in a while a VC would stick its head in and encourage the startup to take on VC funding, and for an even smaller percentage (one in my time doing this), this worked. But for me, the organic growers are the best success story.
- adamcharnock 1y agoDo you have a link for any more information on this? This sounds interesting.
- summarity 1y agoI was working with the "ego." programs in particular: https://www.ib-sachsen-anhalt.de/gruender/gruenden-in-sachsen-anhalt/vor-der-gruendung https://www.ib-sachsen-anhalt.de/gruender/gruenden-in-sachse... This might be different from state to state. There are also EU grants you can apply for, which might contribute to employee salaries. Those are somewhat difficult to navigate and apply for, but sometimes worth it to bridge the salary gap between a "normal" German company and FANG.
- bryanhogan 1y agoNot sure which one the original comment is talking about, but look into "Gründerstipendium" / "EXIST Stipendium". Then there are also more scholarships based on other criteria, e.g. your state or if you are at an university, many universities also have some sort of entrepreneurial scholarship which will then also help you get the larger scholarships afterwards.
- muzani 1y agoI usually compare them as sharks vs bottom feeders. Either you become the predator that eats all the big fish. Or you go somewhere the big fish won't go. There's the 'crab' model, but this isn't for startups. They're old, companies like Yahoo who have a moat and can't leave it. They're at evolutionary peak or rather a local maxima. They're too difficult to change and a major change would make them too vulnerable.
- namaria 1y agoAn ecosystem analogy should draw attention to the fact that most biomass in most ecosystems is not in the apex predators but in the lower trophic levels. Apex predators are a useful regulatory mechanism for the ecosystem, not the be all end all of natural selection.
- muzani 1y agoYup, the analogy falls apart. Basically don't eat unicorn food.
- submeta 1y agoTrying to be a unicorn killed many otherwise good products. For instance Evernote. Or Wunderlist. Or Soundcloud.
- tptacek 1y agoI mean, by the time Evernote died, they were an SFBA skyline company, not a startup.
- jillesvangurp 1y agoI live in a country (Germany) that is famous for having a lot of "mittelstand". These are basically family owned businesses. Some large German companies fall under this. Aldi and LIDL for example, which are super market chains that at this point have a global presence. And some large companies (Bosch, Siemens, VW, etc.) are actually a multitude of smaller companies. Much of the German economy is smaller and bigger specialized companies doing their thing. Only some of them are public companies. What these companies have in common is that they start small and then grow organically. The main issue from a VC point of view is not that these aren't good companies but that it can take decades for them to turn into big companies. But from the point of view of the people founding these businesses, it's a good, honest way to succeed in life. There's nothing wrong with the principle of starting a company to make money from whatever it is you do at whatever scale you are doing it. But it should drive your decision making as to whether or not you give chunks of your company away to an investor. It might stop being your company if you do. Also, if you go down this path. Stop calling yourself a startup. It scares away customers. They don't want to hear that you are a flaky wannabe that is still figuring it out. They want to hear about your other customers and how awesome whatever it is you are selling is. They want to be re-assured that it is safe for them to enter into a multi year customer relationship with you. Projecting that you are new to all this company stuff and might not be around in six months is exactly the wrong message for them. They don't want to hear about what you are going to do, they want to hear about what you have done already. The stuff that gets VCs horny will scare away customers. If you are pitching customers and VCs at the same time, make sure you have two very different pitches. And if you are going to pitch VCs, it actually helps if you have customers. The more business you have the stronger your negotiation position.
- debarshri 1y agoI was part of mittelstand once. I think it is very hard to compete in the market where lot of things are subsidized by VC money. The new VC backed companies have more money for marketing, subsidized sales wherein older orgs are hard to move. Esp. for german orgs, they are very hierarchical, getting an innovation out is hard. Add union to the mix. Their margins are razor thing. It is a struggle. I can imagine back in the day, they moved the innovation needle. Lot of these companies are often bailed out by the government as they employ alot of people.
