Hacker News Reader

Comment by joecasson | Hacker News Reader

It's not about the money. It's about the runway.

The statement is to the market and to potential hires that they have runway. Showing how much money you've raised gives prospects (customer or employee) confidence that you will be around for a reasonable amount of time if they make bet on your business. Plus, it's social selling. Investors do due diligence. I can trust that this business has good fundamentals if VC X invested in them (in theory). I don't want to invest my budget, infrastructure or - heaven forbid - my time on this planet, on a place that's going to disappear.

Lots of startups solve meaningful and interesting things, but that doesn't matter if they can't show they have enough money in the bank to keep operations running.

View on HN

One possible takeaway: it's reasonable to issue a press release and talk about it with prospective and current business partners, customers, and employees, but it's probably not the most compelling thing to submit to HN. A useful message, just not the most interesting one for this audience.

As a point of contrast, imagine a blog post that mentions funding but provides more of the story. What was the funding process like? What's a difficult industry problem that's only possible with lots of funding? How do you think the industry will evolve? If you were explaining the fundraising or startup experience at a bar, what story is interesting enough that people would care?

Any of these still communicates the funding, only with a lot more "meat" for HN readers.

I'm reminded of the story of the chicken and the pig. When making a breakfast comprised of bacon and eggs the pig is committed and whereas the chicken is merely involved. In this story the employee of the startup is the pig - if the startup were to go under the employees are the ones being harmed. The VCs are merely involved. The VCs are playing the odds - you put enough money behind the startups most likely to remain viable and one of them might be your unicorn. All you need is one in a thousand to be that unicorn for you to land your financial windfall.

That's why the OP is correct - the amount of VC investment tells you little to nothing about the startup. It doesn't even tell you anything about their runway as you believe, you have no idea how fast their burning through their cash. That runway might not be quite as long a you thought.

Exactly this.

Communicate:

-validation from VCs who should know whether this company has a viable product

-runway to be able survive and build/improve

To:

- prospective employees

- prospective customers

As someone who recently did this kind of funding announcement, it can really help the business to chest beat. It doesn’t have to mean the priorities of the company are wrong.

In last year's VC market (and some of this year), don't interpret funding as VC validation.

VC's have been throwing money almost indiscriminately, compared to years past.

The best companies to work for during an economic downturn are ones that don't worry about VC or runway... because they're profitable (with real paying customers).

Also from the viewpoint of management, management can put a tremendous amount of effort into getting funding and it really is on front of their mind.

There's a common case where people hear "company X raised $250 million" and people think "I could do that with $2.5 million, what are they going to do, spend the rest on hookers and cocaine?"

If you've got discipline it isn't bad to have more money than you need because you can keep it in the bank account and either give it back or have it left over when the company gets acquired.

I worked at one place where the investors didn't trust management to be disciplined so they controlled the pursestrings tightly and gave out funding in measured drops -- if anything that caused the discipline problems to be worse since it kept them from focusing on long-term problems.

Reply on news.ycombinator.com