Hacker News Reader

Comment by ganeshkrishnan | Hacker News Reader

>To founders, the behavior of investors is often opaque — partly because their motivations are obscure, but partly because they deliberately mislead you.

YC itself is opaque. All their rejection emails are a simple "sorry, we can't tell you". I don't know if they are afraid of legal liabilities or the reasons are much more mundane : "It's been 2 years and your revenue is only $2k", "AI is overhyped", "Too small a market", "You look dodgy" etc.

>Don't raise money unless you want it and it wants you.

I wish I knew this before I went on a wild goose chase for angels.

The only two startup articles I read are either PG or indiehackers and I am impressed with how clear and lucid this dude is with his words.

View on HN

No, this isn't a valid comparison. YC gives an actual answer. If you don't get in to a YC batch, you know you're not in. What's more, pretty much everyone finds out at the same time, on a well-defined schedule.

That's not at all what raising from VC firms is like. VCs rarely tell companies "no"; in fact, they say the opposite: "we'd love to fund you, let's keep moving down the path to us funding you, here are some next steps". They will do this indefinitely, and continue long after the decision not to fund you has been made.

That's what Paul Graham is talking about.

I see fundraising as having the same dynamics as dating or job hunting.

If someone wants to date you or hire you, they will make an effort. They will respond quickly. They make genuine counter-offers ("How about Monday instead?").

If they are lukewarm, they will string you along and eventually fade. They will never make counter-offers, just reject your offers and let you make the next one ("I can't on Tuesday").

If they are not interested, they won't reply in the first place.

When someone wants you it's obvious. And when they don't, it's obvious by omission.

It's sad that it took me so much time and heartache to work this out.

Yep, this is why people who are really good at this advise a breadth-first search that very quickly narrows in on the people who show real enthusiasm. Though it can be hard to accept when you're in the thick of fundraising, anything less than obvious enthusiasm is a no 99.9% of the time.

Think about it from the other side: if you were seriously considering making a company one of the few per year that you give millions of dollars, would you ignore their emails or cancel meetings at the last minute or sound bored on the phone? Investors get just as excited about a company they like as founders do about an interested investor or potential big customer.

You realize some or many people are disgenuine - why you being sad? Isn’t it great that now you know and you can recognize this quickly and take advantage of what you know and quickly move forward?

This is true up to a point.

But VCs keep stringing people along because they don't want to miss out at some point in the future if the business takes off.

That's different to dating or hiring (generally speaking).

I take it you've never experienced the sudden reappearance of someone after their first romantic choice fell through.

Sure. Hence the "generally speaking".

Well, what YC actually says is "not now, but please do apply again twice a year and you might get in eventually". I don't believe there's any point where they'll say you shouldn't bother applying again later.

This is actually quite similar to your description of other VCs.

I mean, if you had to describe how a standard VC firm with the one difference is that they work in batches would reject someone, this is exactly what you'd predict - not right now, but feel free to apply again later. You can even apply in between batches although this isn't encouraged as much. They don't ever want to discourage you from giving them another shot to invest.

This is message board logic. You apply for a batch. You either get in or you don't. YC is clear about this.

Nobody is expecting VC firms to say "no, and never reach out to us with this idea again". Maybe you haven't had the experience of raising from VCs before, so I'll relate it to you: they mostly say yes, and actually put some effort into making you believe they're actively interested, right now. They aren't. It is very difficult to know where you stand with them (right now), and they are more than willing to waste your time.

"and they are more than willing to waste your time. "

But why? What is the motive for doing so, if they don't want you?

First, there's an asymmetry in effort; it costs them very little to ask for things (keeping them informed on progress, having due-diligence calls with their network, &c) that can cost you a lot to provide; second, in exchange for their minimal efforts, they get optionality, which negates FOMO, which is the real reason they invest.

Maybe things have changed in the last couple years, but for first raises for companies, this wasn't like, "a thing that happens sometimes"; it is the normal, standard behavior of VC firms. People who are good at raising have strategies for dealing with it.

If you're actually successful and raise money elsewhere, they miss out. Better to keep you around so they can wedge in if something happens.

They have no idea whether you are something valuable or not. They are gambling, and it's their job to find undervalued companies. To them, there's zero benefit to ever closing the door. If they close the door, you won't come back, and someone else makes all the money. They will keep it open forever, in case your little company turns out to be the next Facebook or Google. They are not actively seeking to waste your time, and they are not wasting their own time. By not saying yes, and leading you on, they are telling you they don't see you as a gold mine yet.

Things change.

Timing is a big factor in tech companies. Ideas which didn't work in 2010 can work now.

Also you can come back with more proof of your thesis.

> pretty much everyone finds out at the same time, on a well-defined schedule.

They absolutely do not.

We found out 3 hours after the 10pm time they stated. And apparently this happens every year.

I sort of rest my case.

That wasn't my experience with YC. We were rejected after an onsite meeting and got a personal email from a partner with clear reasons about their concerns. If you're referring to the pre-onsite stage though, it's not too surprising since they have a huge number of applicants to filter through. The resources needed to give everyone an individual, delicately worded response would be enormous.

> I am impressed with how clear and lucid this dude is with his words.

Just about my favorite thing about good business writers is that, just like in a good sale or pitch, they communicate clearly, concisely, and with a serious economy of words.

Conversely, never trust a business person who can't write a simple article.

> Don't raise money unless you want it and it wants you.

But this is pretty much the whole point and most startups DO need money because without it nobody can hire anyone.

You can make money the old fashioned way, by selling stuff someone wants, and then use it to hire staff.

Yeah, but initially you make very little money. To make more money (at least enough to hire somebody), you need to improve your product or sell it to way more people, for which you need money.

Often times you even need money to build your product in the first place.

The VAST majority of companies- including those in tech- dont raise money. They earn it through sales and use that to hire people.

Dropbox would not be possible without raising money. Airbnb would not be possible without raising money first. Uber would not have been possible without raising money.

Some of them can make revenue from the get-go, some can't. But the truth is most of them would not have survived this long without first round of seed money.

You listed 3 multi billion dollar businesses. Those are the exception in the business-owner community.

Not really. They were just another startup at the beginning.

Pretty much every "start your own business" class sponsored by governments and schools talks in great detail about how to get a bank loan.

You don’t see the catch-22? Or do you believe that no startups require a staff of more than a few cofounders to build their product?

Am I the only one who thinks that the second quote is just content-free and super-generic? (Haven’t read the whole thing, so maybe he goes into explaining it)

>Don't raise money unless you want it and it wants you.

The context is that when you're in Silicon Valley, the upside is you have lots of people that understand what you're trying to do, and a support network that helps you do what you're afraid to admit to yourself that you're capable of. The downside is it's easy to do what all your friends are doing.

If you see your friends raising, you might feel compelled to raise as well. Some people jump in without really thinking it through.

Reality is, money comes with strings and expectations. Too many people raise without understanding what that is, and suffer the consequences when they put their sweat and tears into their company.

Reply on news.ycombinator.com