- senko 1y agoI do like the idea in general and feel there's a lot of room for improvement between the (VC / bootstrapping) extremes. However, the middle path from the article presumes the existence of VCs willing to join you on that path. The article waves this away with: > angel investors are generally more open to a 2-3x ROI For a $1M round you'd need to find 10-20 such angels (assuming $50k-$100k average check size) willing to accept small upside, for which you'll have convince them there's commensurately smaller risk. This will probably mean you have some revenue and some sense of where PMF might lay or some kind of brand/pedigree. Do not underestimate the value of YC brand and being able to present on Demo Day gives you. A random Jane from Ohio building her tech company would have a lot harder time finding those 10-20 angels, to put it mildly. I'd be more careful when extrapolating path-dependent success into a general strategy. That said, my gut feeling is there's room for the next Paul Graham to fill that space - somehow.
- mfld 1y agoThat is what I was wondering as well. Where can I find investors willing to invest up to $1M with an expected 2-3x ROI on typical VC terms? In particular, for pre-revenue ventures. And how can you keep that 90%+ equity with 10 angel investors?
- jonas21 1y agoYeah, unless they're your friends or rich uncle, these investors don't exist. When the OP raised money, it sounds like he was still planning on going the VC-funded route, and that's the assumption investors would have been operating under. In the end, they were probably okay with a 2-3x ROI because they expect most of their investments not to work out, and 2-3x is better than 0x. But I doubt they would have invested if the plan all along was to aim for a 2-3x return.
- zipy124 1y agoFor smaller amounts of monies such as £250k or £1mm, it is much easier to get funding, since a decent amount of countries offer tax relief to the investors for example in the UK through EIS, SEIS, or even VCT. These offer advantages to angels over the VC's. In addition the whole point of this piece is that you are generally looking to grow slower, thus having smaller capital requirements and burn rate.
- Oras 1y agoSomeone investing $1M for 10% might better off buy gold or a property. It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?
- s_dev 1y agoBecause gold will appreciate reliably to an extent but a company can appreciate in value far exceeding what gold can -- that's the risk/reward trade off.
- Oras 1y agoThe chances of a startup failing is way higher than gold degrading in price.
- s_dev 1y agoIt sure is and many do choose gold for this reason. It depends on how much risk you want to expose yourself to.
- 9rx 1y agoHence why the potential upset of a business is so much higher. Risk vs. reward, as usual.
- sukhavati 1y agoif an investor already has X% amount of their portfolio invested in gold, they might seek to diversify by investing in uncorrelated ventured such as startups. an investments idiosyncratic risk/reward is only meaningful in relation to other investments in the universe of choices the investor can make.
- jerrygenser 1y agoPortfolio diversification
- anticorporate 1y agoThere are other good replies as well, but I would add to the list mission-based investing. I would easily consider a positive impact along with risk and returns when making an investment decision. Not everyone would, and not everyone should, but it is a part of the funding landscape.
- Obertr 1y agoI'll send this to my competition thanks!
- ascendantlogic 1y agoWhy are you posting here when you could be crushing it™ delivering 100x value to your shareholders? You've already failed.
- Obertr 1y ago-4 points, the joke worked well
- WhereIsTheTruth 1y agoVC culture gives you the USA, a failing empire and a "silicon valley" which hasn't seen silicon for 3 decades
- JSR_FDED 1y agoA VC will build a portfolio of startups that each have the potential to do massively well. After that they don’t care which of the portfolio companies lives or dies, as long as one explodes and compensates for the others. As a founder you care very much which of your companies succeeds, as you only have one.
- floppiplopp 1y agoI was being called a unicorn in a professional setting... unfamiliar with the term, I immediately thought I was being insulted, because unicorns exist just in people's imagination and fairy tales.
- timestep 1y agoGlad someone is talking about the option other than selling to VCs or ramen diet start ups. The tech community might have collectively forgotten the other option.
- shahzaibmushtaq 1y agoTrue that, and your startup doesn't need to be a success in people's eyes.
- pjmlp 1y agoHere is another one, the company doesn't need to have an endless exponential growth to have a sustainable business.
- istvanmeszaros 1y agoI am a big believer in Seed-Strapping. You need some initial capital to get you started (can be as low as a few months of your own salary). But you should aim to bootstrap your solution.
