5 ms·

I think you are mixing up a correlation vs causation effect. The first thing is there is an extremely important causation effect, the more investors you have,

by birken 13y ago

I think you are mixing up a correlation vs causation effect. The first thing is there is an extremely important causation effect, the more investors you have, the easier it is to get more people to invest (social proof). So, inbound vs outbound: If you have a lot more investors already committed, you have a lot more social proof. Naturally if you have more investors, you will have a lot investors talking about your deal to other investors. Thus, the people who contact you inbound want to invest. However, it has nothing to do with the fact that they are inbound, it is just that by the time they are contacting you, your fundraising already was dripping with social proof. Conversely, at the beginning when you have no investors, you likely are going to have to contact some of them. This is obviously going to have a much lower conversion rate, because you have no social proof! Taken to the logical extreme, if inbound investors are so much more valuable than outbound, when you start fundraising you should just sit next to your telephone and wait for investors to call you. But of course that won't work, because it isn't inbound investors that actually matter. It is all about building social proof, and then once you have that, a lot of good things are going to happen. For example, YC is very powerful indication of social proof, and look how much easier fundraising became! Basically, people who read this TC article: if you are interested in fundraising, PG wrote the canonical piece about it, http://paulgraham.com/fr.html http://paulgraham.com/fr.html This post is fun, and I congratulate you on raising your round, but this data isn't predictive or useful.

michaelochurch 13y ago
This post is fun, and I congratulate you on raising your round, but this data isn't predictive or useful. Yeah, "get inbound investor attention" is the worst advice ever; by definition, it's impossible. Trying to make people like you tends to have the opposite effect. It's like telling an awkward 17-year-old that he'll solve all his problems with women if he gets laid by a supermodel. The fatalism is important. I'm glad that someone on the inside has the courage to point it out. The extremely low rate of success for outbound traffic, especially pre-YC, confirms the fatalistic view of the Valley that is, IMO, the right one. If you're born into connections, you're solid. If you have enough before-age-of-carefulness dirt on important people while at Stanford and got in The Club, you'll never have to raise money; you'll be in the position to turn it away. If you're anyone else, though, the best advice regarding SillyCon Valley is just to sit this lifetime out, because the factors that matter most are those you can't do anything about.
- mindcrime 13y ago
  ; you'll be in the position to turn it away. If you're anyone else, though, the best advice regarding SillyCon Valley is just to sit this lifetime out, because the factors that matter most are those you can't do anything about. Or just start building your company without anybody else's money at all, or money raised outside of SV... and then become, as they say, "so good they can't ignore you." At the end of the day, these people are pragmatic... get enough traction and I'm pretty sure the "in the club or not" distinction disappears in the wash. Of course, the best scenario is one where you never wind up needing VC money at all, whether it's from the Valley or elsewhere. But that might not work for everybody. Still, you can start without those guys in most industries, especially if you can code and are building a software product. Obviously if you're doing a pharma play or something with huge initial capital costs, the equation changes, but I doubt the majority of this audience (HN readers) are founding pharmaceutical companies...
  - timmm 13y ago
    This. Isn't part of the appeal of starting a web business the low costs required to do so? It sure as hell was for me when I started out. I have an app that I go months without doing anything with (touching the code base, answering customers, ect.) and yet it still earns me a constant flow of income. In other words my profit margins are absurd (>90%). That's pretty cool if you ask me. Of course I won't be earning millions from it but I earn enough money and I maintain full autonomy. I frequent places like hacker-news to learn things and to stay connected with the community but I have absolutely no interest networking with investors or taking money from an seed/accelerator firm.
    - soundlab 13y ago
      Couldn't agree more. Step 1 toward this is to completely eradicate any VC/startup investor blogs or threads from your browser and substitute them with real daily communications with potential customers. I look at the entire VC model and see it as a huge waste of most entrepreneurs' time and energy. Why entrepreneurs seek validation from accelerators, investors, and the media is beyond me. The usual response is that to build an enormous company at a very high growth rate requires a ton of money and doing anything other than that is mailing it in infamous lifestyle business approach. I reject that entire premise- you can make quite a large dent in the world, build a large business, and generate a big income by bootstrapping in one niche market after another- the major tradeoff is time.
ChuckMcM 13y ago
I wonder if you can use it as an inverse signal, which is if no one is calling you then your not visible enough? Or some other issue that might need to be addressed?

by birken 13y ago

michaelochurch 13y ago

This post is fun, and I congratulate you on raising your round, but this data isn't predictive or useful. Yeah, "get inbound investor attention" is the worst advice ever; by definition, it's impossible. Trying to make people like you tends to have the opposite effect. It's like telling an awkward 17-year-old that he'll solve all his problems with women if he gets laid by a supermodel. The fatalism is important. I'm glad that someone on the inside has the courage to point it out. The extremely low rate of success for outbound traffic, especially pre-YC, confirms the fatalistic view of the Valley that is, IMO, the right one. If you're born into connections, you're solid. If you have enough before-age-of-carefulness dirt on important people while at Stanford and got in The Club, you'll never have to raise money; you'll be in the position to turn it away. If you're anyone else, though, the best advice regarding SillyCon Valley is just to sit this lifetime out, because the factors that matter most are those you can't do anything about.

mindcrime 13y ago
; you'll be in the position to turn it away. If you're anyone else, though, the best advice regarding SillyCon Valley is just to sit this lifetime out, because the factors that matter most are those you can't do anything about. Or just start building your company without anybody else's money at all, or money raised outside of SV... and then become, as they say, "so good they can't ignore you." At the end of the day, these people are pragmatic... get enough traction and I'm pretty sure the "in the club or not" distinction disappears in the wash. Of course, the best scenario is one where you never wind up needing VC money at all, whether it's from the Valley or elsewhere. But that might not work for everybody. Still, you can start without those guys in most industries, especially if you can code and are building a software product. Obviously if you're doing a pharma play or something with huge initial capital costs, the equation changes, but I doubt the majority of this audience (HN readers) are founding pharmaceutical companies...
- timmm 13y ago
  This. Isn't part of the appeal of starting a web business the low costs required to do so? It sure as hell was for me when I started out. I have an app that I go months without doing anything with (touching the code base, answering customers, ect.) and yet it still earns me a constant flow of income. In other words my profit margins are absurd (>90%). That's pretty cool if you ask me. Of course I won't be earning millions from it but I earn enough money and I maintain full autonomy. I frequent places like hacker-news to learn things and to stay connected with the community but I have absolutely no interest networking with investors or taking money from an seed/accelerator firm.
  - soundlab 13y ago
    Couldn't agree more. Step 1 toward this is to completely eradicate any VC/startup investor blogs or threads from your browser and substitute them with real daily communications with potential customers. I look at the entire VC model and see it as a huge waste of most entrepreneurs' time and energy. Why entrepreneurs seek validation from accelerators, investors, and the media is beyond me. The usual response is that to build an enormous company at a very high growth rate requires a ton of money and doing anything other than that is mailing it in infamous lifestyle business approach. I reject that entire premise- you can make quite a large dent in the world, build a large business, and generate a big income by bootstrapping in one niche market after another- the major tradeoff is time.

ChuckMcM 13y ago

I wonder if you can use it as an inverse signal, which is if no one is calling you then your not visible enough? Or some other issue that might need to be addressed?