Here's a model that exists in Germany, which I like:
You can present a business plan to the state's investment bank and apply for several financial aides, including:
* 1.5 years of universal basic income for you plus up to 2 other people. It's a tiny amount of money, but the point is to free you up to invest your actual time an money into the business. You do not have to pay this back.
* up to 20k EUR in "consulting fees", for which the bank will contribute up to 50%. Again, you don't have to pay it back, but obviously you need money for them to match.
* discounted loans, amount depends on business plan outlook
I've worked with an accelerator that helps founders write the required pitches and plans for this program. And while the majority don't make it (because they mostly realize their idea won't actually hold up to business planning scrutiny), some do. And those don't become hyperscaling unicorns, they become normal companies, growing organically as stable, solvent employers in the region.
Every once in a while a VC would stick its head in and encourage the startup to take on VC funding, and for an even smaller percentage (one in my time doing this), this worked. But for me, the organic growers are the best success story.
It's also connected to so much bureaucracy that you almost need to hire someone for that alone, because you wont have as much time for your actual business. Founding a company in Germany is so much unnecessary paperwork its crazy. Single handedly the only reason I will never try it in my home country.
Some still do it. And while I would never start my own company in Germany. Working at a startup in Germnay is going pretty well for me so far. 1.5 years in.
Ye been working in a startup as well. I just witness all the appointments my boss has to go through and I could never do that. But I'm also the type of person not picking up their phone when it rings.
So KFW (state investment bank?) has a thing called StartGeld (startup loan). I've wondered about few practicalities
1) What sort of collateral does bank expect from you?
2) Can you really get 125ke or more like 10-20ke?
3) Interest rate is a single digit number?
4) Can you really get 10 year payback periods?
Reason why I'm asking is that in Finland(where I live) these startgeld terms seem like a dream come true for entrepreneur. To give you an example;
1) Tradiotional bank wants collateral for the loan. For a 5k€ loan, 5k€ in deposits are needed.
2) There a lots of Swedish/Norwegian "loan-houses" advertising their services for companies, with interest rates are somewhere between 23-30% per annum.
These things do work and created a few unicorns here in Malaysia.
The catch is that they're usually very bureaucratic as it's public funds, and the more corruption, the more rules there are. Someone might say, come in from New Zealand to get a grant, then the condition becomes "must be 51% locally owned". A conglomerate creates a sister company to get the grant and then it becomes, "parent company must be less than 3 years old and have under $500k revenue". The rules just keep stacking on until agile is basically banned lol
Companies funded this way were actually one of my income sources when I was freelancing, but sadly most don't continue on unless there's a Series B later on.
Good to see startup strategies which help build stable, solid middle-sized companies.
Germany has a great success story by the name of the "Mittelstand" (SME businesses), which means a big part if the market are small to middle enterprises. This is far more consumer-friendly and innovative, as more competitive as it's not relying on a few big players like in the US that might also collude with each other.
That just sounds like traditional small businesses. Which is cool but re-branding them to "startup" seems silly. The US has 35 million small businesses and maybe 1 million would qualify as startups.
Every single definition highlights that difference versus traditional small businesses. Trying to re-brand small businesses into "startups" for the cool name factor just seems silly to me. If you're making a sustainable small business then call it that. Don't call it a startup. You'll get more customers that way as well and more relevant business contacts.
People care about startups because of the high growth rate. Renaming a small business to a startup achieves as much as slapping a porsche logo onto a honda civic. The civic is a solid car but you won't make people'd heads turn with that logo on it or not.
Gotcha, thanks. I always thought it was "first 3-5 years". Could be an example of word meaning diluting as it goes mainstream - hacker being the ur-example. ("Semantic bleaching" is the jargon term, apparently).
I just took a look in Google Books and found this from 1805, which is just too good: "a startup was a coarse kind of half-boot with thick soles; [...] its use is now superseded by that of the modern spatterdash." I wonder when the first use of the term in its modern sense was.
Regardless of if the startup intends to hit it big or remain smallish, a startup is really something that's appropriate until it's operating for profits rather than growth and/or growth in it's market niche naturally slows down due to saturation.
>A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model.[1][2] While entrepreneurship includes all new businesses including self-employment and businesses that do not intend to go public, startups are new businesses that intend to grow large beyond the solo-founder.[3] During the beginning, startups face high uncertainty[4] and have high rates of failure, but a minority of them do go on to become successful and influential, such as unicorns.
The characteristics in that paragraph don't apply to new mom & pop restaurants, dry cleaners, new law practices, etc so most people don't usually label them as "startups".
But there is no Global Language Police that everybody has to obey so if some folks wants to label their new neighborhood coffee house a "startup", nobody will stop them.
That's another reason I find the re-naming of small business to startup so silly. Putting a billion dollar company and a family small business on the same label is silly just because were started recently. Some startups are worth billions the second they are created. Personally I think startups generally stop being called startups when they get old enough or go public. Then they get other labels such as a private company or a public company.
The point of labels is to quickly give a lot of relevant information about some entity. This helps customers, investors, clients, future employees and so on understand the entity quickly.
No that's for a full GmbH. You can start with an "UG", which realistically needs maybe 1500 EUR to get registered and up and running. Then, a certain percentage of the profit is contributed towards the 25k (of which in turn only 12.5k have to be deposited in cash) each financial year. If the threshold is met, you can convert from UG to GmbH.
You are confusing UG with something like GbR. UG is basically a baby GmbH with constraints of the name of the company and how much money the associates can extract from it (until the company got 25k€ captial and can become a normal GmbH).
First, it is sufficient to only pay 50 % of the stock capital at registration of the GMbH, ie. 12500 EUR. Obviously you also have less operating capital then.
Second, the money is not gone. It is right there in the company's account. You use it to pay company bills.
The only thing annoying about German GmbH is that it can take 6-8 weeks until you get your tax id and registration numbers. You can, of course, already do business with the name postfix "i.G.", ie. instead of "Foobar GmbH" you write "Foobar GmbH i.G." and done.
> Second, the money is not gone. It is right there in the company's account. You use it to pay company bills.
That's fine if you start a restaurant or small workshop and need money for salaries, materials etc, of course.
It's a barrier to entry when you can start something digital only with just a person or three putting in sweat equity and zero to very little actual cash.
Annual admin costs very much depend on how complex the business is, no?
The primary recurring obligation for a UG is the mandatory retention of 25% of annual net profits until the share capital reaches €25k, enabling tax-neutral conversion to a GmbH.
