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Comment by stonogo | Hacker News Reader

That's not a third way, that's just venture backed.

No, being venture backed implies you're cashflow negative and you're relient on funding to live.

If you're a founder of a venture backed company, one of your main jobs is to build a pipeline of investors and constantly be planning for the next round of funding (that takes a significant amount of energy away from building the company).

With this strategy, you raise one round, then you go back to being similar to a bootstrapped founder where your only focus is to make the business sustainable and you're not spending mind-share trying to raise more money.

So it is a different way of building.

No, being venture backed means a venture capitalist invested in your company. All that other stuff is just like, your opinion, man. It's extremely popular in Silicon Valley but that doesn't mean it's a fact, or even that it's particularly common in the rest of the world. In fact, I'd wager most venture-backed companies only raise one round, and this endless-money fever dream is the rarity.

Okay so your entire comment thread is really arguing about the semantics of what the phrase “venture-backed” means. I really don’t see what’s the gain by pursuing this line of discussion other than to be argumentative. Everyone clearly knows what everyone else means.

No, my entire comment thread is about this article pretending to have invented a third option, when in fact it's still just the two. It's a bullshit clickbait headline, where a more honest one would have been "Endless fundraising isn't necessary" or something. Everyone clearly doesn't know what everyone else means, or else the headline wouldn't be misleading and someone else wouldn't have tried to convince me that 'venture-backed' means your business should be a ponzi scheme.

I'd wager most venture-backed companies only raise one round, and this endless-money fever dream is the rarity

do you have some statistics to that? i'd expect that most startups that raise only once do so because they failed before they could raise again.

how many startups raise once and then become a successful profitable business without ever raising again? that's what "this third" way is about.

In a very narrow strict sense, yes. But I would argue it's not really venture-backed. For me, venture-backed means that over time, the founders collectively own a minority of the shares, and the board structure is such that venture capitalists collectively hold a majority of the board seats. This means that technically the investors could do anything they wanted to with the company.

This is qualitatively different from the founders collectively having a majority of the shares (even factoring in granting tons of equity to thousands of employees), or, if not, they at least control a majority of the board seats for a long time, if not forever.

I think your distinction would imply that Facebook/Meta was not venture backed, which it is, since Mark Zuckerberg has always held a majority stake?

Mark maneuvered for the best of both worlds with the dual class voting shares. He owns the majority of the vote but only ~13% of the share capital. From the rumblings I've heard, I don't think VC allow this type of Google/Meta share class anymore, and/or SP500 don't include new entrants, but not super knowledgeable here.

I work with quite a few company with dual class voting common shares. I will never understand the notion of not implementing that at incorporation if you want it. Will you have the leverage to get a VC to agree to let you keep it? Maybe, maybe not. But the worst that happens is you get rid of it, which is virtually costless.

Honestly, implementing a 10M share one class common company just to make a VC happy sends horrible signals for negotiating with investors. It shows that you are happy to pre-negotiate against yourself from the get go just to look VC friendly. If you cared about retaining control, why would you do that?

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