Why We're Not Raising Funds

http://blog.omnicalculator.com/not-raising/

by MateuszMucha • 11 years ago

41 43 11 years ago

blog.omnicalculator.com

MateuszMucha13• 11 years ago

The decision is far from undisputable, I'd love to hear what you think.

afandian3• 11 years ago

Looks like this isn't connected with Omni Group (who are a long-established software company). Isn't the naming a bit confusing? https://www.omnigroup.com/about/

MateuszMucha13• 11 years ago

There's more than a few companies and projects with "omni" in their names. It's a pretty generic word. If I called it "Awesome Calculator" or something like that we'd surely find a lot of similarl names, too.

paskster• 11 years ago

I love the first reason "Because I can’t afford to allocate the time needed". Soooo true. You have really high upfront cost if you start fundraising and it might be that you end up with no real good offer at the end.

gphil• 11 years ago

My opinion is that you probably shouldn't raise money unless you need money to execute your business plan. Some business plans aren't capital intensive, so why give a big chunk of your company away if you don't need additional capital to execute your vision. I don't think mere "growth acceleration" is enough to warrant it. You need to be doing something with the money that you couldn't accomplish otherwise.

MateuszMucha13• 11 years ago

That's exactly what I'm thinking now. And what smart people have been advising me all along... it took me a while to hear them, though.

afandian3• 11 years ago

Genuinely non-snarky question.

It looks like a standard calculator and conversion app, and it looks like most of the implementation I could imagine being in a calculator app is already done.

Why would you even think of raising funds? You thought it was a good idea to write the blog post, so it obviously crossed your mind.

solutionyogi• 11 years ago

Exactly my thought.

I went to their website, tried to find non-trivial calculations and I couldn't find any. I really don't know why there is even a question of whether to raise funding or not.

MateuszMucha13• 11 years ago

afandian,

This app is just an MVP, the future hopefully is much bigger. On of the reasons is "because it's what startups do" and "everybody thinks that's the next step". I do have needs (development, content creation and in-house marketing team), but none of them are a must-have, I can do it a bit slower with whatever means I have at my disposal.

ohquu• 11 years ago

What does "the future hopefully is much bigger" mean for a calculator application? Competition with Wolfram Alpha? Unless you're doing something on that scale, I can't imagine what you mean.

CookWithMe• 11 years ago

Because he went through an accelerator. He'll be told for months that the demo day and the pitch will be super-duper important, because investors.

I attended a different accelerator than him (but also corporate and in Berlin), and the idea that bootstrapping may be viable, or even that waiting for another 6 to 12 months when one has real feedback from the market, was never brought up. This is especially sad, because the situation in Berlin is basically inverted to the one in SV: Living costs are cheap, raising (seed) money is hard.

Our Demo Day... afaik no startup got an investment because they met an investor there :-) Afaik, some proceeded to later (>12 months) raise money, one did have success with crowd-funding. But we all wasted a serious amount of time training our pitch...

MateuszMucha13• 11 years ago

I agree with most things and that's been the general sentiment in our accelerator, too. However, I don't consider it a waste of time. Pitching is great in a way that it forces you to have a clear vision of what you want to do. And boy, I needed it. Every time I pitched, I got questions I knew I didn't have good answers to. These were the biggest holes in my business plan and pitching alone made me think harder about them.

As for the demo day, we were told early on that it's a big thing, but it's unlikely that we'll be discovered then. I got in touch with a pretty great investor who's kinda interested, but I think they're way out of our league now (series A/B level), so we'll wait. Also, on that day we initiated a B2B deal which just might turn out to be what we need at this stage (we're building a prototype now).

I love the Berlin-SV comparison and your conclusion!

lewispb• 11 years ago

Why does your app ask for my location even when i'm not using the app?

MateuszMucha13• 11 years ago

It's a bit embarasing, but I'm not sure. I released it in June or July and didn't notice it for a long time (wasn't an iOS user). Then we've been working on a complete rewrite for a long time. The new release awaits App Store review.

psionides• 11 years ago

You might find this useful: http://mackuba.eu/2015/03/17/accessing-user-location-data-in... :)

codegeek• 11 years ago

Good read but it may be nice to add the word "yet" to the end. The author clearly says at the end that 'So, if it's going to happen, it will be because they will have knocked on our door, not me knocking on 50 of their doors"

I have a very small web based business that has the potential to be a $50MM business as well but I am always worried about the same thing if investors even care to blink unless we promise a $1B return/exit ?

MateuszMucha13• 11 years ago

You're right, edited.

pxlpshr• 11 years ago

$50MM isn't big enough. It just doesn't support most funds' basic economics. It's nothing personal about you or your idea.

Furthermore, why would you want to raise money if your market cap is $50MM? If you were to raise, you'd likely have to exit for upwards of $300-500M to have the same exact returns as not raising. A bootstrapped, $50MM company is absolutely nothing to scoff at.

mdekkers• 11 years ago

Very nice read, I can relate to everything you write.

nvk2• 11 years ago

It really resonated with me, at Coinkite.com we chose to bootstrap and have been turning away offers for 18 months now. I'm not fully opposed to taking money, It's just been great to focus 100% of our time on Product.

We've managed to get 160,000 active wallets (funded), 1000+ devs using the API, 8000 debit cards and terminals in over 30 countries with very little money.

it's amazing how far you can stretch your own money specially if your business has some revenue form day one.

I don't rule out eventually raising for accelerating growth.

