
The Fatal Pinch - _pius
http://paulgraham.com/pinch.html
======
LukeFitzpatrick
I agree with this article. Founders overspend once they get their first
initial investment, and rely on the next investment too much. Founders should
be paying more attention to burn and churn rates.

I once saw one of my best friends fail his first startup. They had a kickass
programming team, received investment and did a bunch of things wrong.

1) Spent the whole investment on Founders salaries. They had 4 tech
programmers (top notch guys), and used the money to pay for their time whilst
they were building the platform.

2) They had the wrong product market fit. They expected to sell their services
to Universities for 50K. In my opinion, they should of targeted college
students, and add a tutoring service and take a small commission.

3) They built a fully finished product. Their was no room to scale it or grow.

4) They expected that the product would just sell itself. We all know, that's
not how it works in the real world.

5) They didn't do any market testing and validation = wrong product market
fit.

The end result, they got an investment and spent it quickly, they didn't try
to pivot, tried to get another investment and failed. The team broke up pretty
quick, or as you referred to in your article, they got an unwelcoming 'pinch'
on the backside.

I learnt a lot from seeing my friends fail, and their failure has helped me
out a lot with my startups. When startups first get their investment, they
should have a 1-2 year plan for that money (burn rate). Divide the investment
by a specific time period and that's how you spend it.

Realistically, after you get through the TechCrunch 'trough of sorrow' as
Andrew Chen puts it, you have to stay motivated and plan for the future. The
future looks dim if your startup is heavily reliant on receiving additional
investments to keep you alive.

More on the pinch, startups shouldn't be getting an investment to keep them
going. They should have this already sorted out. A very wise person once told
me, you should seek investments when you don't need them, as this means you
have done your homework and can also find the best deals.

Great article, and I appreciate the awesome content.

~~~
rdtsc
Selling to big colleges is not too different than selling to large enterprises
and/or to Uncle Sam. Product quality and features are much lower on the list,
than lobying, networking, marketing, developing contacts. Learn to play golf
(or whatever the CEOs and administrators of big institutions or companies are
doing today to socialize). Or instead of hiring another programmer hire
someone who was in charge of making buying decisions for the industry you are
trying to sell to.

That is also the reason why many colleges, or governments, end up with crapy
overpriced software. You look at it and say "I can do 10x better and sell for
10x cheaper". The problem is you are not aware of the size of the iceberg
lying under the water.

~~~
LukeFitzpatrick
I think they had the options to target Universities or college students. The
product connects college students to other students to for help with problems.
It's mostly suited for the mathematics, engineering and computing faculties.

The big issue is, they didn't have anyone to do marketing for it or test the
market to see whether it wants their service or not. They should of done a
pilot system. Focused on one university in Beta mode, and then expanded. They
were too fixed on selling it for 50K a piece.

------
ChuckMcM
That is so spot on. Put another way, the seed round is a peek to see if you
can do what you say you can do, series A is a bet you can make it profitably,
and series B is the gas to grow the market. As soon as you know your cash and
your profitability cross below the 'zero' line you calk your investors that
week and you ask them, call it or push forward. They say no, then you just
roll it up. And I know, that is much much easier to say than to do.

~~~
philjr
Love this description!

------
joshu
This is why I hate investing in startups raising $500k or less. You won't be
able to raise again unless you have significant upwards progress.

~~~
paul
Several of my best investments have been from startups raising less than
$500k. Justin.tv/Twitch returned 97x my original investment, and Weebly will
likely be even more.

~~~
super_sloth
Presumably those were a while back?

Do you think the climate has changed since then to make it much harder?

~~~
paul
The climate has changed in that it's easier for startups to raise more, but
even those that do not can still be very successful. Justin.tv or Weebly would
not require any more money to start today than they did six years ago -- if
anything it's gotten cheaper.

~~~
kenrikm
I remember David from Weebly noting that they narrowly avoided the pinch by
becoming profitable (circa 2009?) Now AFAIK they are kicking ass.

