Hacker News Reader

Comment by wpietri | Hacker News Reader

Hi! Founder here. I think we indeed are indebted to our investors. Often financially, when the investment comes in the form of a convertible note. But more importantly, there's a social debt. These are people who bet on us when few others would. They provide advice, support, and connections.

Sure, there's a financial aspect to this, and it's not like founders personally guarantee the company's books. But Silicon Valley doesn't run on money; it runs on people. And on their relationships.

View on HN

You feel indebted to the professional investors who picked you along with 5-10 other companies to place bets on with the clear expectation that most of those bets would lose? Why?

This is like the guy a few years ago who felt social pressure to pay back corporate debts for his C corporation because nobody was telling him that the debts applied to his company and not to him personally. But the risk of the company vanishing was priced into all those contracts! The same is true for investments. Anybody who invests professionally in startups has a valuation function of some sort that captures the fact that you --- even if you're Jack Dorsey or Elon Musk --- are more likely than not to fail before your company becomes liquid.

(I am also a founder; this time of a bootstrapped company, but I was one of three founders of a VC-capitalized company a few years prior to starting this one, and the two other startups I worked at were both VC companies.)

No, it's not like that.

I agree that the financial and legal situation is as you say. (Having written financial trading software, I know how to price a deal.) But that's the skeleton. The flesh is the human relationships. I personally feel more responsible to the people I hire than to the investors, in that their commitment is larger and the failure hits harder. But my sense of obligation also extends to the investors, and in all cases it extends beyond the legal minimums.

I think there are practical reasons one might behave that way: Silicon Valley is a small place, and one's reputation has a lot of value. But for me it's deeper than that: collaborative projects come with a sense of obligation to one's collaborators.

I think we're in a silly place now, where we're both vociferously arguing a point we probably agree on. You have to do a good job, yes. You can't phone it in. But you don't have to work routine 70 hour weeks. You don't owe that to anyone.

You're right... but start-up culture glorifies the long hours and epic all-nighters[1], that to do otherwise would have you tarred a slacker[2].

[1] "One of the most pervasive myths of startup life is that it has to be all consuming. That unless you can give your business all your thoughts and hours, you don’t deserve success. You are unworthy of the startup call. This myth neatly identifies those fit for mission: Young, without obligations, and few if any extra-curricular interests. The perfect cannon fodder for 10:1 VC long shots." http://37signals.com/svn/posts/3106-all-or-something

[2] "Startups Are Hard. So Work More, Cry Less, And Quit All The Whining" http://uncrunched.com/2011/11/27/startups-are-hard-so-work-m...

Yep. I'm not sure how I got people riled up, but I don't think I'm saying anything particularly controversial.

I agree strongly on the 70-hour weeks. I'm working on a book about startup misconceptions, and one of the chapters is titled, "Working lots of hours means you're making progress." Interested in being interviewed for it? Stories from actual founders are what will really persuade people.

Details here: https://www.quora.com/William-Pietri/Startup-Misconceptions-...

Right, but you can always just walk away from it all. It's not the same as a student loan.

Sure, you can walk away from a professionally managed fund, hopefully with your name intact, but I bet it's not so easy to walk away from friends, family, and small angel investors who believed in you. The mental burden of failure, of disappointing those closest to you, must weigh heavy.

So don't take money from those people. I'm not trying to be facile here. I'm asking you to recognize that if failing to provide a return to a startup investor generates acute non-dischargeable guilt, that is probably a good sign that you rationalized away the arguments for not taking money from them in the first place. If you're a pro, you do the company thing with the clear and honest expectation that you are likely to fail.

Companies going public spell this out in detail in their disclosures, which practically shout "do not put money into this". And those companies almost invariably have cracked 9 figures of revenue!

That's a good point.

Yes and no.

You can also walk away from a student loan; if you go teach English in small Asian villages for the rest of your life, it's not like they'll sent in a SEAL team to extract you.

And you can certainly walk away from regular loans by declaring bankruptcy. Provided you're prepared to have that on your record and on your conscience. And deal with the many years of consequences.

It's the same thing with investor money. Legally, at any point you can just shut down the company, return whatever's left in the bank, and call it a day. But there's more to it than the legality.

It's not the same. Startups go south, the founders split, things get wound down, and everyone tries again, or gets other jobs. This happens all the time. Nobody involved gets exiled to a small asian village. Matt Maroon said it better elsewhere in this thread. Bitcartel also made a good point about letting down early friends & family investors, which seems like it would cause more emotional stress than letting down professional investors.

That said, since it seems like half of hacker news imagines that VCs are something akin to loan sharks. Maybe the new breed of angel investors really are putting an emotional squeeze on founders these days? When I worked at startups, the investors were very hands off unless the founders were really mishandling things. However, I've been out of the scene for a few years, and there seem to be a whole lot more VCs, angels and incubators. Perhaps things have changed for the worse.

I'm not saying it's the same; I'm saying they are points on a continuum. All of which you can walk away from at varying costs.

I'm perfectly ok letting down professional investors. And also the people I hired. And the users. And myself. That's the game; sometimes you lose.

But that doesn't mean I won't regret it when it happens. Or tell those people I'm sorry it didn't work. Or work hard to avert that outcome. That's also part of the game. At least that's the game I want to play.

I have no idea why that's controversial here.

Predator drones instead of SEAL teams?

You can, but some people have a big conscience and want to deliver on the expectations people have of them, so some people can't just "walk away."

It's those people who are suicidal in failed startup scenarios.

Do we have a lot of evidence that startup failure is actually a suicide trigger? And, more so than student loan debt, or job termination, or flunking out of school? I worry a little about enshrining this bit of conventional wisdom. Startup founders feel pretty exceptional as it is without adding the idea that they carry the weight of the world.

Reply on news.ycombinator.com