_Note: I'm a terrible ESL writer._

jxm262• 11 years ago

Reading your comment is a huge inspiration to me. Do you plan to do any writeups/blog posts of your experience. I love to hear stories from successful bootstrapped companies. I too would love to start something in the bitcoin space :)

nvk2• 11 years ago

The main thing I can say is build something and charge for it, if people are willing to pay, you might have something :)

I'm a terrible writer, so unlikely, but happy to chat anytime. We are not "successful" yet, long road ahead. Look for @nvk on twitter, can give you my email there.

pla3rhat3r2• 11 years ago

A lot of people believe that raising capital is completely necessary for your business to succeed. However, many do it and achieve great success. Not raising money slows growth in most cases but what you gain in control and complete ownership outweigh the the risk. It's not for everyone but I feel like raising money is the benchmark for success in people's minds. Which to me has always been silly. Raising funds is not for every business. Good read. Wish you guys all the luck.

MateuszMucha13• 11 years ago

Thanks. While I agree for the most part, I do think that raising money is an important validation. Often you hear about a project you wouldn't even consider interesting, but when it's accompanied by "raised X MM from Y", your perception changes.

Also, it's that head-turning thing. They say "we raised X" and you start listening. I had something similar with my downloads count. Honestly, I didn't think 1 million is all that special, but over time I learned I should start most of my pitches with. People just start to listen.

pla3rhat3r2• 11 years ago

Yeah and I'm not saying it's a bad choice. I just think too many people put so much importance on whether or not a company raised money as a measurement of success. When the reality is many companies can do it on their own, control complete ownership, and still achieve a level of success that many companies that raise money see. It's really just based on where your company is headed and whether or not you're eyeing an exit for your company. If you are looking to sell, be acquired, or go IPO then raising funds makes complete sense.

MCRed3• 11 years ago

I don't buy that not raising money slows growth. Your growth is a factor of finding product market fit. Fast growing companies are not doing it because they spent millions on a super bowl add- they are not buying growth (and when they do it turns out to not be real, and thus you end up with the situation like groupon)

Fast growth is about finding a product that resonates with the market and leveraging that.

That takes time and attention-- not money.

And what do you give up when you chase VC money? The time and attention of the CEO who should be the one finding that product market fit opportunity!

zura• 11 years ago

Did you use any cross-platform frameworks for developing this?

MateuszMucha13• 11 years ago

@zura: yes, it's running on Cordova, but we'll move to React Native as soon as we're comfortable with it (we're using React right now, although the iOS version is still on Angular).

pistoriusp• 11 years ago

I also made a calculator and I'm not raising funds either:

https://itunes.apple.com/fi/app/calcable-spreadsheet-calcula...

CPLX• 11 years ago

The idea that a couple kids that programmed a fairly trivial, albeit useful, calculator application feel like they should be raising multiple millions of dollars is what's wrong with the present state of affairs. In my humble opinion only of course.

MateuszMucha13• 11 years ago

CPLX, the whole point is I don't think I should. And yes, we want to make it a big thing, just wait and see :-)

billmalarky• 11 years ago

Well over a million installs with no marketing is no joke. I think they could be on to something. I mean.... look at snapchat.

MCRed3• 11 years ago

We're not raising money either. We took a small amount (< $6,000!) from an angel, and that's it.

I've been working for startups for 25 years, both as early stage employee and as founder.

I feel that the general sentiment really underestimates the cost of VCs.

There's several reasons I'm inclined to pass on VCs:

1. In the early stages it is a huge distraction, and worse, while you're still figuring out what your company really is-- finding product/market fit, etc, having a VC in there pushing the flavor of the day is not a good thing. The VC is looking in the rearview mirror, not at the market and not forward, but chasing whatever's hitting right now.

Notice how many Video sites got funded when YouTube got bought? How many of them are around now? When the latest news means "you gotta have a video story!!@!!" thats just a distraction your startup doesn't need.

When you're at the point that you have a profitable engine and need to scale it, then VC money can be taken and poured into customer acquisition, capital needs to scale production, etc.

But when you're just figuring it out, an accelerator or angel money is the way to go. Or go without if you can, even better.

I'm concerned that Accelerators have been "demo day bootcamps" that focus too much on pitching and not enough on business development (or customer development) ... and slot you right into thaking a big VC round when your company is only a few months old and not ready to scale.

In fact, given my experience, I'd bet if you analyzed the failures of companies that came out of great accelerators, you'd find that a lot of them got VC money (and influence, distractions, etc.) too early.

2. The cost of money from VCs is always too high. They have way too many "hostile" deal terms that they "need because they're taking such a huge risk", but this ignores the fact that you're taking even more risk. Their shares should not be more valuable than your shares that you put actual sweat into. They want special incentives because they are "early money", but you're even earlier money, and worse you spent TIME which is more valuable than money.

Thus the situations where taking VC money makes sense are the ones where you get a rather good deal from them, yet still can't get by with ploughing profits back in, or taking a loan from a bank or some other funding source.

In fact, now that there are angel.co syndicates, why should you take money from VCs? You can raise a couple million from a syndicate of angels, get better terms, and spend less time on angel.co than running around the bay area for half a year.

3. VCs are always pitched as "it's not the money, it's the connections". I've seen very few anecdotes where this turned out to be true, but I've directly experienced many situations where the VCs killed the company. In fact, every VC backed company I've been involved with that failed, and a lot of the early (lower) exits, were caused by VCs. Sometimes these are seen as "fights between the founders" but even then it's because the VCs are trying to force the company to do the wrong thing ("What's your video story?!") and half the founders see it or want to just go along to minimize conflict and the other half of the founders realize it is a company-killing idea. Other times when a founder is too strong the VCs have worked to undermine him, push him out, etc.

VCs meddle too much, and I've seen very little actual productive help.

biot• 11 years ago

  9. Because it's just a freakin calculator

Why We're Not Raising Funds

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