4 ms·

10 people making 80k per year, that's a million dollars already. Now add taxes. If you think VCs are interested in companies that won't need 10 people to run t

by inerte 18y ago

10 people making 80k per year, that's a million dollars already. Now add taxes. If you think VCs are interested in companies that won't need 10 people to run their business, ever... you're thinking to small :) And not only there are your employees, but imagine hiring accountants, lawyers, cleaning staff... the list, only with actual human beings, is already huge! Now add costs like transportation, hotels, food, all the furniture, the stuff you need just to have the office open, like electricity and water and... fumigation? Ad on Techcrunch? 20k for 2 months. NY Times front page on Sundays? 100k. And let's not even mention prime-time TV... It just costs a lot of money to have a big business running. Open a spreadsheet anyday and do some calculations. I've only skimmed some of the costs with my examples here (even though I am sure someone will comment how NY Times ads don't apply to your question).

matthias 18y ago
That outlay is fine if you're a year into trading and are showing signs of being top 1% successful. However, many of these huge sums that are raised pre-launch or pre-build just seem like madness and I can't see it continuing. The yc vision seems more sustainable: $5k+$5kpf = you build something. If it's good you get to raise a couple hundred k to turn it into a company. If at that point it looks like you might be google, then raise the millions that you need.
- inerte 18y ago
  I can't figure out if you're agreeing or disagreeing with me :) The OP asked why VC funded companies need millions, and you've said yourself, they do need. You don't need to be on the top 1% to have 10 employees. If you do have ~10 people working, then your operating expenses are in the million range. But let's use your Google example. We know that the search market is dominated by Google, followed by Yahoo and MSN. Who are the others? I've searched and all I could come up in 10 seconds in this: http://marketshare.hitslink.com/report.aspx?qprid=4 http://marketshare.hitslink.com/report.aspx?qprid=4 Let's go with Lycos. 0.01% market share. They have 500-1000 employees. Huge costs there. I am ignoring Terra, and Daum. I guess what I am trying to say is that even a 0.01% market share can make you profitable, or attractive enough to get bought. And depending on the market (I did "cheat" a little by picking the largest internet market possible, search), even a 0.01% share might cost you millions to get there. These huge sums are raised pre-launch/build because they're essentially, bets. Educated bets at best, but still, bets. The thing is that the payoff (for the VCs) can be huge, so they gamble on dozens hoping that 3 or 4 will provide return. It's not my cup of tea, btw. I am currently building my Micro-ISV and I am quite happy, aspiring at most a nice boat, perhaps a bigger house. But the VC world is a reality :) It's like complaining about software patents. They SUCK. But the system is set up in a way that you need them. It's part of the rules. You can complain about it, but they're there. So what makes most sense in the business sense of things is to get them. Just like VCs when you're trying to dominate a market.
deleted 18y ago
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by inerte 18y ago

matthias 18y ago

That outlay is fine if you're a year into trading and are showing signs of being top 1% successful. However, many of these huge sums that are raised pre-launch or pre-build just seem like madness and I can't see it continuing. The yc vision seems more sustainable: $5k+$5kpf = you build something. If it's good you get to raise a couple hundred k to turn it into a company. If at that point it looks like you might be google, then raise the millions that you need.

inerte 18y ago
I can't figure out if you're agreeing or disagreeing with me :) The OP asked why VC funded companies need millions, and you've said yourself, they do need. You don't need to be on the top 1% to have 10 employees. If you do have ~10 people working, then your operating expenses are in the million range. But let's use your Google example. We know that the search market is dominated by Google, followed by Yahoo and MSN. Who are the others? I've searched and all I could come up in 10 seconds in this: http://marketshare.hitslink.com/report.aspx?qprid=4 http://marketshare.hitslink.com/report.aspx?qprid=4 Let's go with Lycos. 0.01% market share. They have 500-1000 employees. Huge costs there. I am ignoring Terra, and Daum. I guess what I am trying to say is that even a 0.01% market share can make you profitable, or attractive enough to get bought. And depending on the market (I did "cheat" a little by picking the largest internet market possible, search), even a 0.01% share might cost you millions to get there. These huge sums are raised pre-launch/build because they're essentially, bets. Educated bets at best, but still, bets. The thing is that the payoff (for the VCs) can be huge, so they gamble on dozens hoping that 3 or 4 will provide return. It's not my cup of tea, btw. I am currently building my Micro-ISV and I am quite happy, aspiring at most a nice boat, perhaps a bigger house. But the VC world is a reality :) It's like complaining about software patents. They SUCK. But the system is set up in a way that you need them. It's part of the rules. You can complain about it, but they're there. So what makes most sense in the business sense of things is to get them. Just like VCs when you're trying to dominate a market.

deleted 18y ago

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