Did you have the self-awareness at the time to realize that what you were building is something DHH would be proud of, or was that only in retrospect? I'm asking these questions, because I struggle with listening to outside advice vs listening to my gut, and Ive been trying to strike a balance as of late.
This always confuses me: sure, you needn't have gone through VC funding, but how far could you have taken the company without it? What would have the alternative been?
"This week, I need to speak to the other founder and fire our first employee before he leaves on a planned vacation. He’s a good developer, but I won’t fucking make payroll next week if I don’t clear him and his severance out of the company."
Is it wrong that I feel worse for this employee than for the author? He's looking forward to a (probably well-earned) vacation, and he's about to be forced into a job hunt instead.
Can't you wait till he gets back so he can have a good vacation?...Although I've seen the whole "got fired upon returning from vacation" thing happen a few times. That sucks too! Sorry for both of you.
Ugh. I remember what it was like the first time the 2000-era dotcom I was at missed payroll. A co-worker and I had taken the day off to take our kids to the state fair, and found our money wasn't where we thought it would be. They announced the payroll shortfall the day it happened, in company email we didn't read because we were off that day.
Good luck with the convo man. I've been through similar situations on both ends and its not easy for either side. Hopefully he has a healthy respect for you and understands the circumstances involved. No telling how he'll react but let him vent if he needs to.
Then make plans to do this shitty job in as kind and professional manner as possible.
That means NOT stringing people along. Sit down and figure out whether you're going to be able to keep people employed at 100% of their current pay and benefits. If you know you can't, then the biggest favor you can do for them is to lay them off quickly so they can start looking for a new job immediately.
If you can make some calls to get them leads at other places that's great, but the most helpful thing you can do for them is to let them go as soon as you know that they have no future at your company.
I've done firing and layoffs and I know it's hard. Delaying it makes it all much worse, for you and the departing employees.
This happened to me 6 weeks ago. I'm now happily employed at another (slightly more stable) startup with good work and a better situation.
Trust me, any employee would be happier to be in a stable and improving startup than in one that's going downhill anyway. If they're a dev with startup experience, they'll have no trouble finding a new job and will be better for it.
Don't worry, just be honest and open with them ASAP. The worst thing you can do is keep them in the dark.
Its why I don't get the idea that being an employee is a 'safe' option. Your only as safe as the company you are working for. And frankly you look better as failed founder, then a developer at a failed start up.
That's a tough spot and I've been there, as the employee that's on the fence as the management nail-bites over accounts receivable and wondering if they can make payroll.
I've since learned that you keep your ears to the ground at all times, in ANY company you work for.
You don't sit in your cube with your Dr Beat Headphones on, you listen to office talk. You overhear that phone call from a vendor asking where their overdue payment is. You notice the rise in closed-door meetings between management and the CFO. You make friends with the assistant that cuts the checks. When you've done it long enough, you know where you stand and when it's time to get the hell out before you're caught with your pants down.
This is just no way to live. If you find yourself doing this, you're either needlessly paranoid and worrying yourself into an early grave, or you're justifiably paranoid, and you should reconsider the choices you're making regarding employment.
Obviously we don't all have the option to bail at any time and find other work, but if this is the kind of culture you're seeing as normal, I feel very sorry for you.
Anyone in this position should -- for their own good -- at least attempt to take a longer view and see if they have options that don't involve constantly sleuthing to narrow down your job's expiration date. Unless you actually like living like this... in which case, hey, it takes all kinds. ;)
I'm not advocating sneaking around and spying on your co-workers. I'm not suggesting paranoia.
What I'm saying is that it's not a bad idea to understand the health of your employer (commercially, competitively, and financially) and recognize when that health changes for better or worse. If I get up and ask 10 co-workers who our biggest competitors are, I can guarantee 5 of them couldn't answer that question. If I asked the winning 5 which ones were growing and could possibly eat our lunch, 4 of them would fail that test.
Have you ever been let go from a job after being told for months/years that everything was fine and the company was doing great? I have. Luckily, at the time, I had no substantial obligations such as raising a family. Now I do.
I learned from that point on to never be blindsided again. And it's worked well for me so far. And I'm not a paranoid person at all. I sleep pretty well, actually.
No, it's situational awareness. "Is this company doing well? Or is it not?"
That's a very reasonable and business-minded way to approach your employment. You have a very direct interest in the company's success: your paycheck, reputation, friends, etc. Being aware if the company is exploding is simple sanity.
I think to add to OP's point. This is a smart move for any company whether large or small. Large one's do layoffs as well as small ones. You probably should be more aware when you join a startup that has a burn vs generates cash but the symptoms discussed here are the same ones that Cisco goes through prior to a big layoff as well as a 10 person startup.
I've been through all of this, it sucks. But this line sticks with me:
"Honestly think the only thing that keeps my health and my marriage intact is my running."
I gotta start running. That's the one thing I always get wrong.
Good luck. Just remember, this happens all the time. For you, it will be a learning experience. In a year's time, you'll be in a new situation with almost a completely new life, and your experience will be valuable to that next step.
Next time will be a little bit better. You'll be a little more trusting of yourself, with a little less naivete, and you'll create something again. Or you'll help someone else create something. Either way, your life will get better, because you're a capable person who started a company, and you're capable of even more. Do the best you can right now and stay positive. The future will be brighter.
For me it's cycling not running (arthritis runs in my family and one knee is pretty fucked from a football injury).
It's literally the only thing that keeps me going some days I reward sustained effort with a ride and a ride wakes me up, clears out the cobwebs and I get some of my best work done after a ride.
It also helps that I've lost more than a stone (14lbs) in just over a month by switching diet and cycling 200 miles a week :).
Could the OP chime in as to why he is writing and publishing this blog? It appears to be a cautionary tale, but I'm not sure what anyone can learn when all the particulars are removed. Why not just write a retrospective after the next 30 days?
Not a cautionary tale, just a blog to vent my frustrations and record the experience.
I'm not in a position to give "advice" nor do I suggest anyone follows "advice".
If you're a new founder and about to get on the VC train, through the accelerator and out again at light speed, it's good to know that this is one way it can all end up. (Nobody really speaks about it anyhow)
Here are some lessons I'm taking away from this article:
> ... our initial desire to not raise a seed round was
> dismissed and we were thoroughly convinced that we had
> to continue on the VC rocket-ship in order to matter to
> anyone. My reluctance to do this was met by scoffs and
> dismissals from many others in the accelerator cohort...
> as well as by the mentors and investors who had offered
> their time, network and resources to help us succeed.
Lesson: VCs want founders to take larger risks with their company for the reward of a larger payoff. If the founders don't want to "bet the farm" like this, then they probably shouldn't be seeking out VC money, or at least wait until they're profitable enough to have a lot more negotiating leverage.
> I didn’t believe the shit I was selling investors. This
> was not the company I put my life on the line to build.
Lesson: Founders have to push back on their investors when the investors don't understand the full ramifications of what they're asking the company to do. First-time founders often fail to push back because the investor/advisor line is blurry.
> When I built this team, I didn’t build it with
> generalists and with people who could jump into any
> area of the business and get shit done. Instead, I built
> it with quality-minded perfectionists who build
> beautiful things.
Lesson: The founding team has to build two things: The product and the company that builds the product. Find people who can do both.
For a VC your company is just 1 of 1000 they have invested in and so they are focused more on the numbers game. But for you it could be your life's work. It seems taking VC money early on is a big mistake for serious founders.
I think the best way to look at this is as a learning experience. You have "scar tissue" now and won't make the same mistakes again.
Since you are an entrepreneur, you will inevitably build another successful startup - except this time you'll make it happen in half the time with twice the wisdom.
Failure is a part of growth. This may be a monumental failure, but this blog is both therapeutic and introspective for the author. Examining failures helps us as we move forward.
We get the added benefit of looking in from the outside. Kudos for coming forward with this kind of honesty.
I have complete understanding of your situation, having been in the position of having to let people go from a very small team a couple of times. It's hard and feels awful, but you are doing what you see needs to be done which is great in comparison to not having the willpower to act.
If the developer you need to let go is as good as you say, he won't have a problem finding a new job. You feeling shitty will not help him nor you so continue working to remedy the situation to the best of your ability. That's all you need to do and I think it sounds like you will be able to look back to all of this and be proud of you being able to make hard decisions even in a situation when it's so much easier not to.
Maybe I missed it, but WHY does your startup have 30 days to live? You ran out of money and have no raise potential? How could your employee and cofounder not know this already?
Founders are all very well aware, employees still in the dark.
No raise potential as metrics are nowhere near where they should be. Solid IP and team that might make for a good acquisition, provided investors will OK it (they've rejected one some time ago)
Do investors know you have 30 days? Company is most valuable with team intact, and hopefully no negative PR. Don't let your company get publicly connected to your post, it could kill a deal. I'm referring to acqui-hire scenario
shouldn't you give employees 30 days notice? or is the plan to just fire them when the money runs out? before they've had time to look for another job...
What if you just kept everyone, told them the truth that you can't pay them, and kept going? If you still believe in the core underlying thing that was working when you started then maybe you can turn this around.
All I can do is wish you good luck and say that I admire you for having the courage to try. These seem like empty words, so read some of my other posts to see that I really say what I mean (i.e. I'm very harsh with people I don't think much of, so when I'm nice, it means something). I'm sorry to hear that this is happening and I hope things turn out for the best.
Where are you located? What's your next move?