What I could think of for UG with idea on converting to GmbH, you could have:
- UG setup cost (fairly low compared to GmbH)
- UG/GmbH accounting & tax compliance
- Commercial register updates
- Notary fees for structural changes, and eventually the conversion process
This might be different from state to state. There are also EU grants you can apply for, which might contribute to employee salaries. Those are somewhat difficult to navigate and apply for, but sometimes worth it to bridge the salary gap between a "normal" German company and FANG.
Not sure which one the original comment is talking about, but look into "Gründerstipendium" / "EXIST Stipendium".
Then there are also more scholarships based on other criteria, e.g. your state or if you are at an university, many universities also have some sort of entrepreneurial scholarship which will then also help you get the larger scholarships afterwards.
What are you looking for in particular? The model is geared towards slow, sustainable growth. And that growth might also not need to exceed a certain level. So you're unlikely to hear about many of them. Not all are in tech or software, many are focused on German-only (or DACH region) research, industrial development, etc. I think that's fine.
Presumably you'd want to see that such initiatives are increasing the number of sustainable businesses created, per capita. Is that the case?
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EDIT: Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
Just wondering what actually moves the needle and how to better create a society that is entrepreneurial, and not just in a "billion dollar social media unicorn" kinda way, but businesses that provide actual tangible value. Definitely recognize that the "quality" of businesses being started in Germany could be higher, but I think you actually need to measure these things and understand what interventions actually make a difference. It is a similar issue with UBI in general: while it sounds nice and might be necessary if our "AI is the future" overlords get their way, you do actually need to back up the promise of "UBI will unlock human creativity" with some amount of hard data, imo.
> Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
It sounds like these are small businesses and not startups. The US has 10% small businesses per capita.
> Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
I believe there's differences between east and west Germany, so if you look at the west specifically, the gamp might get a little bit smaller.
Beyond that, Germany doesn't have as much of a startup culture as the USA, which is precisely why we need to incentivise people in a way that others don't.
> Just wondering what actually moves the needle and how to better create a society that is entrepreneurial
Willingness and awareness, where the latter is probably easy to fix but the former is a bit trickier: You need those people who have the ability to pull it off to want it in the first place.
And there I guess it splits into a) the benefits of entreprenaurship b) the benefits of employment and c) the cultural influence on how these are weighed against each other.
So tl;dr: a) make starting a company attractive, b) make employment suck more and c) convince people that independence beats security.
Employment in Germany is definitely a lot cozier than in the US, so unless we want to get rid of that, a) and c) are the options we have. If you want to achieve it without propaganda, then all you can really do is a), and that's what these programmes are already doing.
I think reducing buerocracy and offering good social safety nets so a failing business doesn't translate to a ruined life are the way to go, at least in the short term.
German bureaucracy is a constant hindrance. Your first year in business is pure compliance work, and waiting for various paper-based processes to complete.
Bureaucracy is crazy in Germany. Forget about doing anything online, paper and in person only.
Founding any form of limited company is expensive and complicated. Want to put a website online? Have fun putting your full name and address in the imprint. Want to offer some courses that teach X? Yeah, no, you need a license for that, mate!
Also being self-employed you lose most social benefits. You need to get private healthcare, you need to save up for retirement and so on. Getting back into public health care later on can be a bit complicated.
So my advice is to keep working part time on a job that gives you health insurance and everything and work on your company in your free time.
Germany is also one of the least friendly countries for expats. And I say that as a native Germain. Officials will refuse to speak English to you. Yes, refuse. Most people know how to speak English but often can't be arsed to do so. Plus general xenophobia and people being very tight-knit and not open to making new friends.
While I completely agree with many of the points that you made, I disagree with some:
> Bureaucracy is crazy in Germany. Forget about doing anything online, paper and in person only.
The latter point has nothing to do with bureaucracy.
>
Germany is also one of the least friendly countries for expats. And I say that as a native Germain. Officials will refuse to speak English to you. Yes, refuse.
For example in the USA, they will refuse to speak German with you. So what?
In my opinion there actually exist good reasons for this:
1. A lot of legal, bureaucratic German terms have no direct analogue in English (and their word forming sometimes depends on subtle grammatical features of the German leanguage).
2. For official purposes, it does not suffice if the clerk can somewhat speak English; he/she rather has to be fluent in a way that is "negotiation-safe" ("verhandlungssicher"; I know that this German term is usually translated with "confident in business discussions", "business fluent", "language proficient", but all of these translations don't catch the subtlety of the German term).
> people [are] not open to making new friends.
The German word "Freund" (commonly translated with "friend") has a different meaning than the English "friend" - the relationship goes much deeper. I don't think that Germans are not open to making new "Freunde", but if you want to have shallow, superficial relationships, Germany is not the ideal country. Vice versa, if you want to have deep relationships, you will likely be annoyed by the USA.
Have you heard of Rocket Internet? It's one of the most successful models in the world. They may avoid the US market and such, but most of the unicorns in Malaysia are backed by Rocket. And most of the people who stay and start their own, backed by YC or whoever, are usually ex-Rocket. They hit 10% growth per week, even at unicorn sizes.
I would anecdotally put Germany at #3 globally just for Rocket alone, with US and China ahead of them.
There's lots of successful non-Rocket startups from Germany too, but most are boring stuff like agriculture, grocery delivery, pet stuff, etc. We normally don't take note of startups until they're Stripe-sized or something.
Isn't Rocket's reputation that they just steal ideas from other startups and create cheap clones of them? Not a terrible business to be in, but not massively inspiring or globally reproducible.
I'm not a big fan of Rocket, but I think that's an unfair way to put it. I'd say they're similar to what Bezos would be like if he had to start from Europe lol.
They take an existing model with a lot of potential and focus on implementation. They had a golden period with e-commerce because e-commerce is heavily logistics. And they do it in the hardest places, because the harder it is, the more they can sell the company for.
Back when Lazada started, Indonesia had terrible credit card penetration. Roads were not suited to delivery; heck they built their own logistics because the local logistics were not suited for e-commerce. There's a lot of complex laws on hiring, or incorporating companies there (which are nicer now).
China won't do it. They don't want to build companies in 6 different low income country with a total of 500m population or so. Normal people would just target the US or EU, which has more people and more money.
But Rocket goes into these countries. They have a lot of emphasis on leadership. They drop a scalable playbook for the locals. They grow it fast until it hits a cap before they sell it off to something like Alibaba. They do have some dark patterns as well. Whatever caricatures people have of China, Rocket does it better - they work longer hours, work people harder, build things for extreme scale, do what the Chinese won't.
