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Comment by brenden2 | Hacker News Reader

I don't think there's any opportunity anymore. The market is super saturated, capital has dried up, and only insiders have a shot at funding. The cards are stacked against outsiders.

I've lost hope on the Silicon Valley dream and decided to just use my big brain to make money in public markets, which is surprisingly easy given how much effort the government puts into pumping up the stock market.

I used to think YC was great, I applied several times, but YC doesn't really represent what it used to anymore (to me at least).

Just my 2 cents.

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The coronavirus situation has certainly altered capital markets but outside of that your comment doesn't conform to the data. There was more capital deployed in the last several years, at all levels, then we've ever seen.

I wish I could say that was my experience.

Making generalizations about the world at large based on your personal experience is a mistake. Look at the data.

I mean, yeah, look at the data: https://pitchbook.com/news/articles/21-charts-showing-curren...

It's not really a secret that angel and seed funding has been steadily dropping since the mid-2010s.

With that said, I think that @brenden2 is overvaluing funding. Most people around here build software -- which can be easily bootstrapped. For those in hardware/biotech/energy/etc. it's much harder to get out an MVP without funding.

Ya, I believe 2014 was the peak when it comes to seed deals per year so fair, we are below peak. But there was a TREMENDOUS rise starting in about 2005 or so (a combination of coming out of the dotcom bust then the rise of mobile with iOS/Android).

Overall I see the availability of seed funding as still quite high.

Very much agree with your last point about overvaluing funding. It's never been easier to bootstrap something for a year or two. Get an actual product working, maybe have a few users, and then go for funding to scale up. We see this in the data too with median company ages at the time of seed funding rising.

Do startups need as much capital early on?

What cherry picked data are you looking at? Just because TOTAL investment amount is rising doesnt mean that it is lifting all boats. Pareto distribution 101.

Thanks!

"There are three kinds of lies: lies, damned lies, and statistics."

Generalizations based upon experience are perfectly valid when the market is not flat.

I suspect that there is lots of capital washing between insiders and very little outside the bubble.

there's also opinion, expert opinion, and statistics.

the problem with statistics is you have to look how it's being used to figure out if you've got something lower than a damned lie or higher than an expert opinion. Which requires work and expertise of its own.

> There was more capital deployed in the last several years, at all levels, then we've ever seen.

If you consider all the money thrown at unicorns ... maybe.

The $15-70 million range has been a desert for the past 4 years.

Everybody wants the unicorn or the $1 million 100x exit.

Ya, the so called Series A Gap is real. OP seemed to be talking about seed funding though which is plentiful.

Things look quite different to many small, non vc-funded, profitable businesses: there is so much vc money sloshing about that one is constantly fighting competitors who operate at a loss to try to build monopolies whereas in more typical industries such businesses face much more fair competition.

On your second paragraph, you may be amused to note that a popular theme in Matt Levine’s column is that “private markets are the new public markets”.

> Things look quite different to many small, non vc-funded, profitable businesses: there is so much vc money sloshing about that one is constantly fighting competitors who operate at a loss to try to build monopolies whereas in more typical industries such businesses face much more fair competition.

This story doesn’t add up.

1. VC funded company operates at a loss.

2. All incumbents are pushed out of market.

3. VC funded company has monopoly. They raise prices above the original “competitive-profitable price”.

4. New company enters market at original price.

5. VC funded company goes to the original price or goes bankrupt.

6. Anddd, we’re here again.

I don’t see why that doesn’t add up. It looks plausible to me.

Note that often this low price for internet companies is 0 and many users will not put up with any price increase, so the VC backed company will fail once their monetisation strategy ( usually it’s “something something advertisers”) doesn’t pan out.

A small profitable business is harmed by the unsustainable competition at steps 1-2 and may struggle to hold out until step 3 (which likely won’t happen; going bust/being acquired and shuttered seem more likely to me) or 6

Operating at a loss doesn’t mean they’re running at negative margins. It means they’re burning money to do sales or marketing or hire a bunch of devs to build faster than other companies.

They provide the service at a lower price and would be profitable if they weren’t aggressively expanding?

That’s just a better company.

I’m not sure why you’re fixated on price. Most interesting companies aren’t building commodities like toothpaste.