I can't stand how these investors get so hung up on Playing God with other peoples' companies. If they want to take over the world (and endure the risk involved; since world domination has a much higher chance of failure than a sustainable, mid-growth lifestyle business) they should do it with their careers and companies, not someone else's.
Elon Musk is doing the right thing. He's chasing the vision with his own work, rather than jumping into someone else's Magitek Armor and then deciding to burn Narshe.
Also, these asshats are the reason it's so fucking hard for startups to get clients. Businesses (clients) have been burned, horribly, in the past by startups dropping them to chase dragons because their investors thought it a better idea to drop the client and roll the dice on some red-ocean product play with a 1-in-100 shot at success. This creates a world in which clients are very cautious about dealing with startups.
We'd have a better ecosystem if the VCs were just passive investors who didn't try to live out their own adolescent do-the-world fantasies. They'd certainly make more money that way.
Your startup is going to die, you're going to get a new job (which you'll have no trouble doing), and sometime in the future you'll start another company. Maybe you'll do the next one smarter, since you'll have more experience.
It is very hard to say "This too shall pass" during your darkest days, but tptacek is correct on this one. You'll also know who your true friends are once you get out on the other side.
I'm going to say this knowing that I may get down voted to heck. And I don't mean it as a "told you so" to the OP, but rather hopefully some cautionary advice for would-be founders.
I have come to the opinion that if you are bootstrapping, you have no business calling your company a startup. You are building a small business. And there is nothing shameful about this. You are among solid companions with your local plumbers, restaurants, and barbers. You make a good living building a sustainable business that is growing steadily but slowly, to serve a small group of loyal customers.
But you are not a startup.
Startups are about growth. About chasing metrics like 5% week over week. About going from 100 customers to 100,000 in a month. That is the reason you take VC money. It's not "I have this idea for a business, but I need some money to quit my job while I work on it". It's "I have an idea for a business that could be huge but I need to build it up fast".
So when I see someone bemoaning the advice they were given by their investors, telling them they should be meeting all these crazy metrics, I can't help but ask, what did you expect? The VC isn't in the business of slow, organic growth of your company. They are in the business of generating a return for their fund within a relatively short timeframe. The advice you get is their best effort to try and help you find "explosive" growth.
Before you sign your bootstrapped business on for investment money, ask yourself: is this business, and more importantly am I, really suited for massive, short term growth?
Many accelerators have a knack for picking up teams that have demonstrated the ability to build things that generate revenue and traction. The siren song of money, networking and growth is really seductive. The implications you speak of (and I experienced it) aren't always so clear (or too easy for a prospective founder to dismiss).
Yet every bootstrapped company would grow faster if it took (the right kind of) VC money.
(For the record... I'm happily bootstrapping my startup which is a startup as far as I'm concerned. I'd call startups that rely on VC funding "VC startups.")
That is the untrue statement of the decade. In my experience, VC and angels are little more than lucky, but deluded to believe otherwise. Or corrupt, and using you to hide their activities.
Many VC's may very well be primarily lucky, but that does not mean that the companies they put their money on are not more often than not in a position to grow faster with their investment. It's just that they are still also at high, and often substantially increased, risk of failing fast. Not least because an investment is often used to execute strategies that substantially increase the burn rate.
I know a couple of 3 person startups where one person was pretty much full-time dealing with the funding side. When you're small that's a huge cut away from people focusing on delivering product.
Both went under and said in retrospect the extra person would have been better applied building the product/marketing.
Agree completely - startup is about growth - but there is a definite difference between a small technology company and a local barber or restaurant. A local barber or restaurant has a limited customer base. No matter how incredible or world class his haircuts are, nobody will fly from across the country to have their hair cut. A technology/internet startup is different. If the company is small and sticks to very slow but definite growth through a genuinely good product, eventually they can become an enormous corporation even if they weren't planning on it because anybody in the world can give them money for their value.
Intent is important, but the reality is that a slow growing internet company not focused on growth can eventually end up growing at 100% week on week simply because of slow improvement on product that provides value - 'startup by mistake'. A local barber can never have the same effect.
I would call any new business a startup, but call the VC-driven, exponential-growth-seeking model "growth startup".
I think you make a great point, but out of curiosity, what do you suggest are the best avenues for funding a tech business in the more traditional revenue-driven-growth model, if you're not bringing enough seed capital to get off the ground on your own? It seems like what's missing is an accessible happy medium.
There are a couple options, but the traditional small business route was a bank loan. These are obviously harder to get now, but still not impossible.
The right private investor/angel is also a good route. This should essentially be someone who wants to join you in the business, not someone who is looking for a specific return timeline on their investment. That's a big differentiator between a good angel and a VC.
>I think you make a great point, but out of curiosity, what do you suggest are the best avenues for funding a tech business in the more traditional revenue-driven-growth model, if you're not bringing enough seed capital to get off the ground on your own?
Traditionally, you start the business after you have some experience in the field, and either have some skill you can use to drive some revenue, or some capital.
This idea that you start a product business (rather than a business selling your labor directly) right out of school seems like a new one.
It's a relatively new idea, but I don't think things have changed in a bad way in that sense. The sort of people you speak of typically have plenty of experience using the sort of products they develop. Is it a problem to let people try to start business while they're relatively unencumbered and near peak creativity?
>Is it a problem to let people try to start business while they're relatively unencumbered and near peak creativity?
It's not so much 'let' as "pay them lots of money to"
as for the encumbrances, well, we all make choices. Children don't magically appear when you hit 30. Personally, I find it really surprising that people who choose to have children seem to be able to compete with the childfree in top jobs... but it seems they can, so what do I know?
So if "startup" is off-limits, what should we call (and how will we fund) the mid-growth/mid-risk businesses that are too risky for a sane person to take personal liability (which banks tend to require) but aim for 15-50% growth per year as opposed to 5% per week (which is 12.6x annual growth-- impossible without what would be, excluding extreme resources, degenerate gambling).
We say in this country that getting rich slowly is the virtue and that get-rich-quick is the scam. Yet VC is obsessed with the latter.
I don't agree with this because I don't think all bootstrapped businesses have to stay small. The advantage bootstrapping gives you is you can use revenue to find product/market fit, at which point you can start scaling. The problem many 'startups' make is they run out of money before getting to that point.
I think the OP was arguing against calling a bootstrapped business a "startup", and on that ground he has a point (at least according to PG's and Wikipedia's definition of a startup).
That is to say, a bootstrapped business can be a startup (if it gets to the point where it focuses on fast growth) but not necessarily (as in the case of businesses with gradual or no growth).
You may have missed mine. I'm saying that aside from investment, startups and bootstrapped have many similarities. Both are focused on growth, it's just that one is smarter about it (generally). Most of the startups the OP is referring to don't have a mission other than to get acquired before they run out of money. My preference would be to call these 'startups' burnouts instead, and reserve the name for the real businesses.
I completely agree with what you are saying about the "burnouts", but I think a bootstrapped business (unlike a startup) it's not necessarily focused on growth.
You could start a bootstrapped business and only grow to the point where is sustainable in the long term, and just provides you with a decent level of income so that you can work on something you like and under conditions that suit you.
I don't know. I guess I've just always viewed bootstrapping as choosing revenue for financing rather than investors. I don't think boostrapping is the same as what some like to call a'lifestyle business.'
My company is bootstrapped, but we're still very focused on growth.
I don't know. I guess I've just always viewed bootstrapping as choosing revenue for financing rather than investors. I don't think boostrapping is the same as what some like to call a'lifestyle business.'
Exactly.
My company is bootstrapped, but we're still very focused on growth.
Same here. We intend to build a billion dollar business, but we are (so far) bootstrapping. That doesn't, however, mean we'll never take outside money, but there's no need to right now. Once we prove the model and get some initial traction, it might make sense to do it just to fund expansion, but that's a decision for another day.
Good points, but has any VC in history actually underpinned growth from 100 to 100,000 customers in a month? Users, perhaps, but users are different creatures to customers.
What's the value of that kind of user growth? It very much depends on the quality of the user, and the startup's ability to convert users to customers. The Techcrunch effect might give you rapid user growth, but are these the right kind of users for the business? Maybe. Or maybe not.
But for the short term story, the VCs love 'user growth', and let's not worry too much about the detail, right?
The problem with taking the VC dollar is that you also need to take their metrics and KPIs. I can think of no better KPI in business than average customer lifetime value, but I doubt most VCs could care less about that, as it's a long-term KPI. It is the short-term vanity / hype metrics ('user growth' being a good example) that they're more interested in. They want to be in and out within a relatively short timeframe.
Explosive growth is all well and good, but as ever we're overly focused on user / customer acquisition, and not with retention, which is far more profitable over the long term. A healthy business concentrates on the latter, and not just the former. For VCs, it seems to be the other way around, concerned as they are with exit strategy.
This unfairly generalizes and vilifies early stage investors. There are plenty of proper, professional VC's who are sufficiently patient and not focused on faux success. Remember, a typical VC fund has a life of 7-10 years. That's plenty of time to develop a company properly and focus on the things which build REAL value.
Perhaps the devil is in the details here, but OP implies that he took accelerator/angel money -- that's potentially a very different thing than a professionally managed institutional investment.
I agree with you conceptually. Steady stable businesses of any side have no business taking VC money. Maybe they take PE money for capital structure arbitrage purposes.
But I still consider them start-ups. They are entrepreneurs fighting in the marketplace. Not every start-up needs VC money.
Not entirely true. Growth can be exponential, but the growing phase might be very long. Meaning that some business need money, grow steadily for several years and then go stratospheric.