It is not the funding model that GP speaks of. But it is a fairly successful model of creating and exiting startups. It's quite autocratic to my understanding. I don't have that kind of work ethic and I feel like there's a hint of envy when people call them copycats. They don't have a good presence on the English Wikipedia though.
> And yet Germany still doesn't seem to have much more startup / entrepreneurial success than any other European country. What gives?
Too much bureaucracy.
Many people in Germany do hate it; there even exist quite some people in Germany who would really deeply from their heart love to see the politicians dead who are responsible for the whole bureaucratic mess (which are lots of politicians).
Entrepreneurial success they definitely have, it's just not in-your-face tech/digital stuff, it's lots of Mittelstand companies focusing on niches, like in high-precision machines that are then used for precision manufacturing (optical lenses, chemistry reactors, etc.).
What gives is that it isn't a primarily marketing-driven consumer-facing entrepreneurship so you don't hear about Peter Huber Kältemaschinenbau, or Rational AG-like companies[0].
I live in a country (Germany) that is famous for having a lot of "mittelstand". These are basically family owned businesses. Some large German companies fall under this. Aldi and LIDL for example, which are super market chains that at this point have a global presence. And some large companies (Bosch, Siemens, VW, etc.) are actually a multitude of smaller companies. Much of the German economy is smaller and bigger specialized companies doing their thing. Only some of them are public companies.
What these companies have in common is that they start small and then grow organically. The main issue from a VC point of view is not that these aren't good companies but that it can take decades for them to turn into big companies. But from the point of view of the people founding these businesses, it's a good, honest way to succeed in life.
There's nothing wrong with the principle of starting a company to make money from whatever it is you do at whatever scale you are doing it. But it should drive your decision making as to whether or not you give chunks of your company away to an investor. It might stop being your company if you do.
Also, if you go down this path. Stop calling yourself a startup. It scares away customers. They don't want to hear that you are a flaky wannabe that is still figuring it out. They want to hear about your other customers and how awesome whatever it is you are selling is. They want to be re-assured that it is safe for them to enter into a multi year customer relationship with you. Projecting that you are new to all this company stuff and might not be around in six months is exactly the wrong message for them. They don't want to hear about what you are going to do, they want to hear about what you have done already. The stuff that gets VCs horny will scare away customers. If you are pitching customers and VCs at the same time, make sure you have two very different pitches. And if you are going to pitch VCs, it actually helps if you have customers. The more business you have the stronger your negotiation position.
I think it is very hard to compete in the market where lot of things are subsidized by VC money. The new VC backed companies have more money for marketing, subsidized sales wherein older orgs are hard to move.
Esp. for german orgs, they are very hierarchical, getting an innovation out is hard. Add union to the mix. Their margins are razor thing. It is a struggle. I can imagine back in the day, they moved the innovation needle.
Lot of these companies are often bailed out by the government as they employ alot of people.
I do like the idea in general and feel there's a lot of room for improvement between the (VC / bootstrapping) extremes.
However, the middle path from the article presumes the existence of VCs willing to join you on that path. The article waves this away with:
> angel investors are generally more open to a 2-3x ROI
For a $1M round you'd need to find 10-20 such angels (assuming $50k-$100k average check size) willing to accept small upside, for which you'll have convince them there's commensurately smaller risk. This will probably mean you have some revenue and some sense of where PMF might lay or some kind of brand/pedigree.
Do not underestimate the value of YC brand and being able to present on Demo Day gives you. A random Jane from Ohio building her tech company would have a lot harder time finding those 10-20 angels, to put it mildly. I'd be more careful when extrapolating path-dependent success into a general strategy.
That said, my gut feeling is there's room for the next Paul Graham to fill that space - somehow.
For smaller amounts of monies such as £250k or £1mm, it is much easier to get funding, since a decent amount of countries offer tax relief to the investors for example in the UK through EIS, SEIS, or even VCT. These offer advantages to angels over the VC's.
In addition the whole point of this piece is that you are generally looking to grow slower, thus having smaller capital requirements and burn rate.
That is what I was wondering as well. Where can I find investors willing to invest up to $1M with an expected 2-3x ROI on typical VC terms? In particular, for pre-revenue ventures. And how can you keep that 90%+ equity with 10 angel investors?
How exactly is a VC—or any investor, really—supposed to make money from a startup that’s aiming for a “middle of the road” outcome? That just doesn’t add up. In that case, wouldn’t it make more sense to invest in something safer or more traditional?
From what I understand, the very definition of a startup is tied to ambition. Founders need to be aiming for the moon—or at least something close to it. If you’re not taking big risks with the potential for big rewards, can you even call it a startup?
People use "startup" to mean "start up business" and not "business that is aiming for rapid, borderline-unsustainable growth and very likely requires hundreds of thousands, millions, tens of millions of dollar to even start thinking about achieving it," which is what the actual definition is.
VCs aim for 1 out of 50 investments to return 100x what they put into it, and the rest of them to die quickly and stop taking their attention. A company kicking off 5% returns every year is counterintuitively worse than flaming out immediately.
At least some years ago, browsing HN's comment section felt like it was a different world, separated from reality. I think some people need this kind of grounding reminders every once in a while.
Russ: No. If you show revenue, people will ask how much, and it will never be enough. The company that was the hundred x-er, the thousand x-er, becomes the two x dog. But if you have no revenue, you can say you're pre-revenue... you're a potential pure play. It's not about how much you earn, it's about what you're worth, and who's worth the most? Companies that lose money. Pinterest, SnapChat, no revenue. Amazon has lost money every fucking quarter for the last twenty fucking years and that Bezos motherfucker is the king. There's no revenue. No one wants to see revenue. Go!
Richard: Oh, um, I just thought that mainly the goal of companies is to make money.
Russ: Yeah, no no no, that's not how it works. I don't want to make a little bit of money every day, I want to make a fuckton of money all at once. ROI. ROI!
'Be a normal person/company and do normal person/company things,' isn't talked about very often, and it can be useful to be reminded that it is a pathway that can lead to success.
It's not a "regular" company, because it's still raising angel investment, presumably from the tech/startup ecosystem.
A more common route for non-tech-startup companies is to get money via debt - in other words, borrow money from a bank or financiers. That's a different model to with different risk/reward characteristics, but it's how most non-innovative entrepreneurship is done, I believe - things like building restaurants, buildings, etc.
