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This entire story underlies to me the need to bootstrap into something that is already working and has numbers before talking to anyone about taking money. I e

by brc 13y ago

This entire story underlies to me the need to bootstrap into something that is already working and has numbers before talking to anyone about taking money. I enjoyed the piece - the writing, the story. It's meant to have a melancholy, no-end-to-the-story tone. That's the entire point of it. What people have to realise is that most of the rest of the world sees silicon valley entrepreneurs based on what they saw in The Social Network. Ziplines into the pool and young girls hitting bongs while nerds with headphones bashed out code nearby, oblivious. So something like this would serve as a strong counter-current to the prevailing narrative, that it's just a case of hopping the bus and pitching your ideas and becoming rich and famous while still young. Realistically many career paths have low probability, high reward exit points, and that continues to attract youth. The movie or music businesses are really no different. It could easily have been a story about LA and a bunch of wannabe actors waiting tables and going to auditions - some will luck into roles, others will burn out and take normal jobs, a lucky few will walk into top roles because of connections, family or supreme talent.

mkal_tsr 13y ago
> This entire story underlies to me the need to bootstrap into something that is already working and has numbers before talking to anyone about taking money. I could not agree more. There are certainly exceptions, but they should be that, not the standard/norm. Aside from the high risk from a business perspective, you're putting other people's financial situation in jeopardy, not to mention you have an obligation to investors to return their money, thus you are working for them despite what equity % they have. My hard-line for my start-up was that I must be able to pay salary from site revenue, and before I could bring anyone on I had to make sure it could support at least 1 person's living expenses (me) because I do not want to risk other's situations/lives on a promise or a "trust me" or a "by the way I need money" sort of deal. It's certainly a slower process but I'm learning a lot along the way in the area's (non-technical) I'm not as familiar with. I guess the other thing is I'd prefer to be able to travel while I work and I don't feel that'd be possible if I were taking VC-money. Either way, it's a fun game, to work on your idea and bring it to fruition.
madaxe_again 13y ago
Afraid to say this isn't quite right - we followed this path. Essentially, the moment you have a functioning, profitable company, your value becomes rooted in multiples of ebitda. When you have a pie-in-the-sky idea, gaggles of engineers, huge running costs and no product, your value is based on "????? Profit!" We're 8 years in, driving about £1bn of ecommerce transactions a year, and there is no exit.
- brc 13y ago
  I would guess the valuations are based on the expected targeted size of the market and defensible market position. Without a reason why your current growth will accelerate, it's only reasonable why a valuation would be done on a cashflow/profitability basis. You also have to remember that you got to choose your business strategy to this point, you presumably can't be removed from your own company, and your ownership is worth something. There is always an exit for a well-run business, but it's probably not going to be through a VC funded growth-then-exit unless they can see a way to 10x your existing business at a minimum.

by brc 13y ago

mkal_tsr 13y ago

> This entire story underlies to me the need to bootstrap into something that is already working and has numbers before talking to anyone about taking money. I could not agree more. There are certainly exceptions, but they should be that, not the standard/norm. Aside from the high risk from a business perspective, you're putting other people's financial situation in jeopardy, not to mention you have an obligation to investors to return their money, thus you are working for them despite what equity % they have. My hard-line for my start-up was that I must be able to pay salary from site revenue, and before I could bring anyone on I had to make sure it could support at least 1 person's living expenses (me) because I do not want to risk other's situations/lives on a promise or a "trust me" or a "by the way I need money" sort of deal. It's certainly a slower process but I'm learning a lot along the way in the area's (non-technical) I'm not as familiar with. I guess the other thing is I'd prefer to be able to travel while I work and I don't feel that'd be possible if I were taking VC-money. Either way, it's a fun game, to work on your idea and bring it to fruition.

madaxe_again 13y ago

Afraid to say this isn't quite right - we followed this path. Essentially, the moment you have a functioning, profitable company, your value becomes rooted in multiples of ebitda. When you have a pie-in-the-sky idea, gaggles of engineers, huge running costs and no product, your value is based on "????? Profit!" We're 8 years in, driving about £1bn of ecommerce transactions a year, and there is no exit.

brc 13y ago
I would guess the valuations are based on the expected targeted size of the market and defensible market position. Without a reason why your current growth will accelerate, it's only reasonable why a valuation would be done on a cashflow/profitability basis. You also have to remember that you got to choose your business strategy to this point, you presumably can't be removed from your own company, and your ownership is worth something. There is always an exit for a well-run business, but it's probably not going to be through a VC funded growth-then-exit unless they can see a way to 10x your existing business at a minimum.