I see your point about growth, but I disagree over the term bootstrap. I interpret bootstrap to be about external investment. Its possible to have a high-growth company (a "startup"), that receives no investment, or receives investment by the founders.
"...“Cut out that pesky client that generates 80% of your revenue, they’re a distraction on the road to executing $OUR_BIG_VISION”..."
"...I can't help but ask, what did you expect?..."
I can't help but ask what the VC was thinking???
Serious question. I know we don't know all of the details, but this seems, on the face of it, a very bad idea. I would assume there must have been much better methods of handling that client than to cut them loose. A new free tier to generate growth maybe??? Or a tier on the high end which would serve to satisfy that client???
I just don't understand why "paying customer" and "high growth" have to be mutually exclusive??? They are not mutually exclusive in any other industry I work with. Not in the restaurant industry... see Chipotle. Not in the shoe industry... at least women's shoes. Not even bike components... SRAM. Even in industries that are notoriously difficult... like porn... growth and paying customers can coexist.
I mean if "$OUR_BIG_VISION" has no room for customers who pay you gobs of money? I don't know what to think of that.
Without knowing more about the OP's business it's hard to say for sure, but I can give some thoughts based on my own experience. I'm going to assume they are a B2B company of some kind based on the limited description. In this capacity, when you are starting out, often you have a very small customer base. You likely know each of your customers individually. And as individuals, they have their own thoughts and opinions about how they want a service like yours to function. If you're not careful, you end up becoming something more akin to a consultant than a vendor. Your service becomes tailored to the specific needs of one or a few customers.
The problem is, when you are going for growth, you can't focus on the needs of one. You have to be able to take a higher level view, and build a product that can do the most for all of your customers. Sometimes that means cutting features, or at the very least making changes. If you had a product which was tailored for one customer, that fact may very well be quite limiting to expand to many more customers. Even if you build something that could do just as much for that early customer, the fact that you had to make those changes may be enough to sour the relationship and end it.
Again it's hard to know what happened in this specific case without details, but I would wager it was something along those lines. It's a decision not to be made lightly, but one you're likely to face as you grow a B2B service.
Ditching a client who generates 80% of revenue - and enough to provide for 2 people - is akin to quitting a good job with no job to go to.
If you have a client like that who is hindering to growth, then a dominating strategy would be to spin-off rather than ditch. You can afford to put 1 or 2 people on that work while you build from what's already been done.
Indeed... in his essay, "Startup = Growth", PG wrote:
"A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.
If you want to start one it's important to understand that. Startups are so hard that you can't be pointed off to the side and hope to succeed. You have to know that growth is what you're after. The good news is, if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face." [1]
Here's an article with examples from popular media:
> Steve Jobs often speaks of Apple's "startup" culture.
> ... an article in the New York Times referred to
> the seven-year-old airline Virgin America
> as a startup. [2]
Startups are not defined by their growth. However, VC-backed startups are customarily focused on growth. The difference between these two statements is subtle but important.
'Revenue first, growth second', a paraphrasing of Clayten Christiansen.
VC's essentially use founders like race horses. They pump in the steroids, exercise them to the point of optimal performance or death, and then put them out to pasture if they don't perform. Founders are part of a portfolio plain and simple. They are part of a stable. The VC's are benevolent trainers but they have one goal: ROI. Their benevolence is in direct correlation to their ROI, which is largely determined by growth. The irony is that Wall Street operates in exactly the same way. The difference is that the relationship between Bank and Borrower or Shareholder and Company is more clearly defined than the relationship between VC and Founder.
There isn't anything wrong with VC's. They play a vital role in the financial community. Yet, at the end of the day, a VC is going to look at a startup as a financial product. VC's are offering their partners a product just like a startup is seeking to offer the market a product. The fortunate part about the rest of the business world, cut-throat though it may be to some, is that no one expects anyone else to be benevolent. They expect people to conduct business.
The better the VC-Startup relationship is defined, the better it will be for the long-term health of founders. On the other hand, VC's have no incentive to change course because their is still a willing market of young people who want to strike it rich. In some sense, it would be far better for the market and founders if data was more readily available. In fact, it is a jilted environment. It is always in the VC's favor because they hold the money. However, it doesn't mean that they hold future value. If it did, they wouldn't need to go fund startups.
The current VC-Founder relationship is imbalanced compared to other portions of the marketplace. The VC's hold additional chips because of the allure of a successful exit, the siren of Silicon Valley.
That's your definition of a startup. Most people (myself included) think of a startup simply as a new, fledgling business. Every business starts with nothing. Your aspirations, whether they are to become billion-dollar or just side income are irrelevant. They can lead to some bone-headed decisions along the way though.
You see, I can get behind the usage of the word 'Disrupt' - to interrupt the normal course or unity of - Because that's often what happens when a startup enters a market to take market share from entrenched competitors who have been sailing along with a legacy for years.
But I can't get behind changing the meaning of the word 'startup' based on geographic location. The meaning is literally in the word. To start up a new venture. Nothing about 5% weekly growth. Nothing about seeking a business model - because when the word was coined nobody had to 'seek' a business model, people just paid money for goods and services. There's your business model. Of course that part has become a little lost in Silicon Valley recently.
We're talking about startups in the Silicon Valley Business vernacular,
Are we? I'm not in Silicon Valley, and what happens there is of little consequence to me. I, for one, only care what startup means in my vernacular.
For what it's worth, I consider a "startup" any business that's intended to grow into a very large business, where the definition of "very large" is somewhat fuzzy. But I don't think you have to have intent to achieve that in any certain period of time, in order to qualify as a startup.
(Not the OP) I've read PG's article, and it makes sense, but it narrowly fits YC's model and leaves out lean, bootstrapped companies. For that reason, I prefer Steve Blank's definition: "An organization in search of a repeatable, scalable business model". There's a good discussion here: http://www.quora.com/What-is-the-definition-of-a-startup
You're far too concerned with a (buzz)word that loosely fits many, many businesses and definitions and isn't as exclusive or elite or prestigious as you may feel.
And why isn't a barber shop a startup? Great Clips and Super Cuts were once new, fledgling businesses.
Not charging money, taking VC investment, joining an incubator, and creating a stupid name that ends in "fy" or "ly" a startup does not make.
BTW, I've read the essay. I like most of what he writes, but I have a fundamental disagreement on this one and just because it comes from the hands of PG does not make it gospel.
What does this mean, "designed to grow fast?" Only technology businesses can achieve overnight billion dollar valuations, so are we saying that anything that is not in the field of tech is not a startup? If you are aiming to become the next Google, Facebook, or Twitter, good luck to you but you're going to fail. Most businesses that drive our economy were not overnight success stories. Starbucks, Wal-Mart, and Macy's were once single store fronts whose founders were not aiming for "hocky-stick" growth out of the gate.
Ask John Paul DeJoria about what a startup is. The guy started by selling fucking shampoo to salons out of his car in Los Angeles when he was 36 and now owns Patron. Yes, the Tequila company. Watch this video for some perspective: http://www.youtube.com/watch?v=hndfUwPpzyQ
You are free to disagree with PG. Doing so doesn't change the fact that he is the sort of authority who gets cited in Wikipedia articles on the topic. http://en.wikipedia.org/wiki/Startup_company
The term "startup" originated during the dot-com bubble. The very origin of the term means it is supposed to apply primarily to new tech companies who are designed to grow fast.
A barber shop is not a startup. It is a small business. This doesn't make it any less legitimate as a venture. It just distinguishes it in terms of the nature of its business and industry.
edit: if you're going to downvote, at least have the courage to voice your disagreement as a reply.
Let me try this again. When I said "Wow, you ..." I was really saying: "If all you're contributing is rephrased sections of wikipedia, perhaps you shouldn't be trying to sound like an authority"
It definitely pre-dates the dotcom bubble. I think I first heard the word in Inc Magazine in the early nineties.
Edit: Also, it was only during the bubble that you saw startups go from zero to IPO in two years, and moonshot IPOs were unheard of prior to Netscape. The conventional wisdom pre-Netscape is that you had to be profitable and growing for 6-8 quarters before the IPO. A "moonshot" IPO was one that bumped 10-15% on the first day. When Boston Chicken went public their stock was up something like 50% on the first day and it was major news.
Webster says "a fledgling business enterprise," and sites as its first use 1845. [1]
Unless there's another dot-com bubble that happened 150 years earlier than the one I know about, I think you're pretty well wrong about the etymology.
Within the HN-bubble, people may define "startup" to be "VC-backed-startup, but the term does have a meaning outside of that bubble. I call my own company a "startup", and I have no plans to seek out a slot in an incubator or investment from VC.
Eh, I think you're dead wrong in every way, but I upvoted you nonetheless, since your post is a legitimate part of the discussion. I just don't agree with any of it.
I completely agree with this. Web/Tech are not the only industries that have startups. However, I do believe the "gotta have it right NOW" consumer attitude that the tech industry creates also creates the same kind of tech-focused venture capitalist.
PG isn't the only author on the topic, nor is he the most tenured. He presents one point of view from someone with interest in seeing his viewpoint prevail.
I don't think he's arguing about semantics of startup vs. small business. I believe he's trying to explain that new businesses fall into a path where they think they are a "startup" thus must take VC funding. He's trying to explain that there's also the "small business" route where you just bootstrap and fund your business from customer revenue.
He's trying to explain that there's also the "small business" route where you just bootstrap and fund your business from customer revenue.