Companies that have enough market power to crush smaller competitors tend to also drive the quality of products down. I’d prefer more high quality products to fewer “better companies”.

> I’m not sure why you’re fixated on price.

I’m responding to OP.

>> there is so much vc money sloshing about that one is constantly fighting competitors who operate at a loss to try to build monopolies

He’s claiming that VC companies use their warchest to undercut and ultimately force out incumbents.

> Most interesting companies aren’t building commodities like toothpaste.

Why is price less relative for “non-commodity” companies?

> Companies that have enough market power to crush smaller competitors tend to also drive the quality of products down.

Maybe? Peter Thiel talks about small margins in competitive industries leading to lower quality products because companies lack sufficient resources to innovate. eg, Google’s advertising domination lets them build high quality products like GMaps and GMail.

Alternatively, no one enters the market because the monopoly company can still undercut them.

Another bigger problem is that the monopolist pushes the low cost of delivered goods or services on third parties (see the gig economy). That race to the bottom harms people, but there will always be takers for those jobs in any society without a good social security system.

"just use my big brain to make money in public markets, which is surprisingly easy given how much effort the government puts into pumping up the stock market"

Off-topic but do you have a recommended starting place or other ideas? I did well with some short positions recently but would love to explore more strategies.

The truest words spoken here today.

Ha, thanks! I try to always stay 100% honest and true to myself and others.

As an outside insider (live and work here but haven’t gotten funding directly ever), here’s my question: Do you even need funding?

It’s never been this easy to start a thing. Build stuff, get some users, see how much they pay. Then go from there.

Most funded startups these days just feel unnecessarily bloated. Over engineered, over staffed, building run-of-the-mill boring stuff you could slap together in a couple afternoons using 3rd party tools and some glue.

It's not the money itself that matters, it's the social proof. Since I personally have no brand, and nobody knows who I am, they won't take a chance on me. Even with lots of money, nobody is going to join a startup or give you the time of day. Admittedly you can do some marketing to change this, but that's not my area of expertise and not something I'm good at (I'm a technical person and a good natural leader).

It doesn't really matter that I've done well on my own, or that I've been privileged enough to work at a few successful companies. You need either a lot of Twitter followers or a big name VC backing you before anyone will take you seriously.

> Since I personally have no brand, and nobody knows who I am, they won't take a chance on me.

Who is "they" in this case? Customers? Investors? Recruiting candidates?

In any case, I don't think this is true.

Customers don't buy a product because of who created it (in the vast majority of cases). They buy because it provides them value. Build something valuable and you'll get customers.

Once you have customers via creating something valuable, you have revenue, growth, etc. With this you can win over investors, recruiting candidates, heck even other potential customers.

Social proof might help a little, but probably not as much as you think.

Agreed, it's nuanced. I try to keep my comments on here short and easy to digest. Brevity is the soul of wit etc.

Marketing is probably the most important skill for a founder to have. You have to market to raise money. You have to market to hire employees. You have to market to get customers. It's especially hard at the beginning when you have to get the first of all of those things.

If you want to start a company, you should get good at it.

I think that's using a very broad definition of marketing.

Convincing founders to give you money, finding employees and convincing them to join you, marketing or selling to customers are very important skills. But they are fairly diverse and I don't think there is a lot of overlap in the skill sets.

Even just something like "market to customers" can require very different skills depending on your budget, target customer, market segment and could involve such diverse skills branding, networking, inside sales, outside sales.

I think you're right they're very important but I think devs tend to way overestimate the overlap and underestimate how deep and diverse the knowledge bases are.

Congrats, it sounds like you have everything figured out. I wish you the best.

I don't know if it's helpful or not for you to hear this, but as another serial startup person, I strongly second what he's saying. And marketing is a learnable skill, not a personality trait. It can even be engineered! It's also how you acquire social capital, and a "brand".

Another way to think about it is: by writing comments like the one you wrote above, about the unfairness of it all, you're already marketing. You're just doing it badly.

I don't want to sound like I'm picking on you, because this is an incredibly prevalent handicap among smart tech people.

I appreciate you taking the time to try and be helpful. Perhaps I'm just not cut out for being a startup entrepreneur when there are easier ways for me to make a living.

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