The most successful global tech bets are efficient and practical startups | Hacker News Reader

The most successful global tech bets are efficient and practical startups

restofworld.org

100 pointssorenKaram43 comments

Companies that aren't capital intensive (most software companies) don't need VC funding. I'm the cofounder of Eureka Surveys (eurekasurveys.com). We're based out of Utah, bootstrapped, and have been profitable since our inception. Retaining 100% control of the company has been invaluable to our success - not needing to become a unicorn in X years is a competitive advantage.

Nice! Keep that capital with the workers/founders instead of increasing the wealth of greedy VCs.

Let’s not forget that greedy VCs can’t invest in your business without YOUR approval.

Which was the action I am applauding them on - the choice not to use VC.

Sure, but if they’re systematically subsidizing the growth path of your competitors, giving them a massive advantage, withholding that approval becomes a tougher call.

And to our employees!

Isn't the survey space enormously fragmented though? Is there something that prevents a company from spending a billion dollars and wiping out everyone in the space? Are there just too many niches?

Yes, fragmented, but not a big enough market to make it worth it for a large entrant to spend blindly.

that's (imo) the downside to bootstrapping -- you're likely putting a ceiling on the company. There are only a handful of bootstrapped multibillion dollar companies (github, atlassian, patagonia) and even single billion (mailchimp).

Still, that ceiling can be quite high; I know a couple folks doing north of $100m annually that bootstrapped.

Personally, I'm happy building a smaller company.

We're an LLC, so we're allowed to take draws at the end of each year vs. having to wait for a liquidity event (IPO or acquisition).

I did a vc company; my next one is 100% going to be smaller and bootstrapped if at any way possible. I definitely think it's the way to go for founders and tends to lead to better outcomes.

That said, I don't think most saas -- particularly midmarket or enterprise targeting -- can be bootstrapped. You just require too much engineering (ie eng salaries) in the first couple years to self-fund.

Both my cofounder and I are technical and code - helps save a lot on costs!

This is such an old and tiresome argument.

First, just because you made it work, doesn’t mean that applies to everyone. Congrats on your success, but let’s not generalize with one data point.

Second, what about marketing costs? What about a first-mover advantage and staffing up to win that advantage? What if you want to tap into a network (YC, tech stars, etc.)? What if you really value the good feeling of being validated by having a round of financing? What if bu raising capital you get attention that kickstarts your business that otherwise wouldn’t have come?

Not making the argument that VC is bad across the board - companies that require a large amount of startup capital (fintech, space, deep tech) wouldn't exist without VC funding.

We've actually grown entirely through word of mouth. 0 ad spend after 2 years. We also happen to be a late entrant to the market. Companies like Swagbucks have been around since 2008.

I don’t catch how a founder sharing success is an old and tiresome argument. Rather, it’s a common path that many founders have had incredible success with. There’s no particular reason to raise money just as there’s no particular reason to bootstrap. Good founders found successful companies using the most appropriate tools.

In this case, you just accused someone successful of an old and tiresome argument. That’s unhelpful at best.

Tiresome? It's hardly ever discussed on this site.

Wow - nice work. I'm honestly surprised firms will pay $1 for just a single response and also not gravitate towards a fixed cost survey solution instead.

$1 is actually significantly cheaper than industry average. Most providers charge upwards of $5. We're able to cut costs by connecting you directly to end respondents and cutting out middlemen - our proprietary panel is over 1M respondents large now.

Totally agree, I tried and failed. Kudos for making it! And keep it up!

Thanks!

> Companies that aren't capital intensive (most software companies) don't need VC funding.

The converse problem is that there are lots of capital intensive companies, and none of them can get VC funding because the VCs are all chasing 18 month unicorns.

The article is an ad for the author's VC firm.

Just like most articles on HN are ads for someone’s project.

The submarine

but most other ads have some bait.

This one starts with a story and then offers nothing.

"we tried to sell ice to a eskimo. They told us they don't need ice. So here's why it is very obvious why eskimos won't buy ice. kthxbye"

Not very useful article.

It's short (10 paragraphs) and doesn't provide much analysis beyond about 4 statistics and 2-3 anecdotes.

I wish it had more data and visualizations of data.

I had a similar thought, although I do think the article is somewhat useful - I haven't come across many other people supporting the view that efficient and practical startups are a better investment and create higher quality and more useful tech than unicorns.

I do strongly wish the article had more data. Note that the article is labeled as an 'Idea' on the website. See https://restofworld.org/series/ideas/ . I don't think that label should prevent data from being included, though.

Given that the goal of venture capital is to make blockbuster amounts of money, it seems problematic to have this discussion without numbers on what the return on investment is for these companies.

That, or the goal of "make blockbuster amounts of money" is a different goal than "make a successful tech company". There is certainly overlap in that Venn diagram, but they are not the same thing.

There are different scales though. It is very hard to turn a $50M investment into a $500M exit. That requires chasing unicorns. But you can find many more opportunities to turn a $1M investment into a $10M return. Same 10x factor, very different investment scale, and also very different portfolios.

Should the second set of numbers be different, or is can $1M -> $5M be a 10x return in some way that I'm not aware of?

That was an error, thanks for pointing it out.

The challenge is growth. Employees of so called "practical" startups, will compare compensation/wlb options of working at the startup vs fast growing unicorn. Without growth, it is hard to keep great talent (at least that has been my experience).

Also, big tech/unicorn can just spin up a new product line to compete in the same market as the startup. In some situations, they might sell for loss to gain market share (e.g. microsoft teams vs slack).

Hmm, not sure what the narrative is here. You scout for startups that have managed to succeed on their own and then convince them to accept investments? OK, but… you aren’t really part of their success then, right? What did your investment enable the startups to do that they couldn’t otherwise?

Growth and scale!

Probably good to have both: SV and a few other mega hype environments and rest of the world for everything else.

I think those SV unicorns are flashy because they're practical, and efficiency comes with money, generally.

Did Theranos (and Elizabeth Holmes) looked like efficient and practical startup?

You bet!!!

I don't see how a startup like Theranos, real or not, could succeed without venture capital. You can't iterate your way to a medical device and casually fail along the way with paying customers.

Ironically, didn't Theranos casually fail along the way with paying customers?

I would imagine that VC would be required to build the machines, but I'm not sure how many rounds. It seems like if their tech worked, it should have required far less than what they raised to hit sustainable revenues. Maybe 10%?

Not to a lot of experts, though. I remember sitting in a conference room at the time discussing options of entering this market and people were basically "we don't know how they can possibly do this, it's either some unknown technology magic or a scam". So it shouldn't really have looked efficient or practical to anyone, more like a PowerBall lottery.

I thought that Theranos fell on the other side (flashy unicorns) from efficient and practical in the author's thesis.

> The most successful global tech bets are efficient and practical startups

No? I mean, it depends on your notion of success, maybe?

The article does nothing to prove the headline and talks only about an obscure Romanian company.

In Spain where I live - traditionally a venture capital backwater - "successful" startups in the last couple of years have been backed by eye-watering amounts of capital compared to the old standards.

Zero-interest rates and the resulting phenomenon of "money not knowing where it can drop dead" is catching up outside the US as opportunities become saturated there and investors are lured to emerging venture markets.

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