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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 a

by 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.
  - adambenayoun 14y ago
    | You just need to wait. You could do that but you are risking a lot. A well funded competitor with competent founders who understand the market like you do would likely outperform you. (Emphasis on competent founders).
jackowayed 14y ago
I don't think raising early increases the chance of that company going for a talent acquisition at all. Just one example: I work for Cloudera. As I understand it, we raised a fairly large round when we had almost no employees or revenue, and weren't exactly sure what we were doing. And we absolutely needed to. Hadoop wasn't mature enough for most businesses yet, most businesses weren't really looking to do the things that Hadoop is letting them do yet, and the company was nowhere near mature enough to know how to support enough big enough customers to pay the bills anyway. We needed time, so we needed funding. 3+ years later, everything has matured and there will certainly be no talent acquisition. More generally, your claim doesn't seem to make much sense. Why does raising money make a nascent company more likely to sell out for a small talent acquisition? The real reason that companies that raise early sell more than companies that raise late is that the set of companies that raise late is a biased sample. It is, by definition, a set of companies that got too big and successful to be talent-acquired. In the current landscape, early companies that haven't yet started printing money may well find that their best option is to take a fairly large check and work for someone else. I can't see how investment would make them less likely to get past that stage; investment gives them more time to figure out their business, and less incentive to sell because investors will get a cut and not really want them to.

by dools 14y ago

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.
- adambenayoun 14y ago
  | You just need to wait. You could do that but you are risking a lot. A well funded competitor with competent founders who understand the market like you do would likely outperform you. (Emphasis on competent founders).

jackowayed 14y ago

I don't think raising early increases the chance of that company going for a talent acquisition at all. Just one example: I work for Cloudera. As I understand it, we raised a fairly large round when we had almost no employees or revenue, and weren't exactly sure what we were doing. And we absolutely needed to. Hadoop wasn't mature enough for most businesses yet, most businesses weren't really looking to do the things that Hadoop is letting them do yet, and the company was nowhere near mature enough to know how to support enough big enough customers to pay the bills anyway. We needed time, so we needed funding. 3+ years later, everything has matured and there will certainly be no talent acquisition. More generally, your claim doesn't seem to make much sense. Why does raising money make a nascent company more likely to sell out for a small talent acquisition? The real reason that companies that raise early sell more than companies that raise late is that the set of companies that raise late is a biased sample. It is, by definition, a set of companies that got too big and successful to be talent-acquired. In the current landscape, early companies that haven't yet started printing money may well find that their best option is to take a fairly large check and work for someone else. I can't see how investment would make them less likely to get past that stage; investment gives them more time to figure out their business, and less incentive to sell because investors will get a cut and not really want them to.