- bob1029 1y agoBeing forced to bootstrap with your own funds is the best bullshit business filter I am aware of. I also think it says a little bit about the founder's ability to maintain some amount of stability in their life and put their money where their mouth is. Everyone can come up with ideas. How sure are you of yours? Are you willing to use some of your own money to prove it out? No? Then I guess I'm not that interested either. The way I am trying to do this now is to only ask for money if I can obtain at least one paying customer who is willing to vouch for me. If I can't market an MVP to at least one small shop, I don't know why a non-fraudulent business partner would want to work with me. In any case, I wouldnt feel great about that relationship. I've done the burn someone else's fifteen million bucks thing on tech stack shiny rabbit chases. It's really not a fun time in retrospect. Mostly just a sick feeling all the way to the bottom.
- LikeAnElephant 1y agoTotally with you. If the plumber in my neighborhood can start a business with all their overhead, then why can’t I on a $5/mo Digital Ocean server? It really comes down to being willing to start small and grow within your means (even if that means a SMB loan or small investment). But if you can’t find even 1 customer then it’s likely you’ve started building without talking to actual customers.
- zupa-hu 1y agoSeems like you are a startupper from Hungary? Shoot me a mail, I love getting to know other local startuppers. (in profile)
- neom 1y agoThe problem with this idea is that capital markets exist and capital seeks compounding. If there is a market to be addressed and it has size, someone will go in and displace you with a cash flywheel.
- tlogan 1y agoI think the post is off. How exactly is a VC—or any investor, really—supposed to make money from a startup that’s aiming for a “middle of the road” outcome? That just doesn’t add up. In that case, wouldn’t it make more sense to invest in something safer or more traditional? From what I understand, the very definition of a startup is tied to ambition. Founders need to be aiming for the moon—or at least something close to it. If you’re not taking big risks with the potential for big rewards, can you even call it a startup?
- pc86 1y agoPeople use "startup" to mean "start up business" and not "business that is aiming for rapid, borderline-unsustainable growth and very likely requires hundreds of thousands, millions, tens of millions of dollar to even start thinking about achieving it," which is what the actual definition is. VCs aim for 1 out of 50 investments to return 100x what they put into it, and the rest of them to die quickly and stop taking their attention. A company kicking off 5% returns every year is counterintuitively worse than flaming out immediately.
- tlogan 1y agoIn the tech and venture capital (VC) world, a startup is usually defined by its intent to grow fast and at scale. If you’re using the term “startup” in a tech/VC context: Yes, high growth is core to the definition.
- felideon 1y agoIsn't this the gap TinySeed tries to fill?
- tiffanyh 1y ago“Startup” implies VC-backed company. And VC’s invest in companies to get a 100x return. Which almost by definition means, if you run a startup - you need to get it to become a unicorn for it to be successful. Otherwise, why take VC money … and just bootstrap it instead.
- AbstractH24 1y agoI’m by no means an expert on this, but I never assumed “startup” implies VC-backed. I thought “VC-backed startup” meant that and “bootstrapped startup” meant not. That “startup” was an indicator of not being an incumbent in the space and using technology to disrupt things. But in an increasingly tech-first world, it does beg the question what separates a tech first SMB from a startup.
- the_bear 1y agoI think there are two common definitions of startup, and neither require VCs to be involved. One (seen elsewhere in these comments) is any small business. I personally don't like that definition because there is a pretty big difference between a local coffee shop and the thing we all mean when we say "startup". The other one which is more common here is a company that is currently small, but the business model involves getting much much larger. There's a blurry line between a small business and a startup with this definition, but it seems to be a "you know it when you see it" type of thing. Companies like Mailchimp and Atlassian (in their early days) clearly qualified as startups even though they hadn't raised VC. You might say they're outliers, but so are the VC-backed companies that reach that level of success. If a small company is growing quickly and on pace to become a multi-billion dollar company, it seems weird to say they're not a startup just because they didn't raise money from the right people.
- jasode 1y ago>Companies like Mailchimp and Atlassian (in their early days) clearly qualified as startups even though they hadn't raised VC. Even the Paul Graham essay defining "startups" the way he saw it said "VC funding" wasn't required: https://www.paulgraham.com/growth.html https://www.paulgraham.com/growth.html It's just that many mentally associate "startups" with VCs and software tech because that's often how rocket-ship growth happens.