This is indeed a "middle path" in terms of raising money by selling equity, but selling a smaller amount of it for less money, which keeps more ownership stake and control in the hands of the founders, but necessitates slower spending cause they raised less capital.
That’s pretty much what I took away. I guess the difference is that in my mind a “regular” company gets its funding via a loan. The post is from someone who got into YC.
But yeah “building for profitability” sounds a lot like… good business!
I run a small 20 year old service business in the US. Just getting a $300K line of credit from a bank required a lot of paperwork and both the company and me personally being on the hook. It took about a month to secure. In contrast, on a different occasion a secured a personal home equity line of credit for $100K in a bout 5 minutes.
I am a big believer in Seed-Strapping. You need some initial capital to get you started (can be as low as a few months of your own salary). But you should aim to bootstrap your solution.
Because gold will appreciate reliably to an extent but a company can appreciate in value far exceeding what gold can -- that's the risk/reward trade off.
The problem with this idea is that capital markets exist and capital seeks compounding. If there is a market to be addressed and it has size, someone will go in and displace you with a cash flywheel.
Hopefully, over time, we will get better and better in creating the world of software from small interoperable pieces that can be maintained by small teams or even solo entrepreneurs.
A VC will build a portfolio of startups that each have the potential to do massively well. After that they don’t care which of the portfolio companies lives or dies, as long as one explodes and compensates for the others.
As a founder you care very much which of your companies succeeds, as you only have one.
I usually compare them as sharks vs bottom feeders. Either you become the predator that eats all the big fish. Or you go somewhere the big fish won't go.
There's the 'crab' model, but this isn't for startups. They're old, companies like Yahoo who have a moat and can't leave it. They're at evolutionary peak or rather a local maxima. They're too difficult to change and a major change would make them too vulnerable.
An ecosystem analogy should draw attention to the fact that most biomass in most ecosystems is not in the apex predators but in the lower trophic levels. Apex predators are a useful regulatory mechanism for the ecosystem, not the be all end all of natural selection.
Glad someone is talking about the option other than selling to VCs or ramen diet start ups. The tech community might have collectively forgotten the other option.
I was being called a unicorn in a professional setting... unfamiliar with the term, I immediately thought I was being insulted, because unicorns exist just in people's imagination and fairy tales.
Also the other thing that I realised after working with a bunch of VCs is that they are all incredibly dumb. Few VCs are founders themselves and you will have better luck with them but the majority of VCs have simply no idea about product and technology and they are simply pattern matching. What that means is that they will cargo cult everything and if your startup doesn't fit the mold they will not respond to you favorably and the sad part is that the actual 10x, 100x returns that their VC firm needs comes from those type of investments but they simply cannot see them.
We also have a problem with VCs that want start-ups to scale quickly, even though this often builds incapable teams. We then say, "Oh, it's because they stopped being in founder's mode," whereas in reality, the team is so malcomposed and mismanaged that it could not build even a simple product.
This has happened a lot in games. Now, VCs have almost stopped pre-seed and seed funding in this industry. The global annual VC funding in games is about $1B, about 1.5 Call of Dutys. This is down from around 12B in 2022.
One could say they threw the baby out with the bathwater because while many executives were abusing the found-scale-exit business model and taking investors' money, many were also not. It's pattern-matching through and through, very little due diligence.
Here's a model that exists in Germany, which I like:
You can present a business plan to the state's investment bank and apply for several financial aides, including:
* 1.5 years of universal basic income for you plus up to 2 other people. It's a tiny amount of money, but the point is to free you up to invest your actual time an money into the business. You do not have to pay this back.
* up to 20k EUR in "consulting fees", for which the bank will contribute up to 50%. Again, you don't have to pay it back, but obviously you need money for them to match.
* discounted loans, amount depends on business plan outlook
I've worked with an accelerator that helps founders write the required pitches and plans for this program. And while the majority don't make it (because they mostly realize their idea won't actually hold up to business planning scrutiny), some do. And those don't become hyperscaling unicorns, they become normal companies, growing organically as stable, solvent employers in the region.
Every once in a while a VC would stick its head in and encourage the startup to take on VC funding, and for an even smaller percentage (one in my time doing this), this worked. But for me, the organic growers are the best success story.
It's also connected to so much bureaucracy that you almost need to hire someone for that alone, because you wont have as much time for your actual business. Founding a company in Germany is so much unnecessary paperwork its crazy. Single handedly the only reason I will never try it in my home country.
Some still do it. And while I would never start my own company in Germany. Working at a startup in Germnay is going pretty well for me so far. 1.5 years in.
Ye been working in a startup as well. I just witness all the appointments my boss has to go through and I could never do that. But I'm also the type of person not picking up their phone when it rings.
Actually just founding the company is the easy part nowadays. You can do it online or let a notary work it out for you.
It's just everything else that's dreadful.
So KFW (state investment bank?) has a thing called StartGeld (startup loan). I've wondered about few practicalities 1) What sort of collateral does bank expect from you? 2) Can you really get 125ke or more like 10-20ke? 3) Interest rate is a single digit number? 4) Can you really get 10 year payback periods?
Reason why I'm asking is that in Finland(where I live) these startgeld terms seem like a dream come true for entrepreneur. To give you an example;
1) Tradiotional bank wants collateral for the loan. For a 5k€ loan, 5k€ in deposits are needed. 2) There a lots of Swedish/Norwegian "loan-houses" advertising their services for companies, with interest rates are somewhere between 23-30% per annum.
These things do work and created a few unicorns here in Malaysia.
The catch is that they're usually very bureaucratic as it's public funds, and the more corruption, the more rules there are. Someone might say, come in from New Zealand to get a grant, then the condition becomes "must be 51% locally owned". A conglomerate creates a sister company to get the grant and then it becomes, "parent company must be less than 3 years old and have under $500k revenue". The rules just keep stacking on until agile is basically banned lol
Companies funded this way were actually one of my income sources when I was freelancing, but sadly most don't continue on unless there's a Series B later on.
> These things do work and created a few unicorns here in Malaysia.
Which ones?
Good to see startup strategies which help build stable, solid middle-sized companies.
Germany has a great success story by the name of the "Mittelstand" (SME businesses), which means a big part if the market are small to middle enterprises. This is far more consumer-friendly and innovative, as more competitive as it's not relying on a few big players like in the US that might also collude with each other.
That just sounds like traditional small businesses. Which is cool but re-branding them to "startup" seems silly. The US has 35 million small businesses and maybe 1 million would qualify as startups.
