6 ms·

Why we stopped raising until we no longer need the money

45 points by pytrin 14y ago

davidw 14y ago
> Funding will almost surely get you coverage on the major tech sites. For many startups, their main audience is the readers of those tech sites That is a mistake too many of us make, I think, and one of the key things you can learn from someone like patio11. Between "I could build that in a weekend", open source, and a fairly critical audience, I think techies are not that great a market for a lot of things. Find a group out there that's not tech savvy, and make something that solves their problem, and they'll think it's wonderful magic.
- pytrin 14y ago
  For us specifically, that is exactly our audience. Non techy people have no use for our service. Many tech ventures are for techy people. Mass consumer startups are a different beast altogether - they can usually get large traction the easy way through sharing and viral loops (if they have a good product).
- randall 14y ago
  We haven't raised a cent and we got decent coverage: http://www.lostremote.com/2012/05/07/vidpresso-offers-low-cost-way-to-get-social-tv-updates-on-air/ http://www.lostremote.com/2012/05/07/vidpresso-offers-low-co... http://techcrunch.com/2012/05/07/vidpresso-wants-to-help-tv-stations-put-your-tweets-and-facebook-comments-on-air/ http://techcrunch.com/2012/05/07/vidpresso-wants-to-help-tv-... http://pandodaily.com/2012/05/07/vidpresso-aims-to-disrupt-broadcasters-signs-up-broadcasters-as-customers/ http://pandodaily.com/2012/05/07/vidpresso-aims-to-disrupt-b... The tech press actually helped with customer acquisition because people were more willing to trust us. I think if you just spend your time meeting the right people, you can get coverage if you, by just being you, can prove you're not a douche / self promoter.
nostromo 14y ago
Some constructive (hopefully) feedback: I had a hard time figuring out what Binpress actually does. "Build software faster with mature code solutions that let you focus on the interesting and unique parts of your product" and "Binpress is a discovery service and marketplace for source-code components. We bridge the gap between open-source and commercial software, improving the process of software development." That last statement is content-free fluff. If you would say, "Buy source code snippets and packages" or something, I'd get it immediately. I'm also not sure you should call anything a "discovery service." Nobody wakes up in the morning and thinks, "I need to find a discovery service today." Pintrest is a discovery service (so is HN) but they don't say that, they say "Browsing pinboards is a fun way to discover new things and get inspiration from people who share your interests."
- pytrin 14y ago
  Thanks for the feedback, it is helpful. We are constantly trying different messaging on the homepage to see what works best and we still haven't found the magic words. We can't say "buy source-code snippets" for a couple of reasons - first, we have a mix of free and commercial open-source, and second we do not publish "snippet" sized packages (see our publication guidelines). Our goal is to create an inventory of curated, professional solutions to common needs in software development, whether free or commercial (as long as we verify the publisher is committed to supporting it). You are probably right about the 'discovery-service' part as a user, we don't use that messaging in our homepage anymore.
  - epo 14y ago
    If you're having trouble describing what it is (and so far, failing to make it sound compelling) then it will be difficult for prospective customers to decide if they want your service. I keep seeing this sort of stuff. "Curated discovery service" is a weasel phrase for "middle man", a species now practically extinct in many spheres of activity thanks to Google and the web. So, you're a middle man. What can you get that I can't get for myself? What do you know that I don't? What value are you adding? What are your curatorial skills? Prove it. There is your web copy.
filip01 14y ago
Isn't being in closed beta a good solution to this paradox?
- pytrin 14y ago
  Good point - I consider a closed beta a product that hasn't launched yet. It is meant to test features and experience, but not to measure actual real-world traction. In this case I would suggest to raise before opening it to the public, since there is no going back once you do.
- wiradikusuma 14y ago
  but no matter in what 'state' your product is in (beta/alpha/omega), wouldn't the investor still ask, "how many users (and traction) you have at the moment?" it's not like you can say, "whoops, we don't install analytics in beta, but we received good feedbacks from people in HN, so give us the money."
- K2h 14y ago
  I was thinking the same thing. Could even an open beta be considered a 'not launched yet' and give you an out should potential investors want to know why the growth hasn't been demonstrated yet? What would the downside to an open beta be vs a closed beta?
  - adambenayoun 14y ago
    You need to be careful with the 'closed beta' stage, It's really easy to get "sucked" into that state for a longer period than you thought and blame all of your shortcomings on being in closed beta. Don't forget to ship. Regarding the 'open beta' - I don't think it's applicable, if you're open to users and anyone can register and growth hasn't happened yet, investors will spot that.