- 2d8a875f-39a2-4 1y agoYeah your small business doesn't need to be a unicorn. But your small business that a VC has bought part of does.
- smjburton 1y agoAlthough it's good to look into alternatives to bootstrapping vs VCs, the funding source isn't the only factor to consider. Balancing how quickly you need to enter the market and how much ownership you feel comfortable having over the final product will ultimately drive the decision on how to fund a venture too.
- roland35 1y agoIf everyone was a unicorn, wouldn't that by definition mean they weren't unicorns??
- _fat_santa 1y ago> even a relatively small deal would produce a life-changing outcome for the founding team. I run a SaaS with a business partner and this is basically our thesis for getting rich. My saying around this is "This amount of revenue/profit will cause a company of 500 or 1000 to go bankrupt, but it will make a company of 5-10 filthy rich"
- ZeroTalent 1y agoThis is exactly what I am doing. I started another startup in February 2024. After a year, I crossed $1M in annual profit with three employees. I am not planning to scale humans. Profits are growing, and we don't need to hire more people. LLMs and scripting automation are doing the work of approx. 20-30 people — this wasn't possible before.
- all2 1y agoI'd be curious to hear about how you are managing quality on LLM generated stuff.
- margalabargala 1y agoThey probably mostly don't need to be. Most SaaS companies are not doing anything particularly innovative or novel. Most of them provide value via putting in the work to glue together several other APIs, automating something that previously was harder to script/automate, or simply applying an idea that another company pioneered to another market segment: "It's like Theranos but for barbers!" These use cases are generally so typical of the technology being used, that LLMs can do a lot of work to script things and it's usually pretty easy to QC.
- ZeroTalent 1y agoI'm using LLMs to analyze 13F corporate filings, options flow, market news, etc. This was very labor intensive before. Essentially impossible for small companies. A 13F report can have 150 pages or so. Just eliminating redious things. It's nothing difficult for a human, but we would have to hire a ton of humans and couldn't compete against the big guys then. I'm not offering an LLM wrapper SaaS for my clients. We are just using this internally.
- dadrian 1y agoYou need to be a unicorn or you need to only take angel checks. This is not complicated.
- LikeAnElephant 1y agoOr, you know, build a business that customers are willing to pay for… Spend less than you earn. Maybe get an SMB loan if the numbers work. This approach is older than the tech industry.
- 9rx 1y agoTrouble is that there isn't much the consumer is willing to pay for anymore. They've become accustomed to devices like their phone where a single purchase fulfills an endless number of functions. The thought of buying much more is becoming a foreign concept. To complicate matters: For what they are not buying, they aren't saving up the money ready to deploy when something compelling does come around. They've decided to redirect that money into paying more for things like housing instead. Good luck chipping that away. There is still plenty of opportunity to build a business that sells to customers who are collecting those angel checks (directly or indirectly). But that is dependent on at least some businesses being funded by angels.
- LikeAnElephant 1y agoI respectfully disagree that there’s no business opportunity that people are willing to pay for. If your only target are developers or the tech industry, maybe, but there’s a whole world of non technical business people with problems that have extremely easy (and boring) technical solutions. I’ve recently signed up my third customer paying $49/mo with a simple CRUD app. No targeted ads or landing pages. I literally walked into offices in my town and asked what the most annoying part of their job is and I made a prototype. They signed a 6 month commitment. They’re amazed at my “computer skills” only because they don’t know any better. Not saying I’ll become insanely rich, but my goal is a reasonable living ($200-$300k) within 5 years. All this to say I think the opportunities in this market are there, but they look different.
- b_fiive 1y agoI don't know much about the fund itself, but https://www.indie.vc/ https://www.indie.vc/ seems like their whole thesis is this middle path.
- justinzollars 1y agoWe are currently fundraising - and we consider this a valid path if VCs don't bite. We have customers and no matter what - we are building something valuable. Nice post!