But funding from customer revenue does not automatically imply "small business". If you manage to generate a reasonable margin off that revenue, but you reinvest the profit back into the company, you can grow that way, as opposed to growing by taking outside money.
Again, it's not about semantics. Replace small business with whatever term you want. The point is that the blog writer built a certain type of business then tried to take it onto a different track that put pressure on faster growth and got in over his/her head.
I love the subtle patronization in your post. "You are building a small business." "You are among solid companions with your local plumbers, restaurants, and barbers."
My brother in-law has a bootstrapped SaaS company making six figures per month at a profit margin of almost 100%.
Is he building a small business? Is he among his local plumbers and barbers?
I'm always confused why people assume that you need VC's money to grow FAST, especially if your company a B2B (similar to what people assumed about OP's business). Growing fast means getting a lot of new PAYING customers fast and if you priced your product right, that should cover the extra expenses of infrastructure, support and allow you to expand your staff to build more features to bring more customers in. VC's money is good when you don't have a proper monetization strategy (which may or may not be a problem to begin with) and need money to get by for the first while, which doesn't seem to be OP's case.
In all the debate this comment spawned, I think people need to realize that we need some language to clearly distinguish between big business, small business, and what I'll call "startups" here. I think "entrepreneur" is a good word to cover small business, including that local pub or barbershop. Such businesses have linear growth and a low ceiling. Software startups can have exponential growth and a ceiling orders of magnitude higher. An entrepreneurial small business could be very successful at a million dollars of revenue. An equivalent level of success in startups is a billion dollars.
So "startup" as a subset of "entrepreneur" seems like good language to me. The difference is the opportunity for exponential growth.
Ah, the "hacker/cracker" debate equivalent for software entrepreneurship, complete with the person who says other people have "no business" calling themselves something if they don't meet their specific definition of that something.
Bolted, of course, to the top of any thread that mentions "bootstrapping" or "VC".
I don't think this distinction is anywhere near as trivial. VC-funded companies have meaningfully different qualities than those that are just trying to build up their revenues. The author failed to internalize this distinction, and it later made him unhappy.
This is more about an internalized understanding of the type of business you are building for the founders than it is about external perceptions. That can be difficult for some, particularly with the prestige we in this community attribute to the word "startup". But understanding the needs of your business and how you want to grow it are key. If you're thinking of your business as a startup, that massive growth is the only way forward, you'll make decisions like taking VC money. If you think of it as a profitable small business, with measured and planned growth, you can recognize that VC money may not be the answer for you.
I think we understand that you believe businesses that don't aim for shoot-the-moon growth shouldn't call themselves "startups".
The problem is, not everybody agrees with you. I've done both kinds of companies and don't think growth trajectory is the defining feature of a "startup". I'm also not particularly interested in debating the point, since it has very little to do with the story we're commenting on. (I also understand your rebuttal to that point, that the problem this person had was not understanding the distinction you're making, but I also disagree with that argument and find it a little mean-spirited.)
My only point is to offer hopefully helpful advice to the legions of folks who come to HN wanting to learn how to start their own business for the first time. Many unintentionally assume they need to operate like a startup to their own peril, when in fact they could have had a successful business if not for chasing that label. Certainly no intention of being "mean-spirited". The fact that it might come off that way likely speaks as much to the aforementioned prestige which we place on the term "startup" as anything.
I think creating a business can be one of the most rewarding things a person can do, and I want as many people to find success in that as possible.
All funded startups are startups, but not all startups are funded.
It is possible to create a business with a very ambitious growth trajectory regardless of whether you have taken VC or angel funding or whether you are bootstrapping. It's just a lot easier to do this if you've taken funding.
In the valley, most plausible ambitious growth trajectory businesses are VC-funded of course; this is not necessarily true elsewhere. As someone who has lived in the valley for many years and before starting a startup outside of the valley, it's easy to understand why: not all funding climates are created equal.
The thing is, your comments come off as extremely dismissive: the implication is that anything not-funded is a "small business", which is the equivalent of a pat on the head and "nice lemonade stand, son" (or, Italian restaurant, if you're DHH).
Finally: say a startup has a high growth trajectory and closes a Series A round. Was it a startup before it closed the round? I'd argue the investors thought so...
I think he actually means to communicate the opposite --- he's dismissing "startups" as he defines them, and chiding the author of the post for pursuing that model.
It doesn't appear that greghinch was harping on the semantics. He's harping on the frustration about investors getting to call the shots on feature X or schedule Y.
As I understand it, that's the startup game. If you want to call the shots and build your own dream, don't take the money.
Except it's not the startup game. Larry and Sergey got to call the shots with Google (much to their investors' chagrin). Zuckerburg got to call the shots with Facebook. Both of those were high-growth startups that took VC money. They got to call the shots because they were high-growth companies with a lot of leverage.
The startups where the VCs end up calling the shots are the ones that are on bootstrapped revenue and user-acquisition trajectories but with VC funding. You have no leverage in that situation, because they provided all the money and you're providing...nothing useful at the moment. If you're careful about taking VC funding only once you've validated the market and your ability to execute against that market, the investors don't even want to call the shots, because if they just let you be they'll make a whole lot of money for zero effort.
Startups are not about growth. People have to stop thinking that way. Startups are about an idea that's new and not tried before. That's why you can have a medical startup raise $10 million and produce NO GROWTH for 5 years while they work in the laboratory solving a problem and creating a business that didn't exist before. (shameless plug I wrote about this last October: http://jmlite.tumblr.com/post/33443330774/startup-idea)
There are clearly differences, different risks, etc. in different kinds of businesses.
A new concept for a physical retail store is different from "another dry cleaner" vs. a franchise vs. taking over an existing successful business.
A consultancy where you have 20 years experience in the field as a consultant for someone else is totally different from a b2b startup a a field you solidly understand where you have initial clients lined up before you start, vs. a consumer "hits driven" business.
There isn't a universal line between startup and small business; it probably varies with time and with the founders themselves.
I disagree that startups are about growth. The growth is the key for startups in certain web / social networking space - but definitely not in all areas.
I like Steve Blank definition of the startup: "A startup is an organization formed to search for a repeatable and scalable business model". So startups need to have _constant_ progress in their search for repeatable and scalable business model.
For example, if you run a bio-med startup, are you going to grow and sell your drugs out of the door? Nope. Or if your startup is some B2B boring stuff - sometimes you want to work hard to make a couple big customers super happy and work very hard on how to repeat and scale that business model.
Also some local restaurants do become startups - depending if they figured out how to scale their business model.
Its kind of annoying that most of the comments in response to this post are basically debating vague jargon
The word means many things to different people. This is an indication that people should start using different words to describe things if they want their audience to interpret them as intended.
Sorry, but I'm of the opinion that your opinion, or at least your use of terminology, is a bit dodgy. I agree that taking VC money implies certain expectations that may not be what you - as a founder - want or are comfortable with, yes. That's just a warning against taking VC money, unless you know for sure what you're getting into. But to suggest that you aren't a "startup" unless you take VC money and do the "get big fast" thing is, IMO, totally unsupported.
Just because a company is bootstrapping does not mean they are "building a small business" or that you are meant to be companions with the "local plumbers, restaurants and barbers". Big companies can be built slowly. Did Wal-mart start off as a huge mega-corp? McDonals? IBM? A million other examples? No.
Organic growth, re-investing in the company and growing slowly but steadily can be a path to being huge just as well as grabbing a pile of VC money and trying to compress it all into a couple of years. It's all about the decisions you make and how you execute and what your vision is.
Also note that it's really not a fixed decision anyway... you could bootstrap for 6 years, then - one day - decide to take VC or private equity money to expand. So were you, or were you not a startup? Or would that be a "Schrödinger startup"?
Nonsense! To start with, "startups are about growth" is Paul Graham's thesis, and it's just one way to define a startup. There are others; see jt2190's comment for a reference to Steve Blank's: "A startup is an organization formed to search for a repeatable and scalable business model." I'm sure there are others.
There was a Silicon Valley decades before Internet/Web 2.0/somolo startups started colonizing San Francisco, and back then, there were startups in other non-Internet industries - heck there still are. There are startups in biotech, medical devices etc, that take several years just to develop a commercially viable product. Those startups don't use metrics like "5% week over week". They are, however, scalable businesses that may eventually justify VC investment.
There are lots of reasons to want to grow a business quickly, but a business doesn't automatically cease to be a startup because you have decided you don't "need to build it up fast", whatever that means.
Bootstrapped businesses can be startups, obviously. The cost of starting almost any business has fallen sharply in the past few years. You don't need VC funding to build a startup, fast or slow, unless you're building a capital intensive business or you can't fund your startup otherwise.
Your description of what defines a startup is myopic and one dimensional. Would you consider a SpaceX competitor to be a startup? They would certainly not be about 5% week over week growth.
I bet the race to reach the "hockey-stick" kills more companies than it helps. In many cases, there is no reason why you can't end up at the same place in 5 years if you let the business growth organically, rather than force-feed it in the beginning in search of that 1-2 year pop. But how many VC's want to see their investment wandering through the wilderness for 2-3 years before things start to "click"?
Hmmm, very interesting and strong viewpoints. However, wouldn't you say this is what is wrong with the industry now? Investors looking to make a few bucks rather quickly than having patience and seeing something flourish over time? Granted, not all startups, if any, actually quite blossom after a longer period of time, but I think it's a bit unfair to expect such rapid growth or success in such a small time. Nevertheless, I believe founders must be more cautious when it comes to taking money from folks who may have such narrow vision for the future. Due diligence should be happening on both sides of the table, and all entrepreneurs must understand the reality of the industry now compared to 10, 15 years ago where there was much more tolerance for high risk ventures and little bit more patience.
