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If a company was going to reduce its spend to a sustainable rate, why would it want to mortgage itself to an investment firm? I thought the main point of selli
by droopyEyelids 12y ago
If a company was going to reduce its spend to a sustainable rate, why would it want to mortgage itself to an investment firm?
I thought the main point of selling your soul to investors was to increase your burn rate. If you were bootstrapping your company it seems like you'd want to maintain control and ownership.
- jacquesm 12y agoNo, if you're playing it smart then VC is used to accelerate development and roll-out, but the business model is already there and deemed viable. This will allow you to capture a large(r) share of the market before you run into your competition.
- k3oni 12y agoInteresting take, was just thinking about this a few weeks ago talking with my wife about an idea i have.
- jasonwen 12y agoA good use of investor money is when you have a proven and controllable conversion from signups -> paying customers. For example if you need $200 averagely to acquire a customer and the LifeTime value of the customer is $500 over a 10 months timespan. With a positive conversion, you can scale very aggressively with almost no risk, whereas if you re-invest your profit, it will take much longer to reach the same point. If you are in a competitive space, you especially might benefit from investor money.
- peterjancelis 12y agoSuch a company with a proven ROI on its marketing should go for venture debt, not venture capital. If you can 2.5x your money in 10 months and capital is at 0% interest out there, why would you sell a huge stake of your business to get to that 0% capital?