~~~
paul
Yes, the Weebly story is amazing. He covered part of it at Startup School a
few years ago:
[https://www.youtube.com/watch?v=l_b228qEVi8](https://www.youtube.com/watch?v=l_b228qEVi8)

~~~
gotothrowaway
Weebles wobble, but they don't fall down.

------
tonydiv
These days, the stakes are higher for everyone. Investors expect faster growth
and want a "meaningful stake" (15%+) early on.

Meanwhile, entrepreneurs generally try to raise more too. Who doesn't want
more cash if they can get it?

This is dangerous for those who don't understand these dynamics. The growth
trajectory needs to align with the incoming cash. The second you raise a $3M
seed round, you're on the roller coaster. You will need to show "hockey stick"
growth in 12 months, and raise your A in 18. If not, you're dead.

~~~
danieltillett
The problem of course is that only a minority of companies can ever really
meet this. This requirement seems to have driven a lot of startups to do
things in a way that does not maximise the benefit to the founders [0] -
investors can spread the risks over multiple investments while the founder are
stuck with all their eggs in one basket [1].

0\. I don't blame the VCs for doing this as they are doing what is best for
them and their partners, but as a founder you should look very carefully at
what is on offer and if what you are expected to do is viable.

1\. Paul's point about the fatal pinch is correct, it is just that it is
occurring much earlier (at the seed round) not 6 months from the money running
out.

------
carsongross
One way to avoid the fatal pinch is the Dickens approach:

 _Annual income twenty pounds, annual expenditure nineteen nineteen six,
result happiness. Annual income twenty pounds, annual expenditure twenty
pounds nought and six, result misery._

In a world with AWS and pay-as-you go services, it's more and more possible.

~~~
TheBiv
(Zero sarcasm) can you possibly explain, in different words, what this means?

~~~
michaelhoffman
The numbers refer to pre-decimalization British currency. To convert to modern
currency:

    
    
      £19 19s 6d = £19.975
      £20  0s 6d = £20.025

~~~
to3m
Wikipedia has a few pages about the various systems of this kind:
[http://en.wikipedia.org/wiki/Pre-
decimal_currency](http://en.wikipedia.org/wiki/Pre-decimal_currency).

Difficult to fathom why the fashion for these passed, because such systems
provide so many advantages. A good example is the Spanish system of division
into 34, which permits straightforward further division into not only 2 but
also 17 pieces - a case very difficult to handle with the modern restrictive,
awkward and inconvenient decimal systems.

~~~
jameshart
It saddens me in some ways that the UK currency decimalized before mass
computerization of record-keeping took off. I think I would have liked to have
lived in a world where database currency columns needed to support pounds,
shillings and pence (keeping in mind that pence could be divided into
quarters, of course).

~~~
jaza
Dealing with Olde English currency units (and other non-decimal currency
units) may have been "a fun challenge" for programmers... but it does NOT
sadden me that programmers have seldom had to deal with them! It would have
led to a whole world of hellish pain. Have we not suffered enough pain as it
is, what with character encoding, timezone handling, y2k-incompatible dates,
spatial coordinate / projection systems, etc?

~~~
to3m
I'm not even sure there'd be much to do: just store everything in sixteenths a
of a farthing and format on output, much as people do with tenths of a penny
today. If anything the numbers are actually slightly more convenient for
machines with no divide instruction.

------
ghobbins
First time founder. My company is in a "fatal pinch."

Similar to a previous comment by @LukeFitzpatrick, we built something for our
alma mater that we thought we could sell to colleges for 50k/year. We got
investment, we built it, we sold it to a few more schools but the software is
not feature-packed and mature enough to attract sales fast enough. Higher ed
also moves super slow even when you're doing well.

We're starting to see some traction with parties that want the software
custom-tailored for their need (the consulting PG speaks of). But we're stuck
in spot where we haven't gotten a check from any of these parties yet and are
reluctant to pull the trigger and focus on only on the consultative sale.