Your comment is spot on about the types of businesses that VCs are funding - the ones with "explosive" growth potential (with the expectation that it happens quite soon).
I do disagree that startup has to be growth centered. By virtue of software for which the distribution costs are practically 0; most software companies have potential for a significant growth (unless they are targeting a very narrow audience). It seems that the growth would come naturally once you have a product of high quality (with sufficient exposure/marketing). Hence shouldn't the primary focus of startups be on producing a product of high quality?
Is it legit? I saw a few 30 days left to live stories here, now 30 days for startup to live. Is it PR shit or real deal? If you fire employee you must pay compensation, so how can you not able to pay his payroll of week? If you fire him it will be more expensive then one weeks payroll.
In most states of the US (at will employment), you do not have to pay that much severance. So you can either pay an employee their salary every 2 weeks (and their vacation is paid), or pay then 2 weeks severance.
The amounts might not be that different. $2k paycheck versus $3k severance.
Thanks for sharing. I sympathize with you, because I just recently went through something similar, with less success than you've had. It sounds like a tough situation, but you're not out of options. You might just be out of the preferred options.
It seems to me that if you're truly out of money, you can either:
1) Try to double down on funding. Your investors can either re-up you or kiss the money they've put in and the debt/equity they have goodbye. But this just puts you on the treadmill for another X months. If you don't like how that feels now, maybe it's not the best direction.
2) Try to get acquired by someone who will pay you to finish your product.
3) Get outside work to pay the bills and put your startup into side project status. Surely with what you've built, you have made yourself highly employable, and if you're in a big-time accelerator, you probably know people who need your skills.
4) Make a "personal pivot", and use the skills and experience you've developed to springboard into something else.
I've come to learn that the discourse in the startup world is completely slanted toward success stories, even though success is far from the most common outcome. Almost no one gets it right the first time.
For example, from my own limping startup, I've learned a lot about what I did that didn't set myself up for success, and how I would do it differently. I got a day job--which I'm loving so far--and I'm planning to save a substantial portion of my pay to build a warchest over the next few years, such that next time, I won't dive in already broke (just one of several crucial things I would do differently).
Interesting. I feel like the time most previously successful startups begin to fail is when the founders are intellectually dishonest and push forward through cognitive dissonance. You have to see and believe in a vision to make it come to life. That is my big takeaway from this - if you disagree with your VCs or don't think something will work, you have to say so.
This may be a shot in the dark, but if it were me I would call up the VCs and begin having the hard conversations. "Hey, we're in trouble. I think we made mistakes here, here and here. I'm in over my head, what do we do now?"
They may ask for what's left of the money back, your business may fail, but at least you go out having been straight-forward with yourself. And you can get on the horse and do it again.
Considering he got on the front page of hacker news, it is far from useless. That's like 10k page views and good chance of investor/VC attention. I've gotten a couple meetings with VCs thanks to being on Mashable/Verge/etc., so Hacker News is likely no different. Actually, the page views are more from Hacker News since people go to your site directly instead of reading an article and maybe going to your site.
Too bad he doesn't have contact info or anything on there to capitalize on the traffic.
Congratulations: You're normal. Look at it this way: You are commanding on a battlefield, there are a helluva lot of guys about to die. If you freeze up, they all die.
So make some fucking decisions, save as many as you can. Throw some into the line of fire for the sake of the others. It's what battlefield commanders do. The gods have chosen you for this role, rise up and do your best. You will make some bad calls, and don't sweat it. Focus on making the right calls, then course correcting the bad ones.
I think commanding on the Battlefield is the wrong metaphor, we use it a lot but its not a battle, its a sport. When you tell your developer you can't afford to pay him any more it isn't that he (or she) "dies" its that they move on to their next job. Is it painful? Of course. But it isn't death.
Sports analogies work better since there is always next season with some of the same and some different players. You decide to go for the touchdown for the win instead of the field goal to tie on 4th down. Its a choice, it works or it doesn't, you go on to the Superbowl or your don't. The decisions tomorrow will be affected by today but you will still have decisions to make.
Start-ups (and I think this is one, and I think pizza stores are start-ups too) are sprouts of a business. Sometimes they grow into bushes, sometimes trees, sometimes they can't develop enough to stay alive and they die after a while. But a start-up "dying" isn't people dying. Its people going on to do something else. For non-founders their work day may proceed pretty much unchanged other than office environment and neighbors in a new job somewhere else. As for founders? Well it demands reflection and inspection to glean the maximum amount of understanding about what worked and what didn't. Sadly its the only way to learn some of those lessons.
Absolutely it's serious. But if we're talking laying someone off because you can't make payroll, that is quite different than dismissing them for cause. Generally the latter is what I think of as 'firing'.
There are scenarios one can construct that are quite painful, the person you convinced to move out of their home town away from an ok job and family to work for you who, due to the high cost of living, had a really long commute and got into a vehicle accident their first week, because they had been putting in 80 hour weeks to come up to speed quickly, that put them into the hospital but they they hadn't worked long enough to qualify for California Disability Insurance. Can we make it any worse? Perhaps their girlfriend found out she was expecting that week and so that was why this poor guy was rushing home? And your startup goes out of business because the lead investor pulled out just before the round closes, so now they don't have a job.
I'm sure we could pile more on.
My point is that the common case, the general case, is that people have multiple jobs throughout their lives. Sometimes it is wonderful, sometimes it sucks, but when they are 60 looking back at their 20's it will be part of a much larger tapestry of experience. If for the majority of people it isn't the end of their world.
> I really love my co-founder. It’s an enduring bromance that will last a lifetime. He’s a talented designer, supportive listener and I trust him entirely. However, he left me alone in the cold. He didn’t mean to do this, he didn’t even realize he did. I became the guy who would “do-it-all”. Biz Dev, check. Product Management, check. Support, check. Accounting, check. PR, check. Ad Copy, check. Development Lead, check. While he took complete ownership over design (and really excelling at it).
Communicate. communicate! Cofounder relationship is like any other and communication matters. a lot. You will get tired, feel low and discouraged. you'll have to share it and let one person know who has an outside chance of understanding it and help you out if possible. your co-founder(s).
> "The day we set foot into the doors of the accelerator, we had a business that DHH would be proud of"
DHH is well known for being against investors in general. Why would he be proud ?
My point of view on this : investors are OK while the funder(s) have more than 51% share, and therefore still making the decisions. You kind of sell your thing to satan here brother, you shouldn't have. You are not in charge of what you put so much work building, from scratch. People with money come here and change your view on the business, on your values ?
Also, I feel you don't talk enough to your co-funder(s). You should not have secrets, work-wise of course.
A bit of advice, if I may : at my startup (in which I'm associate, not funder), we make a scrum retrospective meeting every now and then (2-3 weeks). In these meetings every member of the team explains :
1/ what we should do more
2/ what we should do less
3/ what we should do the same (SAME !)
4/ what they have found frustrating
5/ what they are happy about
6/ any questions
I feel this is really important so that every one is happy. It takes courage to explain all this in front of people, but it builds up the team...
I think you misread his paragraph. He was proud of the business the day in its state that day he walked into the accelerator (and presumably for some time before), not BECAUSE he walked into the accelerator.
I recognize a lot of this from startups I've been involved in.
At the height of the bubble I co-founded a vanity e-mail business. We wanted it to be a paid service. Our only competitor was a paid service. But when we looked around, we saw ludicrous valuations per user for users that provided little to no revenue. And the VC's saw it too. And everyone were seduced into going for a free service and figure out monetization later. So that's what we did.
Of course the bubble burst, and the lofty valuations disappeared, and we had to hunker down. The business survived, but we fired 45 or so people - the vast majority of the team, and the VC's lost most of their investment.
I have two big takeaways from that experience: Be conscious whether or not you want to gamble. A gamble can be worth it, but you may be much happier building a company that'll stand a reasonable chance of giving you steady returns and pay you a salary than taking a long shot at millions. We started out wanting that reasonable chance, but got seduced into the long shot without really thinking about it.
Secondly: Keep in mind the VC's often have a vastly different risk preference than you. A founder is usually investing all his/her time in a single business, often for years. A VC spreads their investment over a wide range of companies, and spreads risk accordingly. For them, it's not such a big deal if a few of their portfolio companies fail, if they get the occasional massive return, so it may make sense for them to be willing to take risks with your business that are not in your interest.
It's vitally important to think through how much risk you're ok with before going out and getting investment, and to look for money accordingly, as well as consider how much control you're willing to give up depending on how aligned you think your interests are with the profile of any investors you bring in.
Failures makes valuable lessons (and I've had more lessons...).
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[ 0.28 ms ] story [ 257 ms ] threadIs it wrong that I feel worse for this employee than for the author? He's looking forward to a (probably well-earned) vacation, and he's about to be forced into a job hunt instead.
Kinda sucked.
That means NOT stringing people along. Sit down and figure out whether you're going to be able to keep people employed at 100% of their current pay and benefits. If you know you can't, then the biggest favor you can do for them is to lay them off quickly so they can start looking for a new job immediately.
If you can make some calls to get them leads at other places that's great, but the most helpful thing you can do for them is to let them go as soon as you know that they have no future at your company.
I've done firing and layoffs and I know it's hard. Delaying it makes it all much worse, for you and the departing employees.
