The Sudden, Mysterious Exit Of A Quora Cofounder Has Silicon Valley Baffled
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Whatever happened it feels like Adam wants to make the point that Charlie was essentially fired. "We" is a lovely ambiguous term. They royal "We"? I suppose it's meant to imply that Charlie also agreed. But "Best for Charlie to step away" is pretty telling. There's a whole slew of options you could use to make it sound like it was Charlie's idea (although he's probably too young to 'focus on his family'
I always thought Quora should monetize around an RFP type concept. It feels to me like 80% of users are there for technology recommendations from the horses' mouth.
1) You can get firsthand info from the horse's mouth, like read about what it's like to be a 25 year old self made millionaire, or what it's like to work with ashton kushter, or what it's like to get an investment on shark tank. You can ask what it's like to get a life sentence in prison and a real prisoner will respond. You can ask Larry Summers his opinion on something and he'll respond.
2) Quora organizes the information on the internet. Some of the stuff you could find by googling, but who just googles random questions? The flow of the site is pretty nice because you go from one interesting answer to suggested related questions.
(I am just a Quora user although I know a bunch of people who work there.)
I guess I need to throw away my phone, my email, my instant messenger, my IRC client, my fax machine, my postage stamps and hell, the telex machine at the local police station.
Using some form of communication.
Of which Quora is but one.
I just started using Hacker News recently and have never really interacted with internet communities at all prior to this year so I'm open to the possibility that I'm not communicating clearly, or that you're being facetious.
The idea that Quora has some magical monopoly on asking famous people questions is so patently and self-evidently ridiculous that I didn't know where to begin.
Except with my old standby, that trusty workhorse: sarcasm.
I don't know why you don't like Quora (or maybe you do and thought I was saying it's a monopoly for famous people? In which case I'd clarify that's not what I believe, nor what I believe I wrote). Do you dislike Quora because you think other people wrongly think it's a monopoly? I don't think anyone thinks that. If you browse the site I think its value will make more sense to you because it has a lot of interesting content, as evidenced by random news sites scraping content from Quora.
I don't have a stake in Quora but I was trying to understand your perspective. It's cool if information/debate is not your goal in this thread. Maybe you want to be erroneously critical because you find it funny or enjoyable- that's fine and doesn't affect me. My perspective is that Quora is fun, well done, and a valuable source of fascinating information despite not being a monopoly.
Quora organizes the information on the internet pretty well too. Even if you can get the same information via googling, you often wouldn't google the information. I've found myself learning a lot about topics I'm interested in that I don't tend to set up Google alerts for. For example, you can find a lot of interesting information about India when you read answers to "What are the most surprising facts Westerners could learn about India?" that would not typically show up if I just googled "India," which I would probably not randomly do anyway.
I'd personally be very hesitant to partner with Adam after reading this, considering how this incident played out. Well... who am I kidding, if I had the opportunity to found the next Quora I'd jump on it, but I'd be watching for knives the whole time..
The drama of these tech companies bores me except insofar as it relates to my personal account. Don't founders leave companies all the time, especially when theyve already made a lot of money? Also I feel like at some point all these decisions are mutual.
I dunno, there's clearly a risk there based on his apparent behaviour here, but there's also an obvious opportunity - who'd _not_ want a cofounder who's not only prepared but also able to dump $400mil into his own B round?
I've met both Adam and Charlie (and Marc and much of the rest of the Quora team), and I can't see Adam/Charlie having a falling out over any personal or professional issues as a likely cause.
The weirdest thing IMO is that Charlie has totally disappeared from online (FB, Quora, etc.). Either it's to avoid being asked questions, or some kind of personal issue. Either way, I wish him the best.
I've said many times on HN that Yahoo needs to start getting REALLY aggressive in the valley to stay alive; they need to be investing in every startup that comes along and acquiring many more.
All the brain trust is being gobbled up by google and (even moreso, recently) facebook.