You said this below, too. What's the difference? In my mind a startup is just a newly established business, but you seem to have a different vision?
> What's the difference? In my mind a startup is just a newly established business, but you seem to have a different vision?
A commonly accepted answer to this question is "The exit strategy does not involve 100X[1] valuation"
[1] Pick the appropriate multiplier.
The dictionary defines startup as: "a newly established business."
Your take is typical on HN, but not the common interpretation.
> Your take is typical on HN, but not the common interpretation.
TBH, it appears to be the commonly accepted answer to the question asked, but that doesn't mean it's a commmon interpretation.
To be even more honest, I'm not really sure how I'd classify the difference either; there's a lot of blurring of lines there.
Startups aim to grow quickly.
Every single definition highlights that difference versus traditional small businesses. Trying to re-brand small businesses into "startups" for the cool name factor just seems silly to me. If you're making a sustainable small business then call it that. Don't call it a startup. You'll get more customers that way as well and more relevant business contacts.
People care about startups because of the high growth rate. Renaming a small business to a startup achieves as much as slapping a porsche logo onto a honda civic. The civic is a solid car but you won't make people'd heads turn with that logo on it or not.
Gotcha, thanks. I always thought it was "first 3-5 years". Could be an example of word meaning diluting as it goes mainstream - hacker being the ur-example. ("Semantic bleaching" is the jargon term, apparently).
I just took a look in Google Books and found this from 1805, which is just too good: "a startup was a coarse kind of half-boot with thick soles; [...] its use is now superseded by that of the modern spatterdash." I wonder when the first use of the term in its modern sense was.
(Spatterdash... spats?)
Replying here because nesting,
Regardless of if the startup intends to hit it big or remain smallish, a startup is really something that's appropriate until it's operating for profits rather than growth and/or growth in it's market niche naturally slows down due to saturation.
> Startups aim to grow quickly
Maybe this is a US centric definition. It's definitely not what I mean when I talk about a startup with European or Asian tech founders.
>Maybe this is a US centric definition.
It's a common definition for new companies that intend to grow beyond a small/medium size and very often associated with funding from VC.
1st paragraph from https://en.wikipedia.org/wiki/Startup_company :
>A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model.[1][2] While entrepreneurship includes all new businesses including self-employment and businesses that do not intend to go public, startups are new businesses that intend to grow large beyond the solo-founder.[3] During the beginning, startups face high uncertainty[4] and have high rates of failure, but a minority of them do go on to become successful and influential, such as unicorns.
The characteristics in that paragraph don't apply to new mom & pop restaurants, dry cleaners, new law practices, etc so most people don't usually label them as "startups".
But there is no Global Language Police that everybody has to obey so if some folks wants to label their new neighborhood coffee house a "startup", nobody will stop them.
From your point of view, when does a startup is no longer a startup? Seed, Series A, B, C, pre-IPO? Can you be a startup after IPO?
That's another reason I find the re-naming of small business to startup so silly. Putting a billion dollar company and a family small business on the same label is silly just because were started recently. Some startups are worth billions the second they are created. Personally I think startups generally stop being called startups when they get old enough or go public. Then they get other labels such as a private company or a public company.
The point of labels is to quickly give a lot of relevant information about some entity. This helps customers, investors, clients, future employees and so on understand the entity quickly.
You still need the 25k to register a LLC or whatever the acronym is in Germany, right?
No that's for a full GmbH. You can start with an "UG", which realistically needs maybe 1500 EUR to get registered and up and running. Then, a certain percentage of the profit is contributed towards the 25k (of which in turn only 12.5k have to be deposited in cash) each financial year. If the threshold is met, you can convert from UG to GmbH.
Always go for GmbH. UG will make you account for everything with your private money. If something goes wrong in your business you'll be dirt poor.
That doesn't sound correct. UG is identical to the GmbH in that regard. Do you mean a GbR?
Ahh might have confused it with one of the other forms then... It's been a while since I had to learn all that stuff.
You are confusing UG with something like GbR. UG is basically a baby GmbH with constraints of the name of the company and how much money the associates can extract from it (until the company got 25k€ captial and can become a normal GmbH).
You need 25k€ to register a GmbH, but you can nowadays register a UG which only requires 1€ and can later be converted to a GmbH
First, it is sufficient to only pay 50 % of the stock capital at registration of the GMbH, ie. 12500 EUR. Obviously you also have less operating capital then.
Second, the money is not gone. It is right there in the company's account. You use it to pay company bills.
The only thing annoying about German GmbH is that it can take 6-8 weeks until you get your tax id and registration numbers. You can, of course, already do business with the name postfix "i.G.", ie. instead of "Foobar GmbH" you write "Foobar GmbH i.G." and done.
EDIT: typo
> Second, the money is not gone. It is right there in the company's account. You use it to pay company bills.
That's fine if you start a restaurant or small workshop and need money for salaries, materials etc, of course.
It's a barrier to entry when you can start something digital only with just a person or three putting in sweat equity and zero to very little actual cash.
Which will cost many thousands in admin per year
Can you elaborate on what you mean by that?
Annual admin costs very much depend on how complex the business is, no? The primary recurring obligation for a UG is the mandatory retention of 25% of annual net profits until the share capital reaches €25k, enabling tax-neutral conversion to a GmbH.
What I could think of for UG with idea on converting to GmbH, you could have:
- UG setup cost (fairly low compared to GmbH)
- UG/GmbH accounting & tax compliance
- Commercial register updates
- Notary fees for structural changes, and eventually the conversion process
I run a small (software) startup in Berlin, the administrative cost is more like €1000/year (of course increasing the bigger your business gets) .
Do you have a link for any more information on this? This sounds interesting.
I was working with the "ego." programs in particular: https://www.ib-sachsen-anhalt.de/gruender/gruenden-in-sachse...
This might be different from state to state. There are also EU grants you can apply for, which might contribute to employee salaries. Those are somewhat difficult to navigate and apply for, but sometimes worth it to bridge the salary gap between a "normal" German company and FANG.
Not sure which one the original comment is talking about, but look into "Gründerstipendium" / "EXIST Stipendium".
Then there are also more scholarships based on other criteria, e.g. your state or if you are at an university, many universities also have some sort of entrepreneurial scholarship which will then also help you get the larger scholarships afterwards.
Are you talking about the "Gründerstipendium"?