Trust me, any employee would be happier to be in a stable and improving startup than in one that's going downhill anyway. If they're a dev with startup experience, they'll have no trouble finding a new job and will be better for it.
Don't worry, just be honest and open with them ASAP. The worst thing you can do is keep them in the dark.
I've since learned that you keep your ears to the ground at all times, in ANY company you work for.
You don't sit in your cube with your Dr Beat Headphones on, you listen to office talk. You overhear that phone call from a vendor asking where their overdue payment is. You notice the rise in closed-door meetings between management and the CFO. You make friends with the assistant that cuts the checks. When you've done it long enough, you know where you stand and when it's time to get the hell out before you're caught with your pants down.
Obviously we don't all have the option to bail at any time and find other work, but if this is the kind of culture you're seeing as normal, I feel very sorry for you.
Anyone in this position should -- for their own good -- at least attempt to take a longer view and see if they have options that don't involve constantly sleuthing to narrow down your job's expiration date. Unless you actually like living like this... in which case, hey, it takes all kinds. ;)
What I'm saying is that it's not a bad idea to understand the health of your employer (commercially, competitively, and financially) and recognize when that health changes for better or worse. If I get up and ask 10 co-workers who our biggest competitors are, I can guarantee 5 of them couldn't answer that question. If I asked the winning 5 which ones were growing and could possibly eat our lunch, 4 of them would fail that test.
Have you ever been let go from a job after being told for months/years that everything was fine and the company was doing great? I have. Luckily, at the time, I had no substantial obligations such as raising a family. Now I do.
I learned from that point on to never be blindsided again. And it's worked well for me so far. And I'm not a paranoid person at all. I sleep pretty well, actually.
That's a very reasonable and business-minded way to approach your employment. You have a very direct interest in the company's success: your paycheck, reputation, friends, etc. Being aware if the company is exploding is simple sanity.
It seems like you were building mobile apps
At this point, I'm running out of options and have a dev team that I can't afford to pay for much longer.
talk to your potential customers and competitors , your IP can be complimentary to someone or if your team is good you can get acquihired for sure
"Honestly think the only thing that keeps my health and my marriage intact is my running."
I gotta start running. That's the one thing I always get wrong.
Good luck. Just remember, this happens all the time. For you, it will be a learning experience. In a year's time, you'll be in a new situation with almost a completely new life, and your experience will be valuable to that next step.
Next time will be a little bit better. You'll be a little more trusting of yourself, with a little less naivete, and you'll create something again. Or you'll help someone else create something. Either way, your life will get better, because you're a capable person who started a company, and you're capable of even more. Do the best you can right now and stay positive. The future will be brighter.
It's literally the only thing that keeps me going some days I reward sustained effort with a ride and a ride wakes me up, clears out the cobwebs and I get some of my best work done after a ride.
It also helps that I've lost more than a stone (14lbs) in just over a month by switching diet and cycling 200 miles a week :).
I'm not in a position to give "advice" nor do I suggest anyone follows "advice".
If you're a new founder and about to get on the VC train, through the accelerator and out again at light speed, it's good to know that this is one way it can all end up. (Nobody really speaks about it anyhow)
Since you are an entrepreneur, you will inevitably build another successful startup - except this time you'll make it happen in half the time with twice the wisdom.
If the developer you need to let go is as good as you say, he won't have a problem finding a new job. You feeling shitty will not help him nor you so continue working to remedy the situation to the best of your ability. That's all you need to do and I think it sounds like you will be able to look back to all of this and be proud of you being able to make hard decisions even in a situation when it's so much easier not to.
No raise potential as metrics are nowhere near where they should be. Solid IP and team that might make for a good acquisition, provided investors will OK it (they've rejected one some time ago)
If you give employees 30 day notice, most will look for other jobs and leave. You will then have no hopes in turning the company around.
Where are you located? What's your next move?
I can't stand how these investors get so hung up on Playing God with other peoples' companies. If they want to take over the world (and endure the risk involved; since world domination has a much higher chance of failure than a sustainable, mid-growth lifestyle business) they should do it with their careers and companies, not someone else's.
Elon Musk is doing the right thing. He's chasing the vision with his own work, rather than jumping into someone else's Magitek Armor and then deciding to burn Narshe.
Also, these asshats are the reason it's so fucking hard for startups to get clients. Businesses (clients) have been burned, horribly, in the past by startups dropping them to chase dragons because their investors thought it a better idea to drop the client and roll the dice on some red-ocean product play with a 1-in-100 shot at success. This creates a world in which clients are very cautious about dealing with startups.
We'd have a better ecosystem if the VCs were just passive investors who didn't try to live out their own adolescent do-the-world fantasies. They'd certainly make more money that way.
Signed,
Been there.
Spot on.
I have come to the opinion that if you are bootstrapping, you have no business calling your company a startup. You are building a small business. And there is nothing shameful about this. You are among solid companions with your local plumbers, restaurants, and barbers. You make a good living building a sustainable business that is growing steadily but slowly, to serve a small group of loyal customers.
But you are not a startup.
Startups are about growth. About chasing metrics like 5% week over week. About going from 100 customers to 100,000 in a month. That is the reason you take VC money. It's not "I have this idea for a business, but I need some money to quit my job while I work on it". It's "I have an idea for a business that could be huge but I need to build it up fast".
So when I see someone bemoaning the advice they were given by their investors, telling them they should be meeting all these crazy metrics, I can't help but ask, what did you expect? The VC isn't in the business of slow, organic growth of your company. They are in the business of generating a return for their fund within a relatively short timeframe. The advice you get is their best effort to try and help you find "explosive" growth.
Before you sign your bootstrapped business on for investment money, ask yourself: is this business, and more importantly am I, really suited for massive, short term growth?
Many accelerators have a knack for picking up teams that have demonstrated the ability to build things that generate revenue and traction. The siren song of money, networking and growth is really seductive. The implications you speak of (and I experienced it) aren't always so clear (or too easy for a prospective founder to dismiss).
(For the record... I'm happily bootstrapping my startup which is a startup as far as I'm concerned. I'd call startups that rely on VC funding "VC startups.")
In general I'd find it hard to believe having more resources available reduces your growth rate.
Both went under and said in retrospect the extra person would have been better applied building the product/marketing.
Intent is important, but the reality is that a slow growing internet company not focused on growth can eventually end up growing at 100% week on week simply because of slow improvement on product that provides value - 'startup by mistake'. A local barber can never have the same effect.
I think you make a great point, but out of curiosity, what do you suggest are the best avenues for funding a tech business in the more traditional revenue-driven-growth model, if you're not bringing enough seed capital to get off the ground on your own? It seems like what's missing is an accessible happy medium.
The right private investor/angel is also a good route. This should essentially be someone who wants to join you in the business, not someone who is looking for a specific return timeline on their investment. That's a big differentiator between a good angel and a VC.
Traditionally, you start the business after you have some experience in the field, and either have some skill you can use to drive some revenue, or some capital.
This idea that you start a product business (rather than a business selling your labor directly) right out of school seems like a new one.
It's not so much 'let' as "pay them lots of money to"
as for the encumbrances, well, we all make choices. Children don't magically appear when you hit 30. Personally, I find it really surprising that people who choose to have children seem to be able to compete with the childfree in top jobs... but it seems they can, so what do I know?
We say in this country that getting rich slowly is the virtue and that get-rich-quick is the scam. Yet VC is obsessed with the latter.
I have some ideas on how to finance this currently underexplored (and underfunded) class of businesses: http://michaelochurch.wordpress.com/2013/03/26/gervais-macle... . But I have no power, so don't count on me to fix the problem.
That is to say, a bootstrapped business can be a startup (if it gets to the point where it focuses on fast growth) but not necessarily (as in the case of businesses with gradual or no growth).
You could start a bootstrapped business and only grow to the point where is sustainable in the long term, and just provides you with a decent level of income so that you can work on something you like and under conditions that suit you.
My company is bootstrapped, but we're still very focused on growth.
Exactly.
My company is bootstrapped, but we're still very focused on growth.
Same here. We intend to build a billion dollar business, but we are (so far) bootstrapping. That doesn't, however, mean we'll never take outside money, but there's no need to right now. Once we prove the model and get some initial traction, it might make sense to do it just to fund expansion, but that's a decision for another day.
What's the value of that kind of user growth? It very much depends on the quality of the user, and the startup's ability to convert users to customers. The Techcrunch effect might give you rapid user growth, but are these the right kind of users for the business? Maybe. Or maybe not.
But for the short term story, the VCs love 'user growth', and let's not worry too much about the detail, right?
The problem with taking the VC dollar is that you also need to take their metrics and KPIs. I can think of no better KPI in business than average customer lifetime value, but I doubt most VCs could care less about that, as it's a long-term KPI. It is the short-term vanity / hype metrics ('user growth' being a good example) that they're more interested in. They want to be in and out within a relatively short timeframe.
Explosive growth is all well and good, but as ever we're overly focused on user / customer acquisition, and not with retention, which is far more profitable over the long term. A healthy business concentrates on the latter, and not just the former. For VCs, it seems to be the other way around, concerned as they are with exit strategy.
Perhaps the devil is in the details here, but OP implies that he took accelerator/angel money -- that's potentially a very different thing than a professionally managed institutional investment.
But I still consider them start-ups. They are entrepreneurs fighting in the marketplace. Not every start-up needs VC money.
Mailchimp is a fantastic example. Bootstrapped with 9 figure revenues and crazy profits. http://www.quora.com/MailChimp/How-much-revenue-is-MailChimp...
