Ask HN: Why would I want funding / investment? | Hacker News Reader

Ask HN: Why would I want funding / investment?

11 pointswotang7 comments

I have a company in a pretty new market and it would be easy for us to get additional funding but right now we simply do not need it to grow. We are profitable and can grow at the speed we need to grow to satisfy increasing demand for what we offer.

I see other companies in this new market getting funding every other week but I do not see any benefits for us. It wouldnt make a difference to how we scale the operation. Does it make sense to seek funding simply for additional business advice?

We have been running a variety of online businesses in the last 10 years so I also wouldn't know in what way this could help.

We plan to develop the company / brand for another year and then sell the whole business.

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Like anything in this world, more money means more opportunities. There is nothing wrong with organically growing your company, but sometimes taking investment can help you realise your goals a little faster. If you have a truly unique product or application, you'll want to get it out there before someone copies your idea and executes it better. I think the biggest advantage of investment from a proper VC is you will usually gain access to helpful resources, business advice, mentoring and support. It is in the best interest of the venture capitalist(s) to guide you as much as possible (consider it is their money).

The downside to investment is you'll have to give up a piece of your company and if you don't need investment, why lose a piece of your company just because someone gives you some money? The reality is once you take investment, you no longer just get to call the shots anymore. It becomes a collaboration, a team effort and anything you want to do which could affect the investment will need to be run by the appropriate entities (this can result in you not having as much freedom as you would without taking on investment).

My advice would be to hold off. If you don't need it, don't seek it. You will only be giving up a piece of your own company for possibly zero benefit other than a little more cash buffer. Especially considering you are planning on selling the business in a year, what if you don't sell it for as much as you needed too? Then the VC gets everything and you get nothing.

I would try and answer the following questions.

1. Can a competitor enter your market, outgrow you and reduce your expected slice of the pie?

2. Does the revenue your business generates, increase exponentially as you increase the number of users? (e.g. revenue based on ads)

3. Can funding let you approach a different market? (say your target customers are SMB and the different market is Enterprise)

4. Can your business gain significantly if exposed to a group of startups that are funded? (one immediate advantage to being YC funded is access to other YC funded companies)

If the answer to any of the questions is a Yes, I would definitely consider looking at funding.

Thank you, great questions to ask. Only 2 is a sort of yes but we already reach market saturation with our product since the market is still very young and growing.

You can give jobs to a few more people, you can serve a few more customers, you can experiment with bigger ideas, you can have a bigger impact, and you can sell something bigger when it comes time to sell the whole thing.

But as you seem to already know, there's no reason that those need to be your priorities and pursuing them comes with added cost and risk. If you're confident that you can satisfy your personal goals without taking investment, there's no reason that you should.

If you're happy with your organic growth then that's fantastic. Joel Spolsky gave a very good talk at at a YC conference some years ago where he compared the organic growth strategy at Fog Creek software with the capital-raising strategy at Stack Overflow and identified some factors that made the different choices appropriate in those different contexts.

You don't want funding. Hacker News (née Startup News) is a alternate reality where the average business plan looks like:

    1. Collect Underpants (MVP!)
    2. ? (VC Funding!)
    3. Profit

Thank you everyone, great feedback!

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