Yes, ego.-START: https://www.ib-sachsen-anhalt.de/gruender/neue-existenz-grue... (just of the programs)
Maybe the ones I meant are for NRW (Nordrhein-Westfalen) only:
- https://www.xn--grndungsstipendium-n6b.nrw/
- https://www.foerderdatenbank.de/FDB/Content/DE/Foerderprogra...
And yet Germany still doesn't seem to have much more startup / entrepreneurial success than any other European country. What gives?
What are you looking for in particular? The model is geared towards slow, sustainable growth. And that growth might also not need to exceed a certain level. So you're unlikely to hear about many of them. Not all are in tech or software, many are focused on German-only (or DACH region) research, industrial development, etc. I think that's fine.
Presumably you'd want to see that such initiatives are increasing the number of sustainable businesses created, per capita. Is that the case?
---
EDIT: Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
Just wondering what actually moves the needle and how to better create a society that is entrepreneurial, and not just in a "billion dollar social media unicorn" kinda way, but businesses that provide actual tangible value. Definitely recognize that the "quality" of businesses being started in Germany could be higher, but I think you actually need to measure these things and understand what interventions actually make a difference. It is a similar issue with UBI in general: while it sounds nice and might be necessary if our "AI is the future" overlords get their way, you do actually need to back up the promise of "UBI will unlock human creativity" with some amount of hard data, imo.
> Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
It sounds like these are small businesses and not startups. The US has 10% small businesses per capita.
> Some quick searching indicates that the startup rate (per capita) in Germany is about 1.1%, while the USA is 1.5%. Not a huge difference, but the USA doesn't have any of those initiatives afaik.
I believe there's differences between east and west Germany, so if you look at the west specifically, the gamp might get a little bit smaller.
Beyond that, Germany doesn't have as much of a startup culture as the USA, which is precisely why we need to incentivise people in a way that others don't.
> Just wondering what actually moves the needle and how to better create a society that is entrepreneurial
Willingness and awareness, where the latter is probably easy to fix but the former is a bit trickier: You need those people who have the ability to pull it off to want it in the first place.
And there I guess it splits into a) the benefits of entreprenaurship b) the benefits of employment and c) the cultural influence on how these are weighed against each other.
So tl;dr: a) make starting a company attractive, b) make employment suck more and c) convince people that independence beats security.
Employment in Germany is definitely a lot cozier than in the US, so unless we want to get rid of that, a) and c) are the options we have. If you want to achieve it without propaganda, then all you can really do is a), and that's what these programmes are already doing.
I think reducing buerocracy and offering good social safety nets so a failing business doesn't translate to a ruined life are the way to go, at least in the short term.
There was even an expression coined for this phenomenon in Germany: https://en.m.wikipedia.org/wiki/Hidden_champions
We have lots of SMEs that are world leading in their niche, but most people have never heard of them.
Is slow growth sustainable?
German bureaucracy is a constant hindrance. Your first year in business is pure compliance work, and waiting for various paper-based processes to complete.
Germany are also very risk averse. So we need such programs even just to counter this risk aversion.
Bureaucracy is crazy in Germany. Forget about doing anything online, paper and in person only.
Founding any form of limited company is expensive and complicated. Want to put a website online? Have fun putting your full name and address in the imprint. Want to offer some courses that teach X? Yeah, no, you need a license for that, mate!
Also being self-employed you lose most social benefits. You need to get private healthcare, you need to save up for retirement and so on. Getting back into public health care later on can be a bit complicated.
So my advice is to keep working part time on a job that gives you health insurance and everything and work on your company in your free time.
Germany is also one of the least friendly countries for expats. And I say that as a native Germain. Officials will refuse to speak English to you. Yes, refuse. Most people know how to speak English but often can't be arsed to do so. Plus general xenophobia and people being very tight-knit and not open to making new friends.
While I completely agree with many of the points that you made, I disagree with some:
> Bureaucracy is crazy in Germany. Forget about doing anything online, paper and in person only.
The latter point has nothing to do with bureaucracy.
> Germany is also one of the least friendly countries for expats. And I say that as a native Germain. Officials will refuse to speak English to you. Yes, refuse.
For example in the USA, they will refuse to speak German with you. So what?
In my opinion there actually exist good reasons for this:
1. A lot of legal, bureaucratic German terms have no direct analogue in English (and their word forming sometimes depends on subtle grammatical features of the German leanguage).
2. For official purposes, it does not suffice if the clerk can somewhat speak English; he/she rather has to be fluent in a way that is "negotiation-safe" ("verhandlungssicher"; I know that this German term is usually translated with "confident in business discussions", "business fluent", "language proficient", but all of these translations don't catch the subtlety of the German term).
> people [are] not open to making new friends.
The German word "Freund" (commonly translated with "friend") has a different meaning than the English "friend" - the relationship goes much deeper. I don't think that Germans are not open to making new "Freunde", but if you want to have shallow, superficial relationships, Germany is not the ideal country. Vice versa, if you want to have deep relationships, you will likely be annoyed by the USA.
Have you heard of Rocket Internet? It's one of the most successful models in the world. They may avoid the US market and such, but most of the unicorns in Malaysia are backed by Rocket. And most of the people who stay and start their own, backed by YC or whoever, are usually ex-Rocket. They hit 10% growth per week, even at unicorn sizes.
I would anecdotally put Germany at #3 globally just for Rocket alone, with US and China ahead of them.
There's lots of successful non-Rocket startups from Germany too, but most are boring stuff like agriculture, grocery delivery, pet stuff, etc. We normally don't take note of startups until they're Stripe-sized or something.
Isn't Rocket's reputation that they just steal ideas from other startups and create cheap clones of them? Not a terrible business to be in, but not massively inspiring or globally reproducible.
I'm not a big fan of Rocket, but I think that's an unfair way to put it. I'd say they're similar to what Bezos would be like if he had to start from Europe lol.
They take an existing model with a lot of potential and focus on implementation. They had a golden period with e-commerce because e-commerce is heavily logistics. And they do it in the hardest places, because the harder it is, the more they can sell the company for.
Back when Lazada started, Indonesia had terrible credit card penetration. Roads were not suited to delivery; heck they built their own logistics because the local logistics were not suited for e-commerce. There's a lot of complex laws on hiring, or incorporating companies there (which are nicer now).
China won't do it. They don't want to build companies in 6 different low income country with a total of 500m population or so. Normal people would just target the US or EU, which has more people and more money.
But Rocket goes into these countries. They have a lot of emphasis on leadership. They drop a scalable playbook for the locals. They grow it fast until it hits a cap before they sell it off to something like Alibaba. They do have some dark patterns as well. Whatever caricatures people have of China, Rocket does it better - they work longer hours, work people harder, build things for extreme scale, do what the Chinese won't.