- beambot 1y agohttps://paulgraham.com/growth.html https://paulgraham.com/growth.html "A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth."
- mediaman 1y agoYes, this is what every venture capitalist says. You aren't doing a startup unless you want extreme growth, which requires our services and cuts us in. Building in a capital efficient way that generates substantial wealth for founders, but without giving VCs a cut of the pie, is, of course, "not a real startup," and often also slandered as a "lifestyle business" for low-ambition people. PG is great in many ways but he's not the person I'd turn to for an unbiased opinion on what counts as a "startup." The founders I'm particularly impressed with are the ones who have such a nuanced understanding of capital efficiency that they do not require VC, and only take money much later in the cycle when they can basically dictate terms and want hundreds of millions for liquidity or whatever (see, e.g., Joe Mansueto).
- milesrout 1y agoIt is the definition of the word. Nowhere does pg say you can't start a non-startup business. >The founders I'm particularly impressed with are the ones who have such a nuanced understanding of capital efficiency that they do not require VC, and only take money much later in the cycle That isn't "understanding capital efficiency" it is called having enough capital already.
- mediaman 1y agoYour comment seems to suggest that you don't see any difference between "capital efficiency" and "having capital." The terms mean very different things. Capital efficiency is measured by metrics such as the cash conversion cycle. It's possible to design a business model in such a way that you have negative cash conversion cycles, which cause you to actually generate cash as a function of growth (even when unprofitable by GAAP!), which is the opposite of most VC funded businesses whose burn rate is roughly a function of their growth rate.
- Eridrus 1y agoIt's obviously better to raise the optimal amount and no more. But things are not always so clean, and the best time to raise is when your company is killing it, not when you're running out of cash and trying to make it to profitability. I think one option this approach ignores is the ability to raise, but not spend profligately and not give up board seats. E.g. if you raise $10m, but still have $8m in the bank, a $10+8m exit is still possible. You do lose whatever percentage on top of liquidation preferences you sold, but the $10m in insurance can be helpful. Another thing to keep in mind is that once you have competitors, the pace at which your invest and ship is not entirely up to you. If your competitors raise more and manage to ship more or out-market you, your product is going to get squeezed out of the market. Slack is sort of the prime example in my mind here of a pretty unimpressive product dominating the space through fundraising. None of their erstwhile competitors had good outcomes because Slack just sucked all the oxygen out of that space and the only company who could really compete with that turned out to be Microsoft.
- tptacek 1y agoIf you raised $18MM total in two rounds and then sell for $18MM, you're going to walk away with a signing bonus for the new company and little else, right? You can't generally sell in order to distribute the proceeds of an investment round to the company operators.
- Eridrus 1y agoI am mostly imagining the "happy middle" scenario where you raise $1m and sell for $10m in cash, but modified to assume you raised $10m and spent $2m of it, and then got the $10m in cash from the acquirer, and still have $8m in the bank account, you would give back $10m to your investors per the liquidation preferences and then split the remaining $8m. You are in a worse boat than if you had only raised the $1m and then sold for $10m, but the founders probably still walk away with ~5-7m pre-tax (depending on how much equity the $10m cost you over 1-2 rounds), and you're in a better position than if you had run through the $1m and hadn't quite gotten to a thing worth $10m.
- datavirtue 1y agoFirst time on substack, apparently first time writing also. Enough undefined acronyms to get an 8th grader smacked.
- boxed 1y ago> For most B2B SaaS businesses, you shouldn’t need more than $1M in capital to get to PMF, find a GTM motion that works (not that it needs to scale), and reach an ARR figure where the revenue multiple for valuation starts to look pretty tasty—enough to offer significant upside even after investors are paid out. That sentence (yes, ONE sentence) is some of the worst I've seen.
- ninetyninenine 1y agoYou don’t speak tech bro.
- Ylpertnodi 1y ago>That sentence (yes, ONE sentence) is some of the worst I've seen. "[S]ome", as in 'plural'? Perhaps 'one of', may be better?
- boxed 1y agoDoh. You're right.
- clusterfook 1y agoAbbreviations :-) being defined or not depends on the audience, so it is not a law that you need to define them. PMF (product-market fit) and GTM (go to market) I would define though.
