I regularly go from hating VCs (DHH style) to thinking that they are pivotal in creating categories that didn’t exist before. A charismatic founder with a strong vision and supporting VC can indeed change the world (hopefully to the better)
For apps, a single person can build a major app in a year.
For products, tooling is often between 50k-1M. Everyone here is a software engineer or similar, so that money isnt hard to make/save.
Can anyone explain? Advice + support is extremely valuable, but I dont quite understand why so many startups go this route.
Alternatively, VC interest is both a cheap experiment in market fit and a boost to your brand. Media is more likely to report on your little startup if it's a YC darling and marketing or sales are at least as important as engineering.
The other reason is that if you have other people invested in it (the VCs) they will also try to help you through things like helping you get contacts etc.
Also, even if you build an app that doesn't mean anything. You need to get some marketing campaign out and you need to make sure you don't violate any laws or regulations. You have to do all of this alone.
It’s about exporting risk.
And to ask a different question - can a founder funded by VC money run their startup without giving up their entire life, and a substantial proportion of their potential earnings?
Very different from using all of your resources to self fund it.
POF was a minimalist app in a well trodden market. You shouldn't raise VC to do something like this, and you shouldn't be able to (though yes it happens far too often).
There are many problems and markets that just don't fit this approach.
Most Americans don't even have a thousand dollars in their bank account.
https://www.cnbc.com/2017/09/13/how-much-americans-at-have-i...
Not everyone lives in SV.
I'm a potter in the UK, FWIW.
I believe this is false by at least two orders of magnitude. Particularly if major means high scale, with properly researched and designed to your customer, with proper support for users/customer, with proper infrastructure technically, financially and legally wise.
I am all for bootstrapping business and have as role models the likes of DHH more than VC-funded founders. But that doesn't mean I don't understand the need of capital.
There’s a lot more to running a business than the coding part and these things take time (and sometimes money). The 50k to 1M estimate is greatly inflated by those other concerns.
Plus, while I can save, say, 250k, that would take me years and then I wouldn’t want to risk all of my savings into one gamble (I obviously wouldn’t take the startup risk if I didn’t believe in what I was building but even if I thought it was a sure thing, I’ve founded two failed startups already, it would be prudent to allow for a high chance of failure even if certain that the business is perfect)
Also, let’s assume everything above is irrelevant and I decide to save up my earnings and go all in on a startup. Let’s say I put 250k in and it takes me five years to save (in reality, I don’t think I could do it in that time, but let’s inagine I can). Let’s also assume that I do as much as work during those five years as possible so that when I have the money, I’m ready to launch. That means that five years from now, I can launch my startup, spend the money on whatever is needed that I couldn’t do previously and hopefully not lose it all (assuming the market still exists, 5 years is a long time in tech land). OR I could give up 5–40% of the company, put up with some hassle of having an investor and launch in a year (assuming development takes a year regardless). That gives me four years to make sure that the remaining % is worth more than -250k (which is where I’m at with the first scenario after that time). The investment route seems like a no brainier to me in this case.
Obviously it is possible to bootstrap a company and it should be the preferred route imho if you can pull it off. For many people, this isn’t an option though and that’s why VCs are becessary.
This is just theory to me, as a nonentrepreneur.
Though you still might build it, then find nobody wants it. Now you've wasted a year or more of your life. It happens all the time even with funded companies. You build it and nobody comes... or two few customers to support a real business.
To do something "major", you need people. People want to get paid.