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In other words, lifestyle businesses, i.e. businesses that plan to direct nearly all profits and investment capital to the founders / employees / other expenses

by solve 11y ago

In other words, lifestyle businesses, i.e. businesses that plan to direct nearly all profits and investment capital to the founders / employees / other expenses while the investors end up getting nothing (unless they do something extractive to the company e.g. via seizing control and extracting value for themselves via that) -- versus "non-lifestyle" where the company optimizes for a big exit through which investors can be compensated. Remember, tech startups nearly never pay dividends. Making a ton of profit but no exit = good for founders and employees, big problem for investors.

danieltillett 11y ago
There is nothing wrong with lifestyle businesses :) The problem basically comes about because almost all startups here are forced to bootstrap for a long time before they even get the possibility of raising funds from an investor. If as a founder you have managed to get your business to profitability by bootstrapping why would you take on any outside investor who you expect will try and screw you over?
- pyrophane 11y ago
  You are right, there's nothing with lifestyle businesses, but the previous comment is still correct: they aren't good or investors. If you can bootstrap one and only need to take on small amounts of funding (i.e. via a business loan or from family members), then they are fantastic, but if you are trying to seek larger sums from outside investors the are problematic for the reason mentioned.
  - danieltillett 11y ago
    There is a bit of a chicken-and-the-egg problem with startup here in Australia. Without a viable investor infrastructure founders won’t create the sort of businesses that will generate returns for investors (i.e they will create bootstrapped lifestyle businesses) and without the right type of businesses being created investors will avoid putting their money into start-ups since the type on offer are the lifestyle businesses that they can’t get the money out of. Someone needs to break this cycle and they only side that can do it is the investors - they need to start putting money into really early startup and supporting the types of companies that will generate returns for investors.
- vorg 11y ago
  > If as a founder you have managed to get your business to profitability Because in Australia (and NZ, Canada, etc) founders and employees tend to be waiting for privately owned residential real estate to move up in value, a "lifestyle business" in these places doesn't need to get to profitability, it only just needs to keep the founders and employees in a job. Any outside investor that evaluates such a business is already being screwed over by the founders as soon as they start talking.

by solve 11y ago

danieltillett 11y ago

There is nothing wrong with lifestyle businesses :) The problem basically comes about because almost all startups here are forced to bootstrap for a long time before they even get the possibility of raising funds from an investor. If as a founder you have managed to get your business to profitability by bootstrapping why would you take on any outside investor who you expect will try and screw you over?

pyrophane 11y ago
You are right, there's nothing with lifestyle businesses, but the previous comment is still correct: they aren't good or investors. If you can bootstrap one and only need to take on small amounts of funding (i.e. via a business loan or from family members), then they are fantastic, but if you are trying to seek larger sums from outside investors the are problematic for the reason mentioned.
- danieltillett 11y ago
  There is a bit of a chicken-and-the-egg problem with startup here in Australia. Without a viable investor infrastructure founders won’t create the sort of businesses that will generate returns for investors (i.e they will create bootstrapped lifestyle businesses) and without the right type of businesses being created investors will avoid putting their money into start-ups since the type on offer are the lifestyle businesses that they can’t get the money out of. Someone needs to break this cycle and they only side that can do it is the investors - they need to start putting money into really early startup and supporting the types of companies that will generate returns for investors.
vorg 11y ago
> If as a founder you have managed to get your business to profitability Because in Australia (and NZ, Canada, etc) founders and employees tend to be waiting for privately owned residential real estate to move up in value, a "lifestyle business" in these places doesn't need to get to profitability, it only just needs to keep the founders and employees in a job. Any outside investor that evaluates such a business is already being screwed over by the founders as soon as they start talking.