I personally think that Acquihires are a bad thing (TM) for the state of our industry... but if Yahoo has any hope in hell, they need to inject some innovative blood into themselves in a damn hurry.
(with that said, I am not sure that Quora is really all that innovative - their UX model was only good when they were tiny - but now they have far too large a signal to noise ratio that is exacerbated by their UX implementation (hijacking typed text, @s etc etc etc)
Totally agree that they really need to shake things up, and whilst they sit on their laurels, the valley keeps moving and every day we see salesforce, google and facebook churning through the acquisitions that either bring in good tech or good people removing them from the pool completely.
I'd make an acquisition contingent upon allowing the product to live on (either with the acquirer or an independent entity or a non profit); this doesn't impair our enterprise value much, since the product doesn't compete with any potential acquirer. I'm looking at putting this into contracts with customers. (a product could still eventually get sunset, but I think a year or two is a reasonable period post-EOL announcement, not a month...)
Given that there are better (or at least more popular) options for many types of questions (StackExchange seems to have figured it out for tech questions, and they aren't saddled with an insane valuation and so have a lot of freedom to exist without even having to grow...though they are growing), I just don't see how Yahoo buying Quora could possibly serve to improve Yahoo; Yahoo's already pretty good at being second or third best in the market.
I feel like Yahoo would be much better served by building a world-class internal VC arm than by aggressively chasing acquihires. Most acquihires aren't going to stick around after their terms vest, and even while they're around, their hearts and minds won't be dedicated to Yahoo. They're a stopgap solution at best. They can be used to good effect (i.e., to bring innovative projects into the company and to attract young talent to those projects). But they aren't the solution at the scale Yahoo needs.
What Yahoo needs is to win the war (or at least be competitive in the war) for the top talent graduating from university every year. Offering a really innovative, supportive, deep-pocketed, world-class incubator is one way to do this. Possibly a better long term solution than paying superstars for the privilege of their company for a few years at a time.
Cisco, which has one of the best acquisition strategies of all times, isn't a VC -- you go outside to get VC, even if your staff and product is all stuff people from within Cisco mostly thought up (which some investors have complained about)... if it goes well, Cisco is a natural acquirer.
The problem with taking a strategic in your first round is that there's an implied option preventing any other strategics from investing later or buying you out or in some cases even using your product (especially if adopting your product has a large investment/risk).
Yahoo better start doing SOMETHING to be relevant.
The people saying they do good playing 2nd/3rd place, I think, are naive. 2nd or 3rd place simply means your biding your time until [upstart] comes and eats your lunch.
In the case of acquihires - the fact is that google and facebook are in a talent war. They gobble up the talent, and guess what? that [upstart] eating yahoos lunch will not be [upstart] but google and facebook themselves.
Another user mentioned that they think that Yahoo should create a great VC arm. I FULLY agree with this, as evidenced by the many times on HN I have said exactly that.
So, its a multi front battle yahoo is in: need talent, need innovation strategy {VC/Acquisitions/dropping driftwood/etc}, need acquisitions that facebook/google are strategically vying for and need to create a relevant service.
Quora, while I have my issues with them, IS relevant. In many ways, but the most important way is they DO have a sizeable % of SV braintrust participating.
Yahoo should bring that braintrust's awareness around their brand!
Why not buy Quora, and "extend and embrace" that userbase and seek advice from some of the people on Quora?
There could be a huge PR win here.
"New mom and CEO Marissa Meyer buys Quora, the silicon valley strong Q&A site, meets with users and holds a town hall on what Yahoo users can truly benefit from, accompanied by an all star panel, many of whom are top users on Yahoo's new site Quora... blah blah blah synergy etc"
I think too many people are scared and lazy at Yahoo, lets hope the new mom and CEO has bigger balls than any of her predecessors.
Sort like what Craiglist had in the 90's. You lose them, and Quora is dead. Not sure Yahoo can own Quora w/o killing it just because of who they are.
when was the last time you ever saw anything from yahoo
answers that was not a joke (accidental or otherwise)?