It is not the funding model that GP speaks of. But it is a fairly successful model of creating and exiting startups. It's quite autocratic to my understanding. I don't have that kind of work ethic and I feel like there's a hint of envy when people call them copycats. They don't have a good presence on the English Wikipedia though.
Is there any way to put numbers to this success? As in, by what metric is Germany #3?
> And yet Germany still doesn't seem to have much more startup / entrepreneurial success than any other European country. What gives?
Too much bureaucracy.
Many people in Germany do hate it; there even exist quite some people in Germany who would really deeply from their heart love to see the politicians dead who are responsible for the whole bureaucratic mess (which are lots of politicians).
EDIT: nicbou gives a similar point: https://news.ycombinator.com/item?id=43609839
Entrepreneurial success they definitely have, it's just not in-your-face tech/digital stuff, it's lots of Mittelstand companies focusing on niches, like in high-precision machines that are then used for precision manufacturing (optical lenses, chemistry reactors, etc.).
What gives is that it isn't a primarily marketing-driven consumer-facing entrepreneurship so you don't hear about Peter Huber Kältemaschinenbau, or Rational AG-like companies[0].
[0] https://www.chargeurs.com/wp-content/uploads/2020/01/The-Bes...
“Startup” implies VC-backed company.
And VC’s invest in companies to get a 100x return.
Which almost by definition means, if you run a startup - you need to get it to become a unicorn for it to be successful.
Otherwise, why take VC money … and just bootstrap it instead.
I live in a country (Germany) that is famous for having a lot of "mittelstand". These are basically family owned businesses. Some large German companies fall under this. Aldi and LIDL for example, which are super market chains that at this point have a global presence. And some large companies (Bosch, Siemens, VW, etc.) are actually a multitude of smaller companies. Much of the German economy is smaller and bigger specialized companies doing their thing. Only some of them are public companies.
What these companies have in common is that they start small and then grow organically. The main issue from a VC point of view is not that these aren't good companies but that it can take decades for them to turn into big companies. But from the point of view of the people founding these businesses, it's a good, honest way to succeed in life.
There's nothing wrong with the principle of starting a company to make money from whatever it is you do at whatever scale you are doing it. But it should drive your decision making as to whether or not you give chunks of your company away to an investor. It might stop being your company if you do.
Also, if you go down this path. Stop calling yourself a startup. It scares away customers. They don't want to hear that you are a flaky wannabe that is still figuring it out. They want to hear about your other customers and how awesome whatever it is you are selling is. They want to be re-assured that it is safe for them to enter into a multi year customer relationship with you. Projecting that you are new to all this company stuff and might not be around in six months is exactly the wrong message for them. They don't want to hear about what you are going to do, they want to hear about what you have done already. The stuff that gets VCs horny will scare away customers. If you are pitching customers and VCs at the same time, make sure you have two very different pitches. And if you are going to pitch VCs, it actually helps if you have customers. The more business you have the stronger your negotiation position.
I was part of mittelstand once.
I think it is very hard to compete in the market where lot of things are subsidized by VC money. The new VC backed companies have more money for marketing, subsidized sales wherein older orgs are hard to move.
Esp. for german orgs, they are very hierarchical, getting an innovation out is hard. Add union to the mix. Their margins are razor thing. It is a struggle. I can imagine back in the day, they moved the innovation needle.
Lot of these companies are often bailed out by the government as they employ alot of people.
I do like the idea in general and feel there's a lot of room for improvement between the (VC / bootstrapping) extremes.
However, the middle path from the article presumes the existence of VCs willing to join you on that path. The article waves this away with:
> angel investors are generally more open to a 2-3x ROI
For a $1M round you'd need to find 10-20 such angels (assuming $50k-$100k average check size) willing to accept small upside, for which you'll have convince them there's commensurately smaller risk. This will probably mean you have some revenue and some sense of where PMF might lay or some kind of brand/pedigree.
Do not underestimate the value of YC brand and being able to present on Demo Day gives you. A random Jane from Ohio building her tech company would have a lot harder time finding those 10-20 angels, to put it mildly. I'd be more careful when extrapolating path-dependent success into a general strategy.
That said, my gut feeling is there's room for the next Paul Graham to fill that space - somehow.
For smaller amounts of monies such as £250k or £1mm, it is much easier to get funding, since a decent amount of countries offer tax relief to the investors for example in the UK through EIS, SEIS, or even VCT. These offer advantages to angels over the VC's.
In addition the whole point of this piece is that you are generally looking to grow slower, thus having smaller capital requirements and burn rate.
That is what I was wondering as well. Where can I find investors willing to invest up to $1M with an expected 2-3x ROI on typical VC terms? In particular, for pre-revenue ventures. And how can you keep that 90%+ equity with 10 angel investors?
I think the post is off.
How exactly is a VC—or any investor, really—supposed to make money from a startup that’s aiming for a “middle of the road” outcome? That just doesn’t add up. In that case, wouldn’t it make more sense to invest in something safer or more traditional?
From what I understand, the very definition of a startup is tied to ambition. Founders need to be aiming for the moon—or at least something close to it. If you’re not taking big risks with the potential for big rewards, can you even call it a startup?
People use "startup" to mean "start up business" and not "business that is aiming for rapid, borderline-unsustainable growth and very likely requires hundreds of thousands, millions, tens of millions of dollar to even start thinking about achieving it," which is what the actual definition is.
VCs aim for 1 out of 50 investments to return 100x what they put into it, and the rest of them to die quickly and stop taking their attention. A company kicking off 5% returns every year is counterintuitively worse than flaming out immediately.
Well yes, that's called a regular company. Not sure if I'm missing something here?
At least some years ago, browsing HN's comment section felt like it was a different world, separated from reality. I think some people need this kind of grounding reminders every once in a while.
Russ (VC): Why would you go after revenue?
Richard (CEO): Because... to make money?
Russ: No. If you show revenue, people will ask how much, and it will never be enough. The company that was the hundred x-er, the thousand x-er, becomes the two x dog. But if you have no revenue, you can say you're pre-revenue... you're a potential pure play. It's not about how much you earn, it's about what you're worth, and who's worth the most? Companies that lose money. Pinterest, SnapChat, no revenue. Amazon has lost money every fucking quarter for the last twenty fucking years and that Bezos motherfucker is the king. There's no revenue. No one wants to see revenue. Go!
