Tim Bray: No Venture Capital

http://www.tbray.org/ongoing/When/200x/2008/10/16/Fear-Venture-Capitalists

by erik • 18 years ago

17 3 18 years ago

webwright• 18 years ago

"These days you can do a Web startup for almost no money and, within a few months, find out for real if anyone will pay for what you’ve built. So why on earth would you sell part of it before you find that out? I strongly believe that a Web startup’s chance of success is significantly reduced by letting VCs into the picture."

This isn't an argument against taking VC investment-- it's an argument against taking it before you have any traction (which I largely agree with). When you have traction, growth, and (even!) revenue-- you've got more leverage.

Once you've proven that someone wants what you've built, how long (and how dangerous/painful) is the road to the point where you can afford to pay yourself a reasonable salary? It tends to be pretty long and still has plenty of risk.

If you take VC (the right amount from the right VC at the right time), you give up ~20% of your company and very little control. In exchange, you get a paycheck and a fleet of valuable/powerful advisors and the ability to hire a guy or two to fill in with the skills that you lack.

"I strongly believe that a Web startup’s chance of success is significantly reduced by letting VCs into the picture."

I am constantly amazed how often people equate VC investment to a loss of control... If you've got good VCs (they exist) and good leverage (because you had some traction before you raised money), your VC has very little power to submarine your business (by design or by negligence). Exactly how does a VC reduce your chances?

In my mind, what reduces your chances is taking too much VC money or not having the discipline to build a scalable business when you have a big pile of money in the bank. This isn't the VC's fault, it's the entrepreneur's.

bootload• 18 years ago

"... I am constantly amazed how often people equate VC investment to a loss of control... If you've got good VCs (they exist) and good leverage (because you had some traction before you raised money), your VC has very little power to submarine your business (by design or by negligence). Exactly how does a VC reduce your chances? ..."

Because hackers are by definition optimists and Venture Capital + successful Startups "can" be risky. A counter view can be read in "Founders at Work" Livingston, Ch24 Phil Greenspun and here ~ http://philip.greenspun.com/business/startup-tips/ and http://waxy.org/random/arsdigita/

Lack of control is a subset of risk.

charlesju• 18 years ago

Good points, I was going to post something along the same lines, but you beat me to the punch.

As long as you have traction and are generating cashflow, the VC will gladly take a sideline to his/her investment.

Tim Bray: No Venture Capital

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