Yahoo Answers isn't just top for "1.3 meters in inches" - they're also top for "1.2 meters in inches", "1.4 meters in inches", one-from-top in "1.5 meters in inches" and "1.6 meters in inches" and top for "1.7 meters in inches" - not to mention "1 meter in centimeters". Evidently, Yahoo Answers is a market leader in this sort of query.
All the brain trust is being gobbled up by google and (even moreso, recently) facebook.
I personally think that Acquihires are a bad thing (TM) for the state of our industry... but if Yahoo has any hope in hell, they need to inject some innovative blood into themselves in a damn hurry.
What's the logic behind aggressive investing/acquiring, other than talent?
http://news.ycombinator.com/item?id=4325445
http://news.ycombinator.com/item?id=4272331
Most specifically this comment I made:
Here's the original: http://www.businessinsider.com/the-sudden-mysterious-exit-of...
Is Quora a great service? Absolutely. Is Quora something I would be incredibly sad to see die? Without a doubt. Is Quora ever going to make enough money to cover costs? Probably not.
This leaves a sale as the only possible exit. Adam is taking the unsexy role of being the business guy that drives Quora towards this conclusion. Great product and engineering minds will quit (especially with the departure of Charlie). People will cry out about how "the Quora I loved is dead" and new features will prompt blog posts like this one: http://www.bothsidesofthetable.com/2012/09/10/the-misstep-of... . But Adam has no choice, either he does this or the company dies and everything that is good about it is lost.
That being said, they will sell, probably by year end or early next year.
That's just my impression though. As a former quora user.
It's user contributed content. Stop treating it with such disrespect.
And to add insult to injury quora-accounts are free anyway. Why do they strong-arm users into creating what will ultimately be 99,9% throwaway accounts?
I did, however, recently delete my Quora account after I didn't like what they were doing with privacy (Lack thereof)
I haven't been back, and while I thought there was some good conversations - the UX at Quora is atrocious. I had a hard time sort wheat from chaff in their feed, the visual differentiation between textual elements in the feed emphasized the wrong stuff. Their mobile view, desktop view and native mobile client view all had separate experiences ad visually didn't match.
There are a lot more things I can say about the UX/UI - but in the end, I am happy I deleted my account.
Edit: grammar/typos
The first clause (investing money) is a much less profound statement than the second clause (buying sole control).
In order to buy sole control, he set the valuation of the new shares at something that washed out the "A" round guys. That should be a giant red-flashing signal to everyone involved.
Money funds day to day operations, pays salaries, power bills etc.
Stock determines ownership, and in most corporations governance.
Now day to day you spend money and ideally you also get revenue. If the revenue that comes in for any given month/quarter is more than the money going out that month/quarter then you are 'operationally cash flow positive' meaning that other than something like a big lawsuit or a promissory note coming due or some big financial event you can keep working and the lights on. It doesn't necessarily mean you can hire anyone or 'grow' or fund a PR campaign.
Then there is stock which represents ownership in the company, there can be multiple classes of stock which convey different rights, and there can be corporate bylaws which change how decisions are made while private vs public, but for the simple case we'll assume that 1 to 1, one share of stock is worth 1/(total-stock) of the company and exerts an equivalent amount of control. When you make a decision for the company you at the board level you effectively 'vote your stock' when you vote. If 50.1% of the stock votes one way that is the way the decision goes.
So lets consider a couple of scenarios:
Lets say the Company is :
1,000,000 shares
Investor A - 10% stock (100,000 shares)
Investor B - 15% stock (150,000 shares)
Investor C - 15% stock (150,000 shares)
Founder A - 25% stock (250,000 shares)
Founder B - 25% stock (250,000 shares)
(everyone else in the company) - 10% remaining stock.
