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Comment by raesene9 | Hacker News Reader

The article has a lot of interesting points, but seems to miss out on one of the main reasons (IMO) that startups take funding, which is to grow faster than (or as fast as) their competition.

Unless you're lucky enough to be in a market segment without competition, you need to keep an eye on what your competitors are up to. If they can expand faster, add features faster and get more customers than you, it damages your chance of success in that market segment.

Taking VC money could provide that velosity.

That said ofc I do agree that, if your goal is to run a profitable business for a long time, taking VC cash is quite possibly a bad idea, depends on what the founders goals are.

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OR (as you say, but many miss) you do not care about being the market leader. I just want to have a nice company with nice people, no stress and making millions for all to live. I don’t need vc money, stress, be the market leader or ‘be faster than the competition’. A LOT of services or products you can make a long term (decades) money with like this. I don’t need more than 10m euros in my life, nor do my colleagues and our clients are happy. No idea why I want all this misery of competing, stress, exposure, running all the time etc etc.

My take is the VC world will split into three

- Million startups - put loads of cash into thousands of startups globally and play a huge vegas lottery - there is a lot of work there for the BC companies but played well it will have influence at the levels seen by newspapers or major consultancies used to

- the current much maligned approach that is going to creep further up the series A B C tree supplying capital to companies that have developed the model to just churn

- your one. The one I and half of HN is looking for :-) Honestly this confuses me - there is a large chunk of people on this very site that you could have convinced to leave what they are doing and set up a company with the risk of doing so mitigated by "nice VC" cash.

And since everyone in the industry claims they invest in people not ideas then they are turning away people because they won't raise their price to meet a new point on the risk threshold curve.

So yeah something like VCs that fund profitable non IPO businesses seems a good idea. I mean if you stop asking people to make moon shots maybe more of them will just make 20% per year ROI

The biggest obstacle I see to using VC money is that it has a good opportunity to distort incentives.

If a company has a vision fulfilling every request outside of the vision could be considered a distraction. The VC has legitimate concerns outside of the scope of the company vision.

Apple is one of the few modern companies that I can think of where the VC money was useful.

If anyone can remember google before going public and after going public might mourn the old google.

Imagine if google wasn't romanced by Wall Street but followed their own path like craigslist.org. I believe that google would have been much more collaborative. I can't see where going public helped google be good at internet search.

Yeah I remember discussing this with friends back in 2004 and concluding that Don't be Evil was dead. Took a little longer than I expected but they got there in the end.

As someone who's worked for tons of startups, it's not that binary. For loads of industries, there is simply no viable path without significant outside funding (whether from a VC or very rich founder), and even if you look at some of the most famous outliers (like Atlassian), I don't believe the path they took is even viable these days anymore.

For example, if you're selling any sort of business SaaS product these days, the regulatory regime has changed greatly from 20+ years ago. The cost of just something like SOC 2 or ISO 27001 certification, which most enterprises will require to even talk to you, often prohibitively prohibits bootstrap-like funding models. Couple that with the fact that software engineering salaries are comparatively way higher than they were 20 years ago.

The short of it is that a lot of people take VC funding not because they want the "misery of competing, stress, exposure, running all the time etc etc", but because, in many industries, there is simply no other option if you're not already rich.

(1) SOC2 is somewhere between $10,000 and $20,000 if you do it cheap.

(2) That's a dollar amount that most bootstrappers can swing.

(3) Critically, you don't do SOC2 until you have a critical mass of purchases requiring it.

(4) Many (most?) of your customers, especially your early customers, won't require it, and/or will have alternate paths for companies without a SOC2 attestation.

(5) When you finally do hit the big deal that absolutely demands an attestation, you can often cut a contingent PO: you sign the deal, deliver the stuff, but you don't get paid (or you don't get the last tranche) until you get the SOC2 attestation.

(6) You can get a SOC2 attestation real, real quick.

There may be other things keeping people from bootstrapping SAAS businesses, but this isn't one of them.