    - K2h 14y ago
      Thanks!
dools 14y ago
From what I can tell, and based on my completely anecdotal analysis of the situation, "raising based on a couple of mockups" is almost guaranteed to result in an acquihire. Look at when SEOMoz and Github raised money: they were already multi-million dollar businesses. Raising money was entirely justified. If you're a B2B product with a revenue model, you don't need funding, you need patience.
- pytrin 14y ago
  I agree to a point - you don't need funding, as we've found out the hard way, reaching break even point without it. Funding can provide a strong springboard that accelerates your growth at the critical first steps. Not to mention, that best kind of investors give your startup a network of connections and exposure that is very hard to duplicate on your own (see YC startups for example).
  - dools 14y ago
    I just totally disagree that funding in the "critical first steps" is what a business that has a revenue model requires. Basically, I have come to be of the opinion that the types of businesses that need funding for critical first steps are B2C businesses with no revenue model other than advertising which need a huge critical mass with a lot of infrastructure investment before it can become profitable. If you have revenue, you don't need a springboard. You just need to wait. There isn't one dry cleaner in New York. I love Chris Savage's post on this topic where he's talking about the idea creation process before Wistia and saying basically that although there are a bunch of companies that already do what you're doing, it's really hard to get people to pay attention online and saturation takes a really long time. If there's only two of you, break even point is really low, and that's all you need. Some are preoccupied with glamour and glitz, Actin all boogee and making big movies, But I'll be in the cut call me Incognito, Busy makin joints that will bump for my people, You're listening to a man who was something for nothing, Stay in me forever head, never be frontin
    - pytrin 14y ago
      I agree that not every business needs to raise. If your goal is to slowly build a lifestyle business, there's no rush. If you want to become huge, funding helps a lot. Being patient means you give opportunity to others to bypass you while they raise - we had 2 funded competitors rise up after we launched. Luckily, we outperformed them both, and one of them will soon become an affiliate, but if they had stronger teams the outcome could've been the opposite.
roasm 14y ago
If you have a company that has good margins, decent numbers, and is not particularly viral, it sounds like your company is a candidate for a business loan, not an equity investment. At the risk of over generalizing, early stage VC are interested in portfolio investing in high risk / high return companies. Well-run, non-viral, near-profitable businesses that could use an influx of cash might be better off with a loan that won't dilute the owners' equity in the company.
- pytrin 14y ago
  Investment means much more than money, if you get the right investor. Connections, exposure and social proof that can help you expand your company in many more ways than with just money. I can think of many similar companies that weren't really viral but used an investment as springboard to get huge by developing strong customer acquisition channels (for example, Mint).
BerislavLopac 14y ago
If you have an idea for a product and can talk a good game, build some mockups or a basic prototype and try to raise with that. That's assuming you live in Silicon Valley or can target their investors. Elsewhere, especially outside US, it's extremely difficult to raise any significant funding unless you are already huge.
- pytrin 14y ago
  You can always travel to Silicon Valley, you don't have to live there - we live in a global village nowadays. Even though I now live in Mountain View, the funding attempt I mention in the post was done on a 3 week visit to the valley (from Israel, no less).
  - BerislavLopac 14y ago
    I now live in Mountain View I rest my case. EDIT to elaborate: Your case just proves my point. You lived in Israel and failed to get funding from Silicon Valley. Now you're in Mountain View, presumably (I'm assuming a lot here, I know) because there's a better startup climate. Have you ever tried raising in Israel. I understand the funding scene is very active over there.
    - pytrin 14y ago
      Not sure what your case is - if read my comment, you'd notice I said I traveled to silicon valley from Israel. Just get on a plane and you're here, if it's important enough for you. Naturally, I did try to raise in Israel. The funding scene there is not active at all, perhaps you meant the startup scene. There's very few funds that do seed rounds and they do a very small amount of investments per firm (1-2 a year). The angel scene is also underdeveloped. Israel is not a good place to raise seed money.
      - BerislavLopac 14y ago
        That's really interesting position, considering all the news I keep hearing about how Israel has a great approach to technology etc. Where I live (Croatia), Israel is the poster boy of the right approach to startups and investing outside the Valley...