Now you need more money (revenues aren't covering it) so you try to sell more stock which is going to change the numbers around. Lets say you need $10M for the next 24 months and none of the investors want to invest any more money. You've got a crisis. But if you are also independently wealthy you can say "I'll put in the $10M but I'll take 2 million shares." So the 'totals' after that transaction are 3 million shares in total (up from 1 million) and as a strict percentage we've got:
3,000,000 shares
Investor A - 3.3% stock (100,000 shares)
Investor B - 5% stock (150,000 shares)
Investor C - 5% stock (150,000 shares)
Founder A - 8.3% stock (250,000 shares)
Founder B - 75% stock (2,250,000 shares)
(everyone else in the company) - 3.3% remaining stock.
so i'm not sure why the original example needed to place an odd value on the newly issued shares. as far as i can tell, it just muddies things.
i wrote this on rights issues, which is kind-of related (works through a similar kind of argument, except this time framed so people keep the same fractional shares) - http://acooke.org/cute/EnersisEnd0.html [edit: just fixed url] (i'm no expert, i was just interested in that particular case in the chilean press recently).
in short: you don't need to screw anyone over. it can just be that the person putting most money in ends up with most of the ownership.
the two key points are: (1) people need to agree on the company's value before; (2) the company gets the cash (and so its value goes up). of course, that cash won't sit in the bank - but it's the company's responsibility (and the investor's hope) that it is spent in a way that increases the value of the company.
This is the bit I don't understand. Is the founder/investor essentially holding everyone else to ransom in such a situation, and saying they'll allow the company to go bust if the other participants don't accept a 2/3 cut in their voting power?
If so, how does a company or a co-founder protect against such tactics? I know about anti-takeover strategies like poison pills and so on in the corporate world, but I wonder whether they are really effective in the early stage rounds.
For example, if someone with 20% shares is trying to sweep up to 51%, a poison pill can come into effect when someone gains 40% ownership of the company, which would then give shares to existing board members, etc. This creates new shares and dilutes shares, but it also dilutes the person's shares who is trying to do the hostile takeover.
You could ask, "Why would anyone ever need to insure against this?" but it happens. Publicly traded companies can represent a massive wealth in assets, which can be stripped away, sold, and cashed out as dividends.
If a company's share price is getting abnormally low, there is a risk that someone could see the assets as being worth more than what it would cost to do a hostile takeover.
For example: Chuck Conway did it with KMart back in 2002 when the company declared bankruptcy. They sold off thousands of the Kmart stores for their land.
In this sort of scenario nobody is being held hostage. The situation is that more money is needed to keep the company operating, there are three ways of getting money, revenue from products, a loan, and selling equity (stock).
Generally revenue isn't a real choice, if it was there then the question wouldn't come up. A loan is trickier, a large loan wants some sort of collateral and if you don't have assets that the lender would take as collateral you are looking at an extortionate interest rate if you can get a loan at all. Worse it adds a re-payment schedule that adds to the burn rate. That leaves selling stock.
So how much is the company "worth?" and what percentage of it would an investor want to buy in order to participate? These are fuzzy numbers, you can say "well sales are X and as a multiple of sales its worth Y" or "the addressable market is Q and these guys capturing 10% would be worth P" but really it comes down to if you believe or don't believe the business is a going concern. It is the place startups go to die, because if they can't convince someone to trade dollars for stock, the next step is bankruptcy.
But if someone is willing to invest they will do so "on their terms" which is to say they will give the conditions under which they will invest. They write this out formally in something called a term sheet. It talks about shares outstanding before the transaction, the transaction itself, and the resulting ownership percentages and valuation post transaction.
So nobody steps forward, next step is bankruptcy. Someone does step forward, well now you have a choice.
A lot of funding agreements have a 'participation right' which basically says Investor A who has 10% has a 'right' to participate in any funding to keep their percentage at 10% or sometimes 10% of the round. So in our example Founder B says I'm setting the terms at $5/share and I'm buying 2M shares for $10M with a post money valuation of $6.66 per share. Then Investor A is offered a chance to participate at that price, so they figure out how many shares they would buy at $5/share such that their ownership would remain at 10% after the transaction. Or they decline. It is their choice. And they may decline because they think its not a good deal, or they think the company is toast anyway and they have already written off that investment as a loss.