SOC2 is also waaaay less expensive on the development side if you do just a little upfront development in dev tooling: logging, backups, encryption in transit and at rest, tagging data with sensitivity levels, IAM policies, and CI. I've seen a few founders who invested a few weekends pre-funding into this sort of tooling get to SOC2 and have almost no development costs (still have to document those processes though).

You don't even need to bother with the encryption and sensitivity levels (your data classification policy can be just that, a policy). The ace move is to roll a set of SOC2 policies that just captures what modern dev teams do anyways; that was the idea behind https://latacora.micro.blog/2020/03/12/the-soc-starting.html.

The right way to think about SOC2 is that it's a ~$15k outlay that will come up when a major customer proposes a P.O. that justifies it, and little else.

SOC2’s cost is primarily just the branding and audit.

Most of the controls are easy ti meet if you follow any sort of best practices.

As a new self-funded founder, thank you for this.

> No idea why I want all this misery of competing, stress, exposure, running all the time etc etc.

Have you ever run a business before? The belief that you can build a business without dealing with competition is a myth. Having a successful company requires picking your poison.

Non-VC is a different poison than VC, and I do agree that it is a much better approach for far more many businesses. But make no mistake, having a company with "no stress and making millions for all to live" is not a realistic goal. There is no free lunch in the world of business. Competition is everywhere. You can either ignore it or embrace it.

> Have you ever run a business before?

Only 30 years. You? Not mean to be as snarky, but this US all or nothing stuff is getting on my nerves just a bit. I came from a simple background, but in a country with free education, so I got a degree in uni, opened a company in high school, all without too much risk. Didn’t need to work myself to death, didn’t have much stress, didn’t need VCs and make more than most here who seem to be dying of stress, lack of proper healthcare, free education etc etc. My clients like I have no funding and that I have enough money yet want to keep working as I like it.

I've been building startups successfully for a decade, but they are US based. So you got me there.

There are many self proclaimed dropshipping millionaires on the the internet selling courses while living the good life in Bali, overleveraged to the gills, living off of credit card debt, desperately hoping the courses they sell as a grift somehow can be ponzied to the next fool before the whole thing collapses. So that's always my assumption when people discuss something in business that seems too good to be true. But maybe you are correct. Perhaps my US all or nothing priors have closed my mind.

What kind of business do you run that can be done without too much risk, how does it make money, and what country do you operate out of? I am genuinely curious and I would like to be prove my priors wrong, if possible. They're not particularly pleasant priors, as you might imagine.

I agree with you completely. Due to the whole business media world spreading these lies, people think business is all us vs them and competition is for losers.

You can make very good income ($4 million profits / annum) in my case while coexisting with competition and having lots of fun.

Very similar experience here. Anonzzzies is not a unicorn outlier :-)

Then you slowly bleed nice people as they switch to company that went for money and now is able to pay better.

If you expect company to reject money in order to stay nice, you should be ready to do the same personally. Otherwise it will not work.

> nor do my colleagues and our clients are happy

Your colleagues can get better jobs elsewhere, so you are constantly competing for talent.

Your customers can get a better deal, or product or service from one of your competitors, so you’re in constant competition with them too.

But I am in the EU and we all do better money than what I hear here what most American devs make. But sure; my colleagues just will never leave here so it would have to be better paid, many vacations, no stress, wfh and more money.

https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

From 2000(!), still a must read today.

My takeaway is: you either raise (and spend) more than all the competitors in your field, or you spend very little. In terms of funding, be the 1st or the 100th. Don't be the 3rd.

I agree with what you said.

> which is to grow faster than (or as fast as) their competition

But I also work for a privately held company and there has been a whole series of companies pop up outgrow us … then fold … It’s like a parade of VC failures. They weren't bad people or bad ideas, they just had so little time and sometimes were so focused on their one cool trick, that was it.

Velocity also means velocity to failure, and arguably less time to learn from mistakes or just make money. I've seen a few who didn't even have time to learn.

That might work for some ventures, much less for others. Just gotta know what you're signing up for.

> Taking VC money could provide that velosity.

Could you provide a few real examples where VCs money helped companies making better product and moving faster than self-bootstrapped competitors?

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