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Comment by moralestapia | Hacker News Reader

Most VCs add zero value aside from the money. Bootstrapping is always better, if you can do it, of course.

Exhibit A: Naval Ravikant, the flagship SV investor, widely regarded to as "a wise man", just released a kind of crappy messaging app that flopped. Imagine having unlimited leverage, unlimited money, unlimited reputation, a huge audience already in place and still that not being enough to put out a competent product. Now imagine this guy asking for 20-30% of your company equity in exchange for "advice", lol.

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No one gives away 20% of a company for advice. He gives them capital. Hopefully connections. And founders can take or leave the advice.

Anyway, he is a successful entrepreneur having built AngelList. Sure, maybe he isn’t Midas, but a single failure in a startup doesn’t make someone an idiot. But assuming you are referring to AirChat, it seems too early to call it a failure anyway.

>No one gives away 20% of a company for advice.

You'd be surprised at how common that is.

Wouldn't you be inclined to believe that @naval wouldn't want to use that capital, connections and whatnot to support the single project of its own authorship in its lifetime? The results speak for themselves.

I have another theory, VCs freeride on the success and luck of other people's projects, which (sometimes) are so good and so profitable that they can even afford to have someone leeching off them. Just look at how many stories are there where the founders end up with zilch and regret ever taking VC money.

Any of the random guys on Twitter that are building and shipping stuff and making 4-5 figures on their side projects is worth more than a 1,000 Denpoks sharing their "wisdom" with you.

This is kind of a confusing perspective considering VCs are giving you money to pay for the operations of your business. Money is money no matter how stupid the giver is, their money won’t leech value from your company itself.

As for founders ending up with nothing, in those cases their investors ended up with much much less than they were hoping to too. Plus there’s plenty of other cases where founders get rich off a worthless company because of the beneficence of VCs.

>>Money is money no matter how stupid the giver is, their money won’t leech value from your company itself.

Yeah, this isn't true for a number of reasons.

1) The money you accept is given in trade for a percentage of the company and that means influence in the company. That influence almost always comes in the form of board seats which literally drive the direction of the company. I've seen many successful companies do some really stupid things because the investors wanted it that way and it actively hurt the business.

2) Certain investors come with a set of prestige. You're the n a forum which is known for just that.

Who you take money from certainly matters.

> That influence almost always comes in the form of board seats

Most pre-seed and seed investors don't take board seats.

And at Series A and above they are putting in enough money where it seems fair enough.

You don’t seem to understand basic economics. When you get on a bus and pay for your ticket, is the rest of the ride a free ride?

VCs are running a business too. Most VCs fail to return the capital to their LPs. That’s right, then spend 10 years of their life working with startups and have nothing at the end. They take RISK and they try to DERISK their investment by helping the portfolio company.

There’s also a LOT of stories where a VC invests a LOT of money only for the company to get recapped. The founders are given (some say rewarded) with new equity with the VC is wiped out. In many cases a founder will exit handsomely and the early VCs who came in end up with nothing. That’s the risk.

VC is simple but it’s not easy.

> then spend 10 years of their life working with startups and have nothing at the end

How do they avoid starving to death after the first few days?

I imagine they spend money to consume food... after which, both food and money are gone.

What money? I thought there was no reason to be a VC?

Or do they get paid? Is it a lot?

Yes. There is a lot of money to be made in VC. Look at "exit strategy" for more info.

> Airchat is an app that lets you chat with anyone, anytime, anywhere. You can share photos, videos, and personal info with other users, but data is not encrypted and may be shared with third parties.

If this isn't gonna fail dramatically, I'm eating my hat

Isn't that just WhatsApp or Facebook Messenger or Telegram or Snapchat or Discord but worse?

> a single failure in a startup doesn’t make someone an idiot

Depends on the failure

> No one gives away 20% of a company for advice. He gives them capital. Hopefully connections. And founders can take or leave the advice.

You could have just said: dumb founders want dumb money.

But... not all founders are dumb.

Caution. You might end up like the Dropbox guy... [0]

[0]: https://news.ycombinator.com/item?id=9224

If the advice was a slam dunk they would just start the company. There are too many factors for it to be useful, and they know that. Theres too much nuance

> just released a kind of crappy messaging app that flopped.

I don't think releasing a messaging app that flops is bad? If getting a messaging app to succeed was easy then there would be more successes at it.

Hell, google has released about 30 and 33 have failed

I just re-read your post and caught it - thank you, made my evening!

> I don't think releasing a messaging app that flops is bad?

For an exec, it's a "learning experience." Most startups fail. Take the VC cash, fail, and "learn" on their dime.

For any employee, it's s short stint to list on a resume that will make them less attractive to recruiters for the rest of their careers. "Why were you only at FooBarCorp for Baz months?" (Oh, wonderful - how do I explain without throwing anyone under the bus?)

> For any employee, it's s short stint to list on a resume that will make them less attractive to recruiters for the rest of their careers.

If you can't make the story about working on Navel's messaging app a win for your career then your resume is probably going to have other problems.

The entire point of a vc is to fund many and hope a success works out. Read on what Paul Graham said about ycomb, have shit tons of people dig holes to find treasure.

Ya I do not know why people hold Naval up so high. What has he ever done?

He cofounded AngelList for one...

Startups are incredibly hard.

If Airchat "flopped" it still got way more usage than most bootstrapped startups ever see.

Can you explain why? Are you suggesting he used the money on marketing instead of product?

I don’t know too many bootstrapped companies that are billion dollar plus but most well run bootstrapped companies can end up becoming successful small and mid level companies that make a decent money. At least from a revenue:num_employees, can’t be capital intensive so they have to be profitable from early on. Pls explain I’m interested to learn thanx

> Are you suggesting he used the money on marketing instead of product?

No, a lot of the marketing/hype just came from Naval and other influencers on Twitter.

> most well run bootstrapped companies can end up becoming successful small and mid level companies that make a decent money

"well run" is doing a lot of work here, but:

- Most bootstrapped companies fail, period.

- Most of them fail without anyone ever noticing they existed. It's very hard to break through the noise, and I know lots of companies/projects that failed without ever getting more than a handful of users.

I see. Thanks!

And how does VC help? Is it just the capital infusion or something else

He co-founded angellist which seems to be at least a moderate success

I've seen this 'Naval' on Twitter, or now X, but there's hundreds of accounts with that shtick, catering to various groups, so it seems doubtful.

Are you sure he was 'the flagship SV investor, widely regarded...' among serious SV folks?

Or just among the peanut gallery?

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