Their choice is same voting power in a non-existent entity (bankruptcy) or 1/3 the voting power in a continuing entity. The latter is better than nothing as they say.
If so, how does a company or a co-founder protect against such tactics? I know about anti-takeover strategies like poison pills and so on in the corporate world, but I wonder whether they are really effective in the early stage rounds.
The board votes on whether or not to do the funding round or turn the company assets over to the creditors (bankruptcy) You protect against this scenario by making sure the company is always more valuable as a going concern than as piece parts. The board can try to negotiate a 'better deal' which is to say reduce the percentage stake the new investor is getting in order to approve it, but if they are not participating then that is not a compelling argument.
If it's between founders, you work out how you want these situations to play out and then you see a lawyer to form a contract that will bind you.
But I might be wrong.
That's a significant over-simplification of what happens in this type of situation. There are all type of scenarios, and I've certainly been at a startup in which the founders have ended up with <5% of the company after investors came in with a significant round of $$$ required to grow the company - they certainly didn't consider it a "giant red-flashing signal" (they approved the deal, after all) but instead, a huge raise that led the company to a $1Billion+ valuation.
1) represent a majority of all outstanding stock (both common and preferred). 2) represent a majority of all preferred stock.
If the preferred stock votes on all protective provisions in an all-for-one manner, then Adam would control the preferred voting, assuming #2 is true above. All-for-one means that all classes of preferred stock vote together as one group, and each share, regardless of class, gives you one vote. If the governance issues that affect the preferred stock are not setup as "all-for-one" voting, then the other likely situation would be independent class voting, in which case Benchmark and Adam would each get their own veto (Benchmark would control the voting of the Srs A and Adam would control the voting of the Srs B, and so they could each vote the other party down). If Adam really has sole control, then preferred voting would need to happen in an "all-for-one" manner.
My explanation is just an assumption based on that one flip line, but that's how it reads to me.
There is a third situation, which is that Benchmark walked away from the B. Given the value of an asset sale, they would not have much to lose.
> My explanation is just an assumption based on that one flip line
Yes noted, and I should have also noted in my post that it's quite possible the reporter confused "80% of B" with "80% of the company".
This leads me to think: does the needle really have to go up? According to pg's latest awesome essay on growth, the answer seems to be yes. But as the hacker news site has shown, no can also be a valid answer. pg's goal with hacker news is to keep a high quality of discussion, and not to grow the site to more users.
As you bring in more users, you are bound to reduce engagement of existing users; this is justified if the growth is an order of magnitude higher (eg. when Facebook went from ivy leagues to colleges to high school to public). But for a site like Quora, I doubt if growth at the cost of pissing off existing users is justified at all.
Total revenue = revenue per user * no. of users
There's an upper bound on how much each user generates in revenue (either through ads, subscriptions), e.g. imagine paying > $200/yr to use Quora, unlikely that more than 100,000 people are willing to do that. So the fastest way to grow is through having more users. On top of pure revenue/user number, there's the network effects of having more users, as well as becoming a key part of cultural fabric e.g. most celebrities have Twitter accounts now.
It's unlikely that more than ten persons are willing to pay $200 per year to use Quora in its current condition, and it's even less likely that those ten would stick around once everyone else left.
In other words, your example has even more force than you suggested.