45 points by pytrin 14y ago

> Funding will almost surely get you coverage on the major tech sites. For many startups, their main audience is the readers of those tech sites That is a mistake too many of us make, I think, and one of the key things you can learn from someone like patio11. Between "I could build that in a weekend", open source, and a fairly critical audience, I think techies are not that great a market for a lot of things. Find a group out there that's not tech savvy, and make something that solves their problem, and they'll think it's wonderful magic.

pytrin 14y ago
For us specifically, that is exactly our audience. Non techy people have no use for our service. Many tech ventures are for techy people. Mass consumer startups are a different beast altogether - they can usually get large traction the easy way through sharing and viral loops (if they have a good product).
randall 14y ago
We haven't raised a cent and we got decent coverage: http://www.lostremote.com/2012/05/07/vidpresso-offers-low-cost-way-to-get-social-tv-updates-on-air/ http://www.lostremote.com/2012/05/07/vidpresso-offers-low-co... http://techcrunch.com/2012/05/07/vidpresso-wants-to-help-tv-stations-put-your-tweets-and-facebook-comments-on-air/ http://techcrunch.com/2012/05/07/vidpresso-wants-to-help-tv-... http://pandodaily.com/2012/05/07/vidpresso-aims-to-disrupt-broadcasters-signs-up-broadcasters-as-customers/ http://pandodaily.com/2012/05/07/vidpresso-aims-to-disrupt-b... The tech press actually helped with customer acquisition because people were more willing to trust us. I think if you just spend your time meeting the right people, you can get coverage if you, by just being you, can prove you're not a douche / self promoter.

nostromo 14y ago

Some constructive (hopefully) feedback: I had a hard time figuring out what Binpress actually does. "Build software faster with mature code solutions that let you focus on the interesting and unique parts of your product" and "Binpress is a discovery service and marketplace for source-code components. We bridge the gap between open-source and commercial software, improving the process of software development." That last statement is content-free fluff. If you would say, "Buy source code snippets and packages" or something, I'd get it immediately. I'm also not sure you should call anything a "discovery service." Nobody wakes up in the morning and thinks, "I need to find a discovery service today." Pintrest is a discovery service (so is HN) but they don't say that, they say "Browsing pinboards is a fun way to discover new things and get inspiration from people who share your interests."

pytrin 14y ago
Thanks for the feedback, it is helpful. We are constantly trying different messaging on the homepage to see what works best and we still haven't found the magic words. We can't say "buy source-code snippets" for a couple of reasons - first, we have a mix of free and commercial open-source, and second we do not publish "snippet" sized packages (see our publication guidelines). Our goal is to create an inventory of curated, professional solutions to common needs in software development, whether free or commercial (as long as we verify the publisher is committed to supporting it). You are probably right about the 'discovery-service' part as a user, we don't use that messaging in our homepage anymore.
- epo 14y ago
  If you're having trouble describing what it is (and so far, failing to make it sound compelling) then it will be difficult for prospective customers to decide if they want your service. I keep seeing this sort of stuff. "Curated discovery service" is a weasel phrase for "middle man", a species now practically extinct in many spheres of activity thanks to Google and the web. So, you're a middle man. What can you get that I can't get for myself? What do you know that I don't? What value are you adding? What are your curatorial skills? Prove it. There is your web copy.

filip01 14y ago

Isn't being in closed beta a good solution to this paradox?

pytrin 14y ago
Good point - I consider a closed beta a product that hasn't launched yet. It is meant to test features and experience, but not to measure actual real-world traction. In this case I would suggest to raise before opening it to the public, since there is no going back once you do.
wiradikusuma 14y ago
but no matter in what 'state' your product is in (beta/alpha/omega), wouldn't the investor still ask, "how many users (and traction) you have at the moment?" it's not like you can say, "whoops, we don't install analytics in beta, but we received good feedbacks from people in HN, so give us the money."
K2h 14y ago
I was thinking the same thing. Could even an open beta be considered a 'not launched yet' and give you an out should potential investors want to know why the growth hasn't been demonstrated yet? What would the downside to an open beta be vs a closed beta?
- adambenayoun 14y ago
  You need to be careful with the 'closed beta' stage, It's really easy to get "sucked" into that state for a longer period than you thought and blame all of your shortcomings on being in closed beta. Don't forget to ship. Regarding the 'open beta' - I don't think it's applicable, if you're open to users and anyone can register and growth hasn't happened yet, investors will spot that.
  - K2h 14y ago
    Thanks!