Richard: Oh, um, I just thought that mainly the goal of companies is to make money.
Russ: Yeah, no no no, that's not how it works. I don't want to make a little bit of money every day, I want to make a fuckton of money all at once. ROI. ROI!
— Silicon Valley, "Bad Money" (2015). https://www.youtube.com/watch?v=BzAdXyPYKQo
'Be a normal person/company and do normal person/company things,' isn't talked about very often, and it can be useful to be reminded that it is a pathway that can lead to success.
It depends very much on your definition of success. Many who grew up upper middle class would define survival as failure.
Who talked about survival? If you think that anything other than becoming as rich as Mark Zuckerberg is "survival", then you're in for a treat.
Life is too short and the works is to big for that kind of mindset.
It's not a "regular" company, because it's still raising angel investment, presumably from the tech/startup ecosystem.
A more common route for non-tech-startup companies is to get money via debt - in other words, borrow money from a bank or financiers. That's a different model to with different risk/reward characteristics, but it's how most non-innovative entrepreneurship is done, I believe - things like building restaurants, buildings, etc.
This is indeed a "middle path" in terms of raising money by selling equity, but selling a smaller amount of it for less money, which keeps more ownership stake and control in the hands of the founders, but necessitates slower spending cause they raised less capital.
That’s pretty much what I took away. I guess the difference is that in my mind a “regular” company gets its funding via a loan. The post is from someone who got into YC.
But yeah “building for profitability” sounds a lot like… good business!
Regular companies aren't given $1m they don't have to pay back.
They have to get loans and founders are usually on the hook if the venture fails.
This is different from what the article advocates.
I run a small 20 year old service business in the US. Just getting a $300K line of credit from a bank required a lot of paperwork and both the company and me personally being on the hook. It took about a month to secure. In contrast, on a different occasion a secured a personal home equity line of credit for $100K in a bout 5 minutes.
A million investment doesn't sound regular. Basically if you raise a mill for 33% you value yourself at $2m. That is without PMF or revenue!
This seems like pulling a fast one on VCs if you then pivot to bootstrapping a nice family business. That ain't why they threw $1m at your PowerPoint.
In "dragons den" style traditional business they'd offer you $50k for 50% at that stage. Maybe.
Isn't this the gap TinySeed tries to fill?
I am a big believer in Seed-Strapping. You need some initial capital to get you started (can be as low as a few months of your own salary). But you should aim to bootstrap your solution.
Trying to be a unicorn killed many otherwise good products. For instance Evernote. Or Wunderlist. Or Soundcloud.
Someone investing $1M for 10% might better off buy gold or a property.
It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?
Because gold will appreciate reliably to an extent but a company can appreciate in value far exceeding what gold can -- that's the risk/reward trade off.
The chances of a startup failing is way higher than gold degrading in price.
It sure is and many do choose gold for this reason. It depends on how much risk you want to expose yourself to.
The problem with this idea is that capital markets exist and capital seeks compounding. If there is a market to be addressed and it has size, someone will go in and displace you with a cash flywheel.
Here is another one, the company doesn't need to have an endless exponential growth to have a sustainable business.
Hopefully, over time, we will get better and better in creating the world of software from small interoperable pieces that can be maintained by small teams or even solo entrepreneurs.
Yuck, we already got enough OpenSSL and other foundational projects that have a bus factor approaching (or being) 1.
Just today I learned that the unzip program hasn't had an official release since 2009 (!) and everyone ships a different set of patches for it.
Relevant xkcd 2347 [1].
[1] https://xkcd.com/2347/
[2] https://news.ycombinator.com/item?id=43608052
A VC will build a portfolio of startups that each have the potential to do massively well. After that they don’t care which of the portfolio companies lives or dies, as long as one explodes and compensates for the others.
As a founder you care very much which of your companies succeeds, as you only have one.
I usually compare them as sharks vs bottom feeders. Either you become the predator that eats all the big fish. Or you go somewhere the big fish won't go.
There's the 'crab' model, but this isn't for startups. They're old, companies like Yahoo who have a moat and can't leave it. They're at evolutionary peak or rather a local maxima. They're too difficult to change and a major change would make them too vulnerable.
An ecosystem analogy should draw attention to the fact that most biomass in most ecosystems is not in the apex predators but in the lower trophic levels. Apex predators are a useful regulatory mechanism for the ecosystem, not the be all end all of natural selection.
Yup, the analogy falls apart. Basically don't eat unicorn food.
True that, and your startup doesn't need to be a success in people's eyes.
Glad someone is talking about the option other than selling to VCs or ramen diet start ups. The tech community might have collectively forgotten the other option.
I'll send this to my competition thanks!
Why are you posting here when you could be crushing it™ delivering 100x value to your shareholders? You've already failed.
Yes, this is so true. I hope all our competitors follow this advice.
I was being called a unicorn in a professional setting... unfamiliar with the term, I immediately thought I was being insulted, because unicorns exist just in people's imagination and fairy tales.
Also the other thing that I realised after working with a bunch of VCs is that they are all incredibly dumb. Few VCs are founders themselves and you will have better luck with them but the majority of VCs have simply no idea about product and technology and they are simply pattern matching. What that means is that they will cargo cult everything and if your startup doesn't fit the mold they will not respond to you favorably and the sad part is that the actual 10x, 100x returns that their VC firm needs comes from those type of investments but they simply cannot see them.
A long time ago - our director of research at a startup used to call VC's carnivoruous sheep ( dumb, flocking, but will eat you alive ).
Ironically he is now a VC - but a very successful one.
We also have a problem with VCs that want start-ups to scale quickly, even though this often builds incapable teams. We then say, "Oh, it's because they stopped being in founder's mode," whereas in reality, the team is so malcomposed and mismanaged that it could not build even a simple product.
This has happened a lot in games. Now, VCs have almost stopped pre-seed and seed funding in this industry. The global annual VC funding in games is about $1B, about 1.5 Call of Dutys. This is down from around 12B in 2022.
One could say they threw the baby out with the bathwater because while many executives were abusing the found-scale-exit business model and taking investors' money, many were also not. It's pattern-matching through and through, very little due diligence.
This is way too broad of a statement.
The smartest person and the dumbest person I've met professionally are both investors.
This.
VC culture gives you the USA, a failing empire and a "silicon valley" which hasn't seen silicon for 3 decades
"In fact, if you pitched this pathway to a VC, I’m sure they’d ghost you quicker than their last Hinge date." — oh they will, fr