AFTER EDIT: By the way, user droithomme nails it with his user's-eye-view description of Quora elsewhere in this thread.
http://news.ycombinator.com/item?id=4603653
AFTER FURTHER EDIT: I just did some specific searches on Google, site-restricted to Quora, which breaks through Quora's wall of obscurity and allows me to see current highly voted answers to questions on topics of known controversy in online discussion. The answers are crap. They don't even cite good sources, but are mostly anecdotes of lower quality than the typical anecdotes found on HN, and in some cases the anecdotal answers directly contradict what careful scientific research has found to be the general correct answer for the same question. But on many issues, Quora is just the opinionated leading the opinionated, and no one makes the effort to LOOK UP better, more reliable sources. I like the user culture here on Hacker News much better. I read whole books, for fun, after learning about those books on factual topics here on HN. I see no reason to put up with Quora's annoying user interface to get into a community with such poor quality control on the answers to the submitted questions.
As they get bigger, the quality of the membership becomes severely diluted. Eventually, the crud fills the pages, the 'good' members leave, and all that remains is the crud.
This is happening on Quora too. Look at up-voted answers on non-tech questions. All it takes is a bunch of nicely formatted paragraphs, lists, bolded text, and a bunch of nice pictures. Tons of posters are commenting on places they have never visited and things they know nothing about.
The problem with Quora is that, more than any other social network in existence, their product is their customers. Quora doesn't have a product without high quality discussion on their site. The problem is that the steps required in maintaining that high level of discussion(active moderation, good community policing, etc.) often directly opposes actively getting more users because of the Greater Internet Fuckwad Theory. While I'm sure that Quora can grow their userbase more, I'm pretty sure that they're seeing a dropoff in total hits. At a certain point, they need to start improving their conversion rate in order to make more money.
Quora is not a money-making product, it wants to be one. In their present incarnations, if they just inserted ads (just for argument sake), it is not clear that Quora would make more money than HN.
You can be a profitable company by just focusing on user engagement, and not on user growth. Quora's problem is that they raised too much money and now have to give their investors a return on their investment.
For those who missed this reference: http://www.penny-arcade.com/comic/2004/03/19
Quora is a business. They are not making any money. Like Twitter, they can only hope to make money if they grow big enough. If the only way to grow requires pissing off existing users (or developers, in Twitter's case), the choice is clear.
I'm struggling to see how growth is going to make them more profitable. While there's a bit of constant overhead, at that kind of scale I'd expect most expenditures to scale linearly or faster with number of users, and I don't see how more users will make income scale faster than linear.
That just doesn't make any sense. Have you ever built any internet infrastructure? Costs grow much less than linearly as you scale.
Imagine a factory that makes widgets. At first there's loads of space, and half the factory is a basketball court for the first employees to relax after a long day of widget manufacturing. but if the widgets are good and demand increases, more and more of the factory is filled with widget-making machines. Finally the factory gets full and efficiency starts to go down because people are literally getting in each others' way as they work and move the widgets around; its costs more an more to squeeze out each additional unit. In technical terms, your Marginal Costs go up and bring Average Total Costs above the minimum where normal profits are maximized.
The solution to this is not to declare that no sane widget manufacturer should try to sell more than 10,000 widgets a year, but to set up an additional or replacement factory. Your Average Total Costs go up even higher because a new factory costs money (like a new DB infrastructure or server farm), but - and this is crucial - that cost of the new business infrastructure is a Fixed Cost, and the more product you ship the lower a proportion of each transaction it represents. The upside is that your Marginal Costs are now lower because you can again enjoy economies of scale. So you expand production as quickly as possible to meet demand, so as to minimize ATC (= FC + MC). Most firms go through this cycle many times as they grow.
http://news.ycombinator.com/item?id=2370291
Edit: do you have an idea of the size of your 3rd-degree network at Facebook? Do you care? :)
Obviously if you're profitable per-user then scaling is a nice problem to have. But I struggle to see how scaling from their current users to say 10x could move twitter or quora from unprofitable to profitable; I think the engineering costs of making these tradeoffs and solving the scaling problems would largely outweigh any economies of scale, and I don't see how more users would increase their per-user revenue.
Quora has taken on too much funding to do "OK". But if it hadn't, it could end up thriving as a successful business. IMO, too many startups go down the road of taking on a ton of funding and expanding very fast. It's very easy to decide that you have the next Google on your hands, but you probably don't. There's nothing wrong with that.