"...I can't help but ask, what did you expect?..."
I can't help but ask what the VC was thinking???
Serious question. I know we don't know all of the details, but this seems, on the face of it, a very bad idea. I would assume there must have been much better methods of handling that client than to cut them loose. A new free tier to generate growth maybe??? Or a tier on the high end which would serve to satisfy that client???
I just don't understand why "paying customer" and "high growth" have to be mutually exclusive??? They are not mutually exclusive in any other industry I work with. Not in the restaurant industry... see Chipotle. Not in the shoe industry... at least women's shoes. Not even bike components... SRAM. Even in industries that are notoriously difficult... like porn... growth and paying customers can coexist.
I mean if "$OUR_BIG_VISION" has no room for customers who pay you gobs of money? I don't know what to think of that.
"We can't get feature X,Y, and Z completed which we think will get us X,000 new customers because of Big Client."
"Well, then fire Big Client."
"OK."
<months pass while new features X, Y, Z are built, Big Client leaves but it's OK b/c X,000 new customers are coming!>
"Hooray! We just released X, Y, and Z"
<crickets>
"Oh no! It turns out the features weren't actually what customers wanted or needed!"
<Hosed>
The problem is, when you are going for growth, you can't focus on the needs of one. You have to be able to take a higher level view, and build a product that can do the most for all of your customers. Sometimes that means cutting features, or at the very least making changes. If you had a product which was tailored for one customer, that fact may very well be quite limiting to expand to many more customers. Even if you build something that could do just as much for that early customer, the fact that you had to make those changes may be enough to sour the relationship and end it.
Again it's hard to know what happened in this specific case without details, but I would wager it was something along those lines. It's a decision not to be made lightly, but one you're likely to face as you grow a B2B service.
If you have a client like that who is hindering to growth, then a dominating strategy would be to spin-off rather than ditch. You can afford to put 1 or 2 people on that work while you build from what's already been done.
Indeed... in his essay, "Startup = Growth", PG wrote:
"A startup is a company designed to grow fast. Being newly founded does not in itself make a company a startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of "exit." The only essential thing is growth. Everything else we associate with startups follows from growth.
If you want to start one it's important to understand that. Startups are so hard that you can't be pointed off to the side and hope to succeed. You have to know that growth is what you're after. The good news is, if you get growth, everything else tends to fall into place. Which means you can use growth like a compass to make almost every decision you face." [1]
[1] http://www.paulgraham.com/growth.html
'Revenue first, growth second', a paraphrasing of Clayten Christiansen.
VC's essentially use founders like race horses. They pump in the steroids, exercise them to the point of optimal performance or death, and then put them out to pasture if they don't perform. Founders are part of a portfolio plain and simple. They are part of a stable. The VC's are benevolent trainers but they have one goal: ROI. Their benevolence is in direct correlation to their ROI, which is largely determined by growth. The irony is that Wall Street operates in exactly the same way. The difference is that the relationship between Bank and Borrower or Shareholder and Company is more clearly defined than the relationship between VC and Founder.
There isn't anything wrong with VC's. They play a vital role in the financial community. Yet, at the end of the day, a VC is going to look at a startup as a financial product. VC's are offering their partners a product just like a startup is seeking to offer the market a product. The fortunate part about the rest of the business world, cut-throat though it may be to some, is that no one expects anyone else to be benevolent. They expect people to conduct business.
The better the VC-Startup relationship is defined, the better it will be for the long-term health of founders. On the other hand, VC's have no incentive to change course because their is still a willing market of young people who want to strike it rich. In some sense, it would be far better for the market and founders if data was more readily available. In fact, it is a jilted environment. It is always in the VC's favor because they hold the money. However, it doesn't mean that they hold future value. If it did, they wouldn't need to go fund startups.
The current VC-Founder relationship is imbalanced compared to other portions of the marketplace. The VC's hold additional chips because of the allure of a successful exit, the siren of Silicon Valley.
http://paulgraham.com/growth.html
The word 'startup' is at least a few hundreds years old, most likely from the word 'upstart' - the action of starting up.
Startup as defined in the Merriam Webster dictionary: A fledgling business enterprise.
Startup as defined in the Oxford dictionary: A newly established business.
But I can't get behind changing the meaning of the word 'startup' based on geographic location. The meaning is literally in the word. To start up a new venture. Nothing about 5% weekly growth. Nothing about seeking a business model - because when the word was coined nobody had to 'seek' a business model, people just paid money for goods and services. There's your business model. Of course that part has become a little lost in Silicon Valley recently.
Are we? I'm not in Silicon Valley, and what happens there is of little consequence to me. I, for one, only care what startup means in my vernacular.
For what it's worth, I consider a "startup" any business that's intended to grow into a very large business, where the definition of "very large" is somewhat fuzzy. But I don't think you have to have intent to achieve that in any certain period of time, in order to qualify as a startup.
Not charging money, taking VC investment, joining an incubator, and creating a stupid name that ends in "fy" or "ly" a startup does not make.
BTW, I've read the essay. I like most of what he writes, but I have a fundamental disagreement on this one and just because it comes from the hands of PG does not make it gospel.
What does this mean, "designed to grow fast?" Only technology businesses can achieve overnight billion dollar valuations, so are we saying that anything that is not in the field of tech is not a startup? If you are aiming to become the next Google, Facebook, or Twitter, good luck to you but you're going to fail. Most businesses that drive our economy were not overnight success stories. Starbucks, Wal-Mart, and Macy's were once single store fronts whose founders were not aiming for "hocky-stick" growth out of the gate.
Ask John Paul DeJoria about what a startup is. The guy started by selling fucking shampoo to salons out of his car in Los Angeles when he was 36 and now owns Patron. Yes, the Tequila company. Watch this video for some perspective: http://www.youtube.com/watch?v=hndfUwPpzyQ
Edit: See below, I was referring to accelerated growth
But I stand by that.
PG doesn't exclusively define the startup world.
Is there really any point in Github's development that anyone would've doubted it was a startup?
The term "startup" originated during the dot-com bubble. The very origin of the term means it is supposed to apply primarily to new tech companies who are designed to grow fast.
A barber shop is not a startup. It is a small business. This doesn't make it any less legitimate as a venture. It just distinguishes it in terms of the nature of its business and industry.
edit: if you're going to downvote, at least have the courage to voice your disagreement as a reply.
Wow, you get some bullshit ideas about business if you get your mba at wikipedia.
Edit: Also, it was only during the bubble that you saw startups go from zero to IPO in two years, and moonshot IPOs were unheard of prior to Netscape. The conventional wisdom pre-Netscape is that you had to be profitable and growing for 6-8 quarters before the IPO. A "moonshot" IPO was one that bumped 10-15% on the first day. When Boston Chicken went public their stock was up something like 50% on the first day and it was major news.
Unless there's another dot-com bubble that happened 150 years earlier than the one I know about, I think you're pretty well wrong about the etymology.
Within the HN-bubble, people may define "startup" to be "VC-backed-startup, but the term does have a meaning outside of that bubble. I call my own company a "startup", and I have no plans to seek out a slot in an incubator or investment from VC.
[1] http://www.merriam-webster.com/dictionary/start-up
But funding from customer revenue does not automatically imply "small business". If you manage to generate a reasonable margin off that revenue, but you reinvest the profit back into the company, you can grow that way, as opposed to growing by taking outside money.
My brother in-law has a bootstrapped SaaS company making six figures per month at a profit margin of almost 100%.
Is he building a small business? Is he among his local plumbers and barbers?
So "startup" as a subset of "entrepreneur" seems like good language to me. The difference is the opportunity for exponential growth.
Bolted, of course, to the top of any thread that mentions "bootstrapping" or "VC".
The problem is, not everybody agrees with you. I've done both kinds of companies and don't think growth trajectory is the defining feature of a "startup". I'm also not particularly interested in debating the point, since it has very little to do with the story we're commenting on. (I also understand your rebuttal to that point, that the problem this person had was not understanding the distinction you're making, but I also disagree with that argument and find it a little mean-spirited.)
I think creating a business can be one of the most rewarding things a person can do, and I want as many people to find success in that as possible.
If you're starting up you should be questioning the ROI on everything--and trying to figure out what it may be for a VC is part of that.
There's no free l(a)unch.
I found your comment(s) very insightful. Thanks a lot for posting.
It is possible to create a business with a very ambitious growth trajectory regardless of whether you have taken VC or angel funding or whether you are bootstrapping. It's just a lot easier to do this if you've taken funding.
In the valley, most plausible ambitious growth trajectory businesses are VC-funded of course; this is not necessarily true elsewhere. As someone who has lived in the valley for many years and before starting a startup outside of the valley, it's easy to understand why: not all funding climates are created equal.
The thing is, your comments come off as extremely dismissive: the implication is that anything not-funded is a "small business", which is the equivalent of a pat on the head and "nice lemonade stand, son" (or, Italian restaurant, if you're DHH).
Finally: say a startup has a high growth trajectory and closes a Series A round. Was it a startup before it closed the round? I'd argue the investors thought so...
As I understand it, that's the startup game. If you want to call the shots and build your own dream, don't take the money.
Makes perfect sense to me.
The startups where the VCs end up calling the shots are the ones that are on bootstrapped revenue and user-acquisition trajectories but with VC funding. You have no leverage in that situation, because they provided all the money and you're providing...nothing useful at the moment. If you're careful about taking VC funding only once you've validated the market and your ability to execute against that market, the investors don't even want to call the shots, because if they just let you be they'll make a whole lot of money for zero effort.
