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>"Indeed, one of the most successful teams in Y Combinator’s 2011 class ripped up its business plan eight weeks through the 12-week program, switched to a diffe

>"Indeed, one of the most successful teams in Y Combinator’s 2011 class ripped up its business plan eight weeks through the 12-week program, switched to a different industry, and wound up raising $2.5 million in funding" And then...what? I guess I'll never understand how, in this world, getting funded is some sort of end. Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor. But it's still only the beginning. What proportion of funded startups end up failing? I'll fathom it's a lot. And if you get funded, then flame out, are you a success?

Eduardo3rd 14y ago
I'd have to dig a little bit for a source to back this up, but I would guess that the odds of succeeding are much higher if you have funding than if you don't. I think the author is critiquing the fact that these companies get money at all, not just claiming that they are successful because of that fact.
- dusing 14y ago
  And the failures much more spectacular and costly
  - enjo 14y ago
    Only for the investors, and that is the beauty of the system.
justin 14y ago
And then.. wend to work on their business, built a product, and acquired customers. Of course, a book covering the period of time that wrapped up right after startups were raising their rounds wouldn't tell the whole story. But it is far more sensationalistic to portray "funding" as the goal. Getting funded isn't the end, and you'll really, really be hard pressed to find anyone who will tell you that in SV, regardless of how much people want to tell you that's the case.
lsc 14y ago
>I guess I'll never understand how, in this world, getting funded is some sort of end. Most people have a goal of selling their company, no? I mean, our tax code is such that it makes far more sense to sell a company than to just take money out the usual way, even if you get the same amount of money total. If you sell the company, you pay a much lower capital gains rate, wheras if you take profit either as a distribution or as salary, you pay much more. (If you take profit as a dividend, you pay corp. income tax on it, then you pay capital gains on it; if you take it as salary/bonus, of course, you pay FICA and everything.) You can sell a company based on it's current earnings, or you can sell a company based on it's anticipated future earnings. When you get investors, you are doing the latter. Of course, then you need to figure out how to cash out; but certainly that's easier after getting funding than before. Personally, I'd prefer to think of it as selling (perhaps only part of) the company rather than "taking funding" - I mean, I'd be okay saying I'd stick around and help out for a number of years (for enough money, of course,) but once you have investors, it's not really yours anymore anyhow; it's more clear to all involved, I think, if you think of it as a sale. > Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor. See, I don't understand how businesses that can't even bring in enough money to pay their founders get funding.
- Evbn 14y ago
  Investors are investing in the company, not buying it from you. That's why the company is worth more post-money. Taking money from the company and quitting is called embezzlement.
  - lsc 14y ago
    >Investors are investing in the company, not buying it from you. well, they bring money, some of which you [usually] get to keep, and you lose [varying degrees of] control of the company. It sounds like selling [part of] the company to me. >Taking money from the company and quitting is called embezzlement. Hm. I'm pretty sure that if you take your salary/bonus, then quit, that's not embezzlement. I'm pretty sure the same goes for selling your share of the company. (there may be other agreements that go with the investment that prevent you from selling your share, or even that have penalties for you quitting, but it's not embezzlement.)

Eduardo3rd 14y ago

I'd have to dig a little bit for a source to back this up, but I would guess that the odds of succeeding are much higher if you have funding than if you don't. I think the author is critiquing the fact that these companies get money at all, not just claiming that they are successful because of that fact.

dusing 14y ago
And the failures much more spectacular and costly
- enjo 14y ago
  Only for the investors, and that is the beauty of the system.

justin 14y ago

And then.. wend to work on their business, built a product, and acquired customers. Of course, a book covering the period of time that wrapped up right after startups were raising their rounds wouldn't tell the whole story. But it is far more sensationalistic to portray "funding" as the goal. Getting funded isn't the end, and you'll really, really be hard pressed to find anyone who will tell you that in SV, regardless of how much people want to tell you that's the case.

lsc 14y ago

>I guess I'll never understand how, in this world, getting funded is some sort of end. Most people have a goal of selling their company, no? I mean, our tax code is such that it makes far more sense to sell a company than to just take money out the usual way, even if you get the same amount of money total. If you sell the company, you pay a much lower capital gains rate, wheras if you take profit either as a distribution or as salary, you pay much more. (If you take profit as a dividend, you pay corp. income tax on it, then you pay capital gains on it; if you take it as salary/bonus, of course, you pay FICA and everything.) You can sell a company based on it's current earnings, or you can sell a company based on it's anticipated future earnings. When you get investors, you are doing the latter. Of course, then you need to figure out how to cash out; but certainly that's easier after getting funding than before. Personally, I'd prefer to think of it as selling (perhaps only part of) the company rather than "taking funding" - I mean, I'd be okay saying I'd stick around and help out for a number of years (for enough money, of course,) but once you have investors, it's not really yours anymore anyhow; it's more clear to all involved, I think, if you think of it as a sale. > Getting funded means you now have the cash to become a real business, rather than having a two-man team eating ramen and sleeping on the floor. See, I don't understand how businesses that can't even bring in enough money to pay their founders get funding.

Evbn 14y ago
Investors are investing in the company, not buying it from you. That's why the company is worth more post-money. Taking money from the company and quitting is called embezzlement.
- lsc 14y ago
  >Investors are investing in the company, not buying it from you. well, they bring money, some of which you [usually] get to keep, and you lose [varying degrees of] control of the company. It sounds like selling [part of] the company to me. >Taking money from the company and quitting is called embezzlement. Hm. I'm pretty sure that if you take your salary/bonus, then quit, that's not embezzlement. I'm pretty sure the same goes for selling your share of the company. (there may be other agreements that go with the investment that prevent you from selling your share, or even that have penalties for you quitting, but it's not embezzlement.)