True, but HN strikes me as a pretty small expense, and its existence certainly helps the growth of YC.
Probably one of the reason they don't invest in upgrading the software/hardware to improve the speed. Keep friction in the experience so only the most hardy put up with the delays.
Having snappier response would encourage more comments with the resulting comments being of lesser quality.
Mr Cheever is "something of a product design genius, and lots of people give him credit for Facebook's best features;" even the now-removed-from-Quora post says "to him the user came first and growth features would sacrifice that." That puts him in complete opposition to the guy (Mr D'Angelo, who to his credit is putting his money where his mouth is) who is paying the bills.
The problem is that almost every Q&A type site has the same issue as Quora: only a small percentage of its membership is actively engaged. The number cited by the article is eight per cent, and in my experience, that's about par for the course. Since revenues (and therefore stock performance) are directly tied to use, there are two ways to increase revenues, with implications regarding the user experience for both:
1. Increase traffic, AKA "make the pie bigger". This means doing the kinds of things Mr D'Angelo probably championed -- the SEO Solution, playing nice with Google, low barriers to entry (i.e. Free). This is the tactic taken by most startups, since they're generally looking at Mountain View and saying "Gee, if we could just get our hands wet in THAT revenue stream, we'd be rich."
2. Keep your existing userbase more engaged, AKA "get your customers to eat more pie". This means doing the kinds of things Mr Cheever championed -- making the experience better, providing more services to them, concentrating on getting lifelong customers rather than more customers for less time. Most startups aren't in it for the long haul; they're in it for the big payday.
The NYTimes obit of Arthur Sulzberger pointed out the difference. His family has always wanted to be in the business of disseminating the news; their competitors are in the business of selling advertising. Mr Cheever wanted to take care of users; Mr D'Angelo wants to see a return on his investment. If there was ever a startup in the position to do the former, it's Quora; I know my colleagues would dearly love to have enough money to where they wouldn't have to worry for a while how to keep the lights on.
But as William F. Buckley noted a long time ago, "Idealism is fine, but as it approaches reality, the costs become prohibitive," and that's when someone like Mr Cheever moves on to his next venture.
-- With the sound of silence, the Market has spoken.
Then again, Clerks was famously paid for by a bunch of credit cards. I guess there's an exception to every rule.
Smith did spend around $30k of his own money on production costs. The bulk of that was for film stock. (Similarly, Rodriguez spent $8k of his own money on Mariachi.)
Now, here's the kicker: Neither one of them spent a dime on film prints. They signed deals and let the studios take care of that. This is significant because if people talked about Clerks' or El Mariachi's budget in those terms, the numbers would be in the rane of hundreds of thousands of dollars.
To put it in perspective: Would you say you "self financed" your startup if a big multinational paid for all the servers and bandwidth from the get go? It's sorta like that.
Saying it in interviews makes for a better story ("College dropout makes major movie for $8,000!") but it's not really accurate.
I think any successful bootstrapped company might challenge that assumption.
It might be a warning sign to people who think you can't succeed without outside investment, who of course are mostly either outside investors themselves or other business people involved with funding somehow.
It might be a warning sign to people who think they're going to make easy money by being able to invest in a successful company, who are all outside investors.
I'm not sure why anyone else would care, and certainly I don't see why either the founders or their customers should.
That suspicion is the sticking point for me.
Clearly there are many types of business that are effectively impossible to start without help unless the founders are already very wealthy. Most people couldn't afford to buy a factory and industrial equipment to start a specialist car manufacturing business, even if they had a team of founders who knew exactly how to build the most profitable car design in history and how to run a successful business selling those cars.
However, many other types that can start small and grow, with a level of initial funding that normal people might have available or be able to raise without relying on formal investment. Almost anything in any creative or service industry qualifies, and even several of the most successful retail brands in the world started as someone's family business selling out of one local store.
