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The mention of $250k at the end is, I believe, telling. This size of deal isn't really available, yet it could well be the most useful to modern startups, espec

by mmt 17y ago

The mention of $250k at the end is, I believe, telling. This size of deal isn't really available, yet it could well be the most useful to modern startups, especially as a seed round. YC, despite being compelling to young entrepreneurs, presents too high an opportunity cost for a season professional, yet a megabuck is too much for an initial build.

rizzn 17y ago
Honestly, that was my problem the during two or so go-rounds ago. I had the first free podcast hosting company some six years ago, and it quickly grew to thousands of podcasters in a matter of months, seizing close to half the world's podcasters at the time. I wanted to grow it past what I was capable of doing on my own, and I started talking to VCs. They were all trying to get me to write budgets for ten, twenty million. My cost was my time and my server bill. I really had no idea what to do with that much money. I coulda used $100k-$500k to build out a sales team, hire a few developers, maybe a content manager, and be fully funded for at least two years or so... .. oddly, I couldn't find anyone who was willing to fund me for a reasonable amount, and there was no way I could justify an insane valuation the tens of millions guys wanted.
- ujjwalg 17y ago
  This is exactly what we are going through. The VCs we talk to want to see revenue projections of $50MM+ in 5 years and want a project plan for investment in $MM. All we need is in $150k range and it is extremely difficult to find money in that tier. We have decided to continue boot strapping and stop wasting time for now.
  - rizzn 17y ago
    Depending on your location, it sounds like the closest thing to what you want is to find a patron or an incubator/accelerator. They aren't that common everywhere, so it's probably just as effective as playing the lottery if you aren't in a tech hotspot. SiliconANGLE incubates a few startups along those lines (SALabs), and for a time we were looking to align with a larger fund to do that on a more scaled up capacity, but it seems like the establishment VC firms aren't particularly interested in that concept. Now that I reflect on our past conversations with said parties, I imagine that it's entirely possible that they're highly interested in the idea, but the wheels of their business move so damn slowly that at some point in the next two years one of them will come back and say "let's do it." I'm not holding my breath.
jf781 17y ago
For technical folks bootstrapping say a iphone or fb app is very little money and 25-150k could be used for market validation - another very important part of the startup cycle. If the entrepreneur is say a business person who can't code anymore then a prototype cost will be roughly 25k or so just to get an initial build this still isn't enough to launch. So getting a customer immediately is very important and working capital to service and grow. There are only two ways to get money for a startup: 1) top line revenue from a product or service or 2) sell equity or do a debt note. That's it. I've estimated that the required amount for a "real" seed round in today's open source environment for tech ventures is about 200-300k. That is unless you are young and can do the coding yourself. However technology isn't the driver any more for startups. The scarce talent is business model engineering and product marketing - building for scale isn't the problem anymore. I can build a hack protytype that works well into the "validation" stage to establish a funding event or customer revenue stream then use the new capital to rebuild, hire and grow.
- mmt 17y ago
  Obviously (I hope, based on my original comment), I don't disagree with your estimate, but I'm curious as to what it's based on. I think YC has demonstrated that a $10-$20k initial seed round is enough for a software-only prototype in a few months, assuming technical founders. Presumably there's a comparable cost to your "rebuild," though please correct me if I'm wrong.

by mmt 17y ago

rizzn 17y ago

Honestly, that was my problem the during two or so go-rounds ago. I had the first free podcast hosting company some six years ago, and it quickly grew to thousands of podcasters in a matter of months, seizing close to half the world's podcasters at the time. I wanted to grow it past what I was capable of doing on my own, and I started talking to VCs. They were all trying to get me to write budgets for ten, twenty million. My cost was my time and my server bill. I really had no idea what to do with that much money. I coulda used $100k-$500k to build out a sales team, hire a few developers, maybe a content manager, and be fully funded for at least two years or so... .. oddly, I couldn't find anyone who was willing to fund me for a reasonable amount, and there was no way I could justify an insane valuation the tens of millions guys wanted.

ujjwalg 17y ago
This is exactly what we are going through. The VCs we talk to want to see revenue projections of $50MM+ in 5 years and want a project plan for investment in $MM. All we need is in $150k range and it is extremely difficult to find money in that tier. We have decided to continue boot strapping and stop wasting time for now.
- rizzn 17y ago
  Depending on your location, it sounds like the closest thing to what you want is to find a patron or an incubator/accelerator. They aren't that common everywhere, so it's probably just as effective as playing the lottery if you aren't in a tech hotspot. SiliconANGLE incubates a few startups along those lines (SALabs), and for a time we were looking to align with a larger fund to do that on a more scaled up capacity, but it seems like the establishment VC firms aren't particularly interested in that concept. Now that I reflect on our past conversations with said parties, I imagine that it's entirely possible that they're highly interested in the idea, but the wheels of their business move so damn slowly that at some point in the next two years one of them will come back and say "let's do it." I'm not holding my breath.

jf781 17y ago

For technical folks bootstrapping say a iphone or fb app is very little money and 25-150k could be used for market validation - another very important part of the startup cycle. If the entrepreneur is say a business person who can't code anymore then a prototype cost will be roughly 25k or so just to get an initial build this still isn't enough to launch. So getting a customer immediately is very important and working capital to service and grow. There are only two ways to get money for a startup: 1) top line revenue from a product or service or 2) sell equity or do a debt note. That's it. I've estimated that the required amount for a "real" seed round in today's open source environment for tech ventures is about 200-300k. That is unless you are young and can do the coding yourself. However technology isn't the driver any more for startups. The scarce talent is business model engineering and product marketing - building for scale isn't the problem anymore. I can build a hack protytype that works well into the "validation" stage to establish a funding event or customer revenue stream then use the new capital to rebuild, hire and grow.

mmt 17y ago
Obviously (I hope, based on my original comment), I don't disagree with your estimate, but I'm curious as to what it's based on. I think YC has demonstrated that a $10-$20k initial seed round is enough for a software-only prototype in a few months, assuming technical founders. Presumably there's a comparable cost to your "rebuild," though please correct me if I'm wrong.