A new concept for a physical retail store is different from "another dry cleaner" vs. a franchise vs. taking over an existing successful business.
A consultancy where you have 20 years experience in the field as a consultant for someone else is totally different from a b2b startup a a field you solidly understand where you have initial clients lined up before you start, vs. a consumer "hits driven" business.
There isn't a universal line between startup and small business; it probably varies with time and with the founders themselves.
I like Steve Blank definition of the startup: "A startup is an organization formed to search for a repeatable and scalable business model". So startups need to have _constant_ progress in their search for repeatable and scalable business model.
For example, if you run a bio-med startup, are you going to grow and sell your drugs out of the door? Nope. Or if your startup is some B2B boring stuff - sometimes you want to work hard to make a couple big customers super happy and work very hard on how to repeat and scale that business model.
Also some local restaurants do become startups - depending if they figured out how to scale their business model.
The word means many things to different people. This is an indication that people should start using different words to describe things if they want their audience to interpret them as intended.
... in the opinion of greghinch.
Sorry, but I'm of the opinion that your opinion, or at least your use of terminology, is a bit dodgy. I agree that taking VC money implies certain expectations that may not be what you - as a founder - want or are comfortable with, yes. That's just a warning against taking VC money, unless you know for sure what you're getting into. But to suggest that you aren't a "startup" unless you take VC money and do the "get big fast" thing is, IMO, totally unsupported.
Just because a company is bootstrapping does not mean they are "building a small business" or that you are meant to be companions with the "local plumbers, restaurants and barbers". Big companies can be built slowly. Did Wal-mart start off as a huge mega-corp? McDonals? IBM? A million other examples? No.
Organic growth, re-investing in the company and growing slowly but steadily can be a path to being huge just as well as grabbing a pile of VC money and trying to compress it all into a couple of years. It's all about the decisions you make and how you execute and what your vision is.
Also note that it's really not a fixed decision anyway... you could bootstrap for 6 years, then - one day - decide to take VC or private equity money to expand. So were you, or were you not a startup? Or would that be a "Schrödinger startup"?
There was a Silicon Valley decades before Internet/Web 2.0/somolo startups started colonizing San Francisco, and back then, there were startups in other non-Internet industries - heck there still are. There are startups in biotech, medical devices etc, that take several years just to develop a commercially viable product. Those startups don't use metrics like "5% week over week". They are, however, scalable businesses that may eventually justify VC investment.
There are lots of reasons to want to grow a business quickly, but a business doesn't automatically cease to be a startup because you have decided you don't "need to build it up fast", whatever that means.
Bootstrapped businesses can be startups, obviously. The cost of starting almost any business has fallen sharply in the past few years. You don't need VC funding to build a startup, fast or slow, unless you're building a capital intensive business or you can't fund your startup otherwise.
I bet the race to reach the "hockey-stick" kills more companies than it helps. In many cases, there is no reason why you can't end up at the same place in 5 years if you let the business growth organically, rather than force-feed it in the beginning in search of that 1-2 year pop. But how many VC's want to see their investment wandering through the wilderness for 2-3 years before things start to "click"?
I do disagree that startup has to be growth centered. By virtue of software for which the distribution costs are practically 0; most software companies have potential for a significant growth (unless they are targeting a very narrow audience). It seems that the growth would come naturally once you have a product of high quality (with sufficient exposure/marketing). Hence shouldn't the primary focus of startups be on producing a product of high quality?
The amounts might not be that different. $2k paycheck versus $3k severance.
It seems to me that if you're truly out of money, you can either:
1) Try to double down on funding. Your investors can either re-up you or kiss the money they've put in and the debt/equity they have goodbye. But this just puts you on the treadmill for another X months. If you don't like how that feels now, maybe it's not the best direction. 2) Try to get acquired by someone who will pay you to finish your product. 3) Get outside work to pay the bills and put your startup into side project status. Surely with what you've built, you have made yourself highly employable, and if you're in a big-time accelerator, you probably know people who need your skills. 4) Make a "personal pivot", and use the skills and experience you've developed to springboard into something else.
I've come to learn that the discourse in the startup world is completely slanted toward success stories, even though success is far from the most common outcome. Almost no one gets it right the first time.
For example, from my own limping startup, I've learned a lot about what I did that didn't set myself up for success, and how I would do it differently. I got a day job--which I'm loving so far--and I'm planning to save a substantial portion of my pay to build a warchest over the next few years, such that next time, I won't dive in already broke (just one of several crucial things I would do differently).
This may be a shot in the dark, but if it were me I would call up the VCs and begin having the hard conversations. "Hey, we're in trouble. I think we made mistakes here, here and here. I'm in over my head, what do we do now?"
They may ask for what's left of the money back, your business may fail, but at least you go out having been straight-forward with yourself. And you can get on the horse and do it again.
Just my two cents.
Start a useless blog!
Perfect!
Too bad he doesn't have contact info or anything on there to capitalize on the traffic.
Congratulations: You're normal. Look at it this way: You are commanding on a battlefield, there are a helluva lot of guys about to die. If you freeze up, they all die.
So make some fucking decisions, save as many as you can. Throw some into the line of fire for the sake of the others. It's what battlefield commanders do. The gods have chosen you for this role, rise up and do your best. You will make some bad calls, and don't sweat it. Focus on making the right calls, then course correcting the bad ones.
Good luck.
Sports analogies work better since there is always next season with some of the same and some different players. You decide to go for the touchdown for the win instead of the field goal to tie on 4th down. Its a choice, it works or it doesn't, you go on to the Superbowl or your don't. The decisions tomorrow will be affected by today but you will still have decisions to make.
Start-ups (and I think this is one, and I think pizza stores are start-ups too) are sprouts of a business. Sometimes they grow into bushes, sometimes trees, sometimes they can't develop enough to stay alive and they die after a while. But a start-up "dying" isn't people dying. Its people going on to do something else. For non-founders their work day may proceed pretty much unchanged other than office environment and neighbors in a new job somewhere else. As for founders? Well it demands reflection and inspection to glean the maximum amount of understanding about what worked and what didn't. Sadly its the only way to learn some of those lessons.
No, but firing somebody who is the head of household and has major medical issues at home, is a helluva lot more serious than 4th down.
There are scenarios one can construct that are quite painful, the person you convinced to move out of their home town away from an ok job and family to work for you who, due to the high cost of living, had a really long commute and got into a vehicle accident their first week, because they had been putting in 80 hour weeks to come up to speed quickly, that put them into the hospital but they they hadn't worked long enough to qualify for California Disability Insurance. Can we make it any worse? Perhaps their girlfriend found out she was expecting that week and so that was why this poor guy was rushing home? And your startup goes out of business because the lead investor pulled out just before the round closes, so now they don't have a job.
I'm sure we could pile more on.
My point is that the common case, the general case, is that people have multiple jobs throughout their lives. Sometimes it is wonderful, sometimes it sucks, but when they are 60 looking back at their 20's it will be part of a much larger tapestry of experience. If for the majority of people it isn't the end of their world.
Communicate. communicate! Cofounder relationship is like any other and communication matters. a lot. You will get tired, feel low and discouraged. you'll have to share it and let one person know who has an outside chance of understanding it and help you out if possible. your co-founder(s).
DHH is well known for being against investors in general. Why would he be proud ?
My point of view on this : investors are OK while the funder(s) have more than 51% share, and therefore still making the decisions. You kind of sell your thing to satan here brother, you shouldn't have. You are not in charge of what you put so much work building, from scratch. People with money come here and change your view on the business, on your values ?
Also, I feel you don't talk enough to your co-funder(s). You should not have secrets, work-wise of course.
A bit of advice, if I may : at my startup (in which I'm associate, not funder), we make a scrum retrospective meeting every now and then (2-3 weeks). In these meetings every member of the team explains : 1/ what we should do more 2/ what we should do less 3/ what we should do the same (SAME !) 4/ what they have found frustrating 5/ what they are happy about 6/ any questions I feel this is really important so that every one is happy. It takes courage to explain all this in front of people, but it builds up the team...
Anyway, good luck brother.
It is much slower but much less stressful too, in my opinion!
At the height of the bubble I co-founded a vanity e-mail business. We wanted it to be a paid service. Our only competitor was a paid service. But when we looked around, we saw ludicrous valuations per user for users that provided little to no revenue. And the VC's saw it too. And everyone were seduced into going for a free service and figure out monetization later. So that's what we did.
Of course the bubble burst, and the lofty valuations disappeared, and we had to hunker down. The business survived, but we fired 45 or so people - the vast majority of the team, and the VC's lost most of their investment.
I have two big takeaways from that experience: Be conscious whether or not you want to gamble. A gamble can be worth it, but you may be much happier building a company that'll stand a reasonable chance of giving you steady returns and pay you a salary than taking a long shot at millions. We started out wanting that reasonable chance, but got seduced into the long shot without really thinking about it.
Secondly: Keep in mind the VC's often have a vastly different risk preference than you. A founder is usually investing all his/her time in a single business, often for years. A VC spreads their investment over a wide range of companies, and spreads risk accordingly. For them, it's not such a big deal if a few of their portfolio companies fail, if they get the occasional massive return, so it may make sense for them to be willing to take risks with your business that are not in your interest.
It's vitally important to think through how much risk you're ok with before going out and getting investment, and to look for money accordingly, as well as consider how much control you're willing to give up depending on how aligned you think your interests are with the profile of any investors you bring in.
Failures makes valuable lessons (and I've had more lessons...).