So my question is, for any business in the latter category, is there any evidence that:
(a) taking outside investment does corrolate with a higher success rate, by any useful measure of success given that obviously we could define it in several reasonable ways?
(b) any such relationship is causal, so the greater chance of success is definitely due to the money and not (for example) to the experience of and/or information available to the people running the business, both of which would tend to be higher at least for first-time founders if they had outside help?
Causality doesn't really matter in terms of putting of customers/investors/employees; if not taking outside investment is correlated with bad things, people will avoid you if you don't take outside investment, whichever direction the causal arrow runs.
If you are starting a business and have no desire for outside funding, that is great. But if you go in knowing that you need outside funding and no one is interested, then you are in trouble. The situation of startups that hit the pavement seeking funding to no avail is all too common.
The cynical angle: if you can get someone else to put up the cash, it seems a little foolish to put up your own, when the venture will probably fail anyhow, no? why not get paid either way?
Next, if all of your net worth is tied up in this one venture, well, that's going to effect your actions. Depending on your preferred outcome, for better or worse. I mean, all of my net worth is tied up in prgmr.com, and I think I've been slightly too conservative about accepting investors/partners. (I've turned down people that would have contributed serious technical ability as well as a little money, which may have been a mistake.)
And, of course, you have the emotional stress of losing your own money. (which varies by person. I've been poor before, I'll probably be poor again. It's not as scary to me as it probably is to some people. Personally, I find the idea of losing other people's money more stressful, so maybe there is just something wrong with me.)
The biggest downside to not taking money might be that there is nobody to make me slaughter my sacred cows. If I think X industry practice is wrong, well, there is nobody else to stop me from destroying the company by going against industry practice. (of course, the other side of that is that if you take money, it's very hard to do anything nonstandard, even when it would be good for the company. If you are doing it right, you know more about this sort of thing than your investors do.)
We all knew one of the commonsense edicts of Hollywood is “never invest in your own movie." But I did it anyway.
-- Garry Marshall, My Happy Days in Hollywood [1]
A few of the many well-known movies that are self-financed: Blair Witch Project, Clerks, most Robert Rodriguez movies[2], the upcoming Cloud Atlas by the Wachowskis. Self-financing might still lead to low odds of success (probably difficult to properly study this), but it seems to me there are enough success stories to question the "never" advice.
[1] http://books.google.com/books?id=X3eXiLG9WnIC&pg=PA196&#...
[2] http://blogs.indiewire.com/theplaylist/robert-rodriguez-talk...
Investing in your own project isn't "commonsense," it's just an individual's view on risk management
I think the italicized bit is the most interesting part of the comment. It seems that that Adam wants to sell the site at some point? but to who? Also, interesting that he is building Quora to flipped it instead of making it into a valid business.
Also, how much does running Quora actually cost? If Adam D'Angelo has many Billions of dollars, I can't see them ever having a financial issue.
If they're not making money, they have a "financial issue" from day one.
I'm not sure GP understands the difference between company finances and personal fortune?
If you manage to find pages they expose to google to capture searches for information, you find it is like Yahoo Answers, except the answers are all blurred unless you agree to sign in and be tracked.
Not surprisingly, this user-hostile abomination of usability has commercially failed. For some bizarre reason the designer who created this nonsense is described as a usability design genius in the referenced article when it is clear from even a moment's glance at the site's usability that its designers are not fit to design a hole in the ground for tossing refuse.
They have produced a system which is creating some of the best authored information online. Each time I get their weekly email, I lose about half of my day because each item in it is so amazing that I have to read it.
Watch Charlie Cheever's interview with TechCrunch recently. I think it's pretty telling that he was done with the company, it might have been the best call for him to leave.
http://techcrunch.com/2011/05/27/quora-we-have-an-explicit-n...
http://www.sfgate.com/technology/businessinsider/article/The...
Pretty good example the bubble we live in here on HN.