- jamesjyu 1y agoThis is what we did for Sudowrite. Took a small seed and got to profitability within 2 years by hiring within our means and laser focusing on our users. Happy to answer questions!
- InkCanon 1y agoHi, I write as a hobby and really like Sudowrite. There's a huge gap between it and virtually every other AI writing tool I know of. The insight that writers: A) Largely only want AI when they are blocked, and not all the time B) Want to consider options (which is how writing happens all the time, IMO) Is really what sets your product apart. So I'm curious, how did you get these insights? Were you a writer and instinctively knew of these, and so you dogfooded your own product? Or did you do a YC style feedeback loop to writers to find this differentiator?
- bdcravens 1y agoThe company I work for is a small company that has enabled above-market results for everyone employed. Almost 20 years ago the founder saw a specific niche, and went after it aggressively, having software built out of his own savings. We've never taken a dime of outside funding (aside from PPP loan in 2020, allowing to us to lose no employees despite our income being decimated). He's very aggressive about keeping expenses low, but he takes care of his employees, knowing they are the most valuable part of his company. (Self-serving for me to say I know, but it really is his value system)
- ilrwbwrkhv 1y agoNo VC company has done what valve has done. More companies should be like valve. YC is also no longer a good deal for a company which has even a little bit traction.
- apparent 1y ago> so if you're aiming for a $10M outcome, they won't be interested VCs won't be interested if you're aiming for a $100M outcome because what you aim for is generally loftier than what you hit. If you're aiming for $100M you might sell for $25M or $50M, which is generally uninteresting to VCs.
- haloblue 1y agoCurrently in a seed funded by a very simple cap table, pre-series whatever SaaS company. This post resonated with me as we will have to raise money later this year and I'm dreading having to take institutional capital. There is another way.
- jiveturkey 1y ago> For most B2B SaaS businesses, you shouldn’t need more than $1M in capital to get to PMF I'm not sure that's true today. Author is a one-time founder that had some success. He exudes selection bias. Note: i'm not poo-pooing him that "oh he's only founded one company". Don't read into it that much. I'm just expressing that he has the standard hubris that any one-time successful founder would have. After that single success he's already enlightening us with his wisdom. Of course there are such businesses, but "most" of those aren't startups. I don't think PMF is a term that even applies to such SMBs. PMF implies scale and repeatability of the sales process -- becoming a unicorn is baseline now.
- garrickvanburen 1y agoI'm always conflicted about this because it's like saying the sky is blue. Stepping outside of the VC startup bubble, we see small self-funded businesses are the norm. It's the neighborhood businesses all around us. 82% of all US business have <10 employees https://forstarters.substack.com/p/for-starters-10-the-three-risks-of-entrepreneurship https://forstarters.substack.com/p/for-starters-10-the-three... 99.976% of new businesses don’t raise venture capital. https://forstarters.substack.com/p/for-starters-32-start-with-a-professional https://forstarters.substack.com/p/for-starters-32-start-wit...
- system2 1y agoHN wants to hear what they already know, what to hear, or agree on.
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- bbor 1y agoI'm guessing you know this, but for those new to the terms: what this post describes as the "VC route" and the "bootstrap route" are usually referred to as "growth businesses" and "lifestyle businesses" (i.e. pays for the lifestyle of the founders). As a big believer in the need for syndicated worker's coops, I think this basic distinction is a pretty great radicalization tool against the current system ;)
- ahzhou 1y agoVC vs bootstrap is usually based on company TAM. There are certainly high growth bootstrapped businesses.
- julianeon 1y agoBut the percentage we're really interested in is "what percentage of tech based startups are VC vs. bootstrapped." Especially in, say, the Bay Area. I don't know what that figure is, but I'd like to know.
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- nektro 1y ago> Your Startup Doesn’t Need to Be a Unicorn yes it does. https://paulgraham.com/growth.html https://paulgraham.com/growth.html > —say, less than $1M— why not go for an SBA loan then instead of VC?
- billy99k 1y agoYes it does. The definition of a startup is that it's high-risk and fast growth. If you want slow growth, it's a small business (which is fine), but not a startup.