Now is a great time to be unfundable(bryce.vc)
bryce.vc
Now is a great time to be unfundable
http://bryce.vc/post/2151529046/now-is-a-great-time-to-be-unfundable
5 comments
You have a good point. I voted you up. But I also have a counterpoint.
The most valuable asset you can build is a resilient founding team. Facing important problems while still building your product is good practice for what happens when a company grows. Not being able to focus 100% on all important aspects of your startup is a good situation to gain experience with.
Another upside to not having funding is it forces you to seek economical ways to grow your userbase. I'm focusing on this intensely now. There are a lot of things my users would like, but I'm picking the ones that help them show my service to others.
The most valuable asset you can build is a resilient founding team. Facing important problems while still building your product is good practice for what happens when a company grows. Not being able to focus 100% on all important aspects of your startup is a good situation to gain experience with.
Another upside to not having funding is it forces you to seek economical ways to grow your userbase. I'm focusing on this intensely now. There are a lot of things my users would like, but I'm picking the ones that help them show my service to others.
The hard part lately (last couple years) seems to be that when you have business traction it's still slow to get capital to expand. Can't get it from a bank. Getting from a VC is slow. Getting from angels works if you need $100k but not if you need $800k, and angels are ironically more likely to give you money if you have no revenue but a promising idea (since if you are actually headed up the hockey stick, your valuation is higher than they want.)
I've encountered a handful of companies that (claim to) have multi million dollar contracts on the table that they need $500k-$1m to execute on and can throw that off in the first year's profit. I'm intensely surprised there isn't more of a factoring type solution that provides asset-backed contract-backed warrant-sweetened lending at credit card like rates. Sort of an alternative asset class to the Series A/B raises.
In fact, if anyone out there wants to put $3-5M to work that way I bet I can matchmake you with five companies in a month.
(Revenueloan and On Deck Capital are the right ballpark, but don't count. Revenueloan only wants to talk to you when you already have three big deals and want capital to spin up your fourth, and On Deck is looking to do loans an order of magnitude smaller.)
I've encountered a handful of companies that (claim to) have multi million dollar contracts on the table that they need $500k-$1m to execute on and can throw that off in the first year's profit. I'm intensely surprised there isn't more of a factoring type solution that provides asset-backed contract-backed warrant-sweetened lending at credit card like rates. Sort of an alternative asset class to the Series A/B raises.
In fact, if anyone out there wants to put $3-5M to work that way I bet I can matchmake you with five companies in a month.
(Revenueloan and On Deck Capital are the right ballpark, but don't count. Revenueloan only wants to talk to you when you already have three big deals and want capital to spin up your fourth, and On Deck is looking to do loans an order of magnitude smaller.)
I speak from my startup's experience. We thought we were a lock for angel funding around 4 months ago. Finally, all the answers came back, "no". We believe it was because it's our first startup, and we did indeed look like the cardboard rocket ship to investors. They loved the cardboard rocket, but weren't about to give us a quarter of a million dollars to turn it into a real rocket.
We have since gone through 3 major pivots (possibly 4, depending on how you split it). One of them was to consult in order to bootstrap -- something through which we've learned a lot about our customers. 2 of them were pretty big changes to our core business.
Interestingly, our original concept is still the long term goal. Hearing "no" from investors just made us realize that we need to build certain foundations before we can build our mansion of a company. This is likely a consequence of us being overly ambitious at the start of the project.
We have since gone through 3 major pivots (possibly 4, depending on how you split it). One of them was to consult in order to bootstrap -- something through which we've learned a lot about our customers. 2 of them were pretty big changes to our core business.
Interestingly, our original concept is still the long term goal. Hearing "no" from investors just made us realize that we need to build certain foundations before we can build our mansion of a company. This is likely a consequence of us being overly ambitious at the start of the project.
Okay, am I the only one who's a bit tired of hearing that every rejection is a badge of honour and the like? I mean, okay, learn from failures and all that, but they aren't badges, they're things to avoid. There's no need to sugar-coat it, sometimes your idea just sucks or is unworkable. Take the feedback and do your best with it, but being proud of it is a bit of a stretch.
I think that there is an optimal number of rejections. Too few and you don't realize all the things that can go wrong with your business. Too many and it wears down on you. We had what I feel was too many, but then we finally raised a big seed round.
This one sounds different. It's by an investor, not a rejected entrepreneur.
I know, but still, it sounds a bit patronising. Sometimes you just fail and it amounts to nothing, just ignore it and go on to the next thing. I know it's hard to admit we've wasted time on something, but sometimes it just happens. Sure, you gain experience, but that doesn't mean it's better than if it had actually succeeded.
hey all- thanks for taking an interest in the post, I've really enjoyed reading your feedback.
the impetus for this one was a series of conversations with entrepreneurs who said they were glad we hadn't funded them when they initially approached us. In retrospect, they felt that funding the wrong direction for them would have validated their bad idea and reenforced their belief that it was worth pursing. The push back ended up forcing them to really think about where to spend their time and limited resources.
The other conversations have been with entrepreneurs and founders expressing concern that its too easy to raise seed funding right now. That there's a growing sense of entitlement and arrogance particularly in the bay area. That half baked ideas aren't getting push back; rather, they're getting validated and compounding the entitlement problem.
No one knows how all of this is going to play out over the long aul. Just trying to lend a little perspective to those going through their own fundraising process.
the impetus for this one was a series of conversations with entrepreneurs who said they were glad we hadn't funded them when they initially approached us. In retrospect, they felt that funding the wrong direction for them would have validated their bad idea and reenforced their belief that it was worth pursing. The push back ended up forcing them to really think about where to spend their time and limited resources.
The other conversations have been with entrepreneurs and founders expressing concern that its too easy to raise seed funding right now. That there's a growing sense of entitlement and arrogance particularly in the bay area. That half baked ideas aren't getting push back; rather, they're getting validated and compounding the entitlement problem.
No one knows how all of this is going to play out over the long aul. Just trying to lend a little perspective to those going through their own fundraising process.
Well a 'no' is definitely a lot better than the silent treatment
However, I still believe that seed funding is important to most startups for the simple fact that if you have to worry about paying for groceries and food, you're not going to be able to focus 100% on your startup.
A 30k - 150k seed round could go a long way for most startups and I think is almost required just to get the basics covered.