Ask HN: VC funded startup downsides? | Hacker News Reader

Ask HN: VC funded startup downsides?

6 pointsmr_puzzled3 comments

I'm starting to question the whole thought process behind VC funded startups : take money -> grow fast -> get to a liquidity event so investors can make returns. VC funded startups are all about growth growth growth. I feel like there are serious downsides to this mentality :

- encourages failing quickly hence is a wasteful process

- almost always companies do desperate things to keep growing and changing, hurting users eg- reddit

- a steady state i.e zero growth but profitable existence is not encouraged. Such a state of existence is actively discouraged so it becomes : keep growing or die already. A lot of companies that could exist, make a profit and keep users happy instead just die.

- It's likely you give up some control over the direction of the company having to balance stakeholders, getting to a liquidity event, growing a business.

What are your thoughts? Here's a crazy idea : YC but for bootstrappers. Give each startup $120k and ask them to pay back 5X that once they become profitable. The most valuable thing about YC is the people, network and fellow founders. I think removing the VC factor should be considered, at least for a parallel program.

> Give each startup $120k and ask them to pay back 5X that once they become profitable.

The devil is going to be in the details of what "profitable" means. If the company just keeps hiring people and growing, are they profitable, or not?

You also have to remember that this idea would be competing with bank loans, so you would have to be willing to take significantly more risk than a bank does to ask for get 5X returns.

Speaking of which, "5X" returns may sound great, but the timeline for those is somewhat important too. 5X in 3 years is very different to 5X in 20 years.

Maybe it's just me, but I wouldn't take this deal. I'm not super interested in VC unicorn money, but as someone in tech, it's really not hard to pull 120k together. And if I thought it was just going to be "profitable", I wouldn't want to be in a position where I am being asked to pay back 600k, since that is a serious drag on my own earnings.

So it just seems to be a really weird niche, where I would think my plan has a high chance of failing (otherwise I wouldn't take 120k, since that's very little money), but I also don't think it's going to have huge returns, which means I would be badly aligned with traditional VCs, but I'm also willing to pay back 600k.

"YC, but for bootstrappers" is an oxymoron. You need the high growth to support the YC staff and other assets because not all the businesses will succeed.

A support program for bootstrappers would look different. Getting $120k "to bootstrap" is also an oxymoron. Bootstrapping means earning the money as you go so you don't need to take investment money.

I am all for the idea of developing more support systems for bootstrappers and small projects that have no goal of growing big. But it would inherently need to take a different format from the YC model.

VC is for investors. That’s who it’s good for. It’s terrible for founders, employees, and society. The people who benefit most from “startups” are VCs. Keep that in mind.

Reply on news.ycombinator.com