dools 14y ago

From what I can tell, and based on my completely anecdotal analysis of the situation, "raising based on a couple of mockups" is almost guaranteed to result in an acquihire. Look at when SEOMoz and Github raised money: they were already multi-million dollar businesses. Raising money was entirely justified. If you're a B2B product with a revenue model, you don't need funding, you need patience.

pytrin 14y ago
I agree to a point - you don't need funding, as we've found out the hard way, reaching break even point without it. Funding can provide a strong springboard that accelerates your growth at the critical first steps. Not to mention, that best kind of investors give your startup a network of connections and exposure that is very hard to duplicate on your own (see YC startups for example).
- dools 14y ago
  I just totally disagree that funding in the "critical first steps" is what a business that has a revenue model requires. Basically, I have come to be of the opinion that the types of businesses that need funding for critical first steps are B2C businesses with no revenue model other than advertising which need a huge critical mass with a lot of infrastructure investment before it can become profitable. If you have revenue, you don't need a springboard. You just need to wait. There isn't one dry cleaner in New York. I love Chris Savage's post on this topic where he's talking about the idea creation process before Wistia and saying basically that although there are a bunch of companies that already do what you're doing, it's really hard to get people to pay attention online and saturation takes a really long time. If there's only two of you, break even point is really low, and that's all you need. Some are preoccupied with glamour and glitz, Actin all boogee and making big movies, But I'll be in the cut call me Incognito, Busy makin joints that will bump for my people, You're listening to a man who was something for nothing, Stay in me forever head, never be frontin
  - pytrin 14y ago
    I agree that not every business needs to raise. If your goal is to slowly build a lifestyle business, there's no rush. If you want to become huge, funding helps a lot. Being patient means you give opportunity to others to bypass you while they raise - we had 2 funded competitors rise up after we launched. Luckily, we outperformed them both, and one of them will soon become an affiliate, but if they had stronger teams the outcome could've been the opposite.

roasm 14y ago

If you have a company that has good margins, decent numbers, and is not particularly viral, it sounds like your company is a candidate for a business loan, not an equity investment. At the risk of over generalizing, early stage VC are interested in portfolio investing in high risk / high return companies. Well-run, non-viral, near-profitable businesses that could use an influx of cash might be better off with a loan that won't dilute the owners' equity in the company.

pytrin 14y ago
Investment means much more than money, if you get the right investor. Connections, exposure and social proof that can help you expand your company in many more ways than with just money. I can think of many similar companies that weren't really viral but used an investment as springboard to get huge by developing strong customer acquisition channels (for example, Mint).

BerislavLopac 14y ago

If you have an idea for a product and can talk a good game, build some mockups or a basic prototype and try to raise with that. That's assuming you live in Silicon Valley or can target their investors. Elsewhere, especially outside US, it's extremely difficult to raise any significant funding unless you are already huge.

pytrin 14y ago
You can always travel to Silicon Valley, you don't have to live there - we live in a global village nowadays. Even though I now live in Mountain View, the funding attempt I mention in the post was done on a 3 week visit to the valley (from Israel, no less).
- BerislavLopac 14y ago
  I now live in Mountain View I rest my case. EDIT to elaborate: Your case just proves my point. You lived in Israel and failed to get funding from Silicon Valley. Now you're in Mountain View, presumably (I'm assuming a lot here, I know) because there's a better startup climate. Have you ever tried raising in Israel. I understand the funding scene is very active over there.
  - pytrin 14y ago
    Not sure what your case is - if read my comment, you'd notice I said I traveled to silicon valley from Israel. Just get on a plane and you're here, if it's important enough for you. Naturally, I did try to raise in Israel. The funding scene there is not active at all, perhaps you meant the startup scene. There's very few funds that do seed rounds and they do a very small amount of investments per firm (1-2 a year). The angel scene is also underdeveloped. Israel is not a good place to raise seed money.
    - BerislavLopac 14y ago
      That's really interesting position, considering all the news I keep hearing about how Israel has a great approach to technology etc. Where I live (Croatia), Israel is the poster boy of the right approach to startups and investing outside the Valley...