The team, product roadmap, and marketing strategy is all geared towards higher
ed. But it's clear now we can't become profitable in 6 months in that
industry. How do we operationally perform the "pivot" into consulting? Do you
agree it's time to do so?

~~~
freshflowers
Please make sure it's something your team can actually get behind, and be very
careful about how you put it. Because for experienced developers, any sign of
pivoting to consulting is a sign to run for the exit. That's explicitly not
what they signed up for when they took a chance on a start-up. Many will
rather help out by cleaning the toilets than to fundamentally change the
nature of their work.

It's kinda shocking that PG omitted that part, because I've seen it happen
several times.

(Read michealochurch's comment further down on this page, he pretty much nails
it.)

~~~
ghobbins
I think you make a good point. We need to make sure the whole company is on
board. PG's comment on using consulting to find the product you want to build
long term feels applicable here. Of course, the slippery slope remains. But if
we can make money while finding those "narrow openings that have wide vistas
beyond"

------
outworlder
I'd argue that the 'consultingish' part is as hard as the startup's main
business itself, if you add the human factor.

On one hand, you have your ideas, your product or whatever you're working on –
which, by definition, isn't working all that great. On the other hand, you
have a client (or more than one), who's willing to pay _right now_ (usually
you can negotiate something upfront) or at least just one invoice away. Plus
you are able to charge a nice amount, certainly better than you'd make as an
employee and better than going broke.

Somewhere down the line, you'll get more work. Maybe from the same client,
maybe it's a referral. Do you turn them down now, that you've achieved the
required runway? It's hard if you are a sole founder, it is much harder if you
have more than one. Harder still if they are married, or with children or, god
forbid, have a mortgage.

The consulting (there's no ish unless it is a somewhat minor customisation of
an existing product or parts of it) path is a very slippery slope. It should
not be taken unless the other option is death. And only after all founders are
on the same page.

It's easier to set a goal when everyone is going broke, than when the money
has started rolling in. There's nothing in the world that's more blinding than
a bank deposit.

~~~
tptacek
Yes, that is what you do when you've cleared the runway: you start saying no
to consulting clients. That is, for example, what 37signals did. I'm not sure
I see the problem here.

~~~
danieltillett
But 37signals bootstrapped. The problem is once the founders take VC money
they are taking on what the VC expect them to do which is play a very high
risk, potentially high reward game with a very low chance of success. This
strategy is almost certainly not optimal for the founders.

~~~
tptacek
So what? At this point in the story we're talking about a company on life
support. That's why they're consulting and not continuing to put all their
time into product. There's not a whole lot VC can do about it at this point.

~~~
danieltillett
>There's not a whole lot VC can do about it at this point.

Except ask for their money back :)

If you think you can get away with running a sane growth company (100% Y/Y)
and don't have to worry about the VCs asking for their money back, then the
most rational thing to do is take the seed money and run the business as a
"slow growth" business with an enormous runway. Unfortunately most VC's are
aware of this and will not be too happy if you try :(

~~~
michaelrwolfe1
VCs can't ask for their money back. It belongs to the company and is in the
company bank account. They can refuse to give you more, and if they control
the board they can try to put in a new management team, but except for cases
of fraud or other malfeasance, they cannot get their money back.

~~~
onion2k
Most seed fund investment is in the form of a convertible note these days ...
it's a loan with the option to convert to equity later. Consequently VCs _can_
ask for the debt to be repaid (within the terms of the note). Obviously
they'll only get back what's left in the bank and assets but the idea that
they can't ask for it back isn't really true.

~~~
philwelch
Right, and that would kill the company, but a VC is probably more likely to
kill a company that's slowly running out of its runway than a company that's
doing something out of the ordinary to survive and get back on track.

------
AndrewKemendo
_There are a handful of companies that can 't reasonably expect to make money
for the first year or two, because what they're building takes so long._

So if someone starts a company that is in this category, is it just dead in
the water if the founders aren't already rich/connected?

~~~
feverishaaron
I know of a company that thought they would be in this category. They ended up
raising a very large seed round (1MM+) from a VC and pre-negotiating a follow-
on of equal size, should they need it. That way the expectation was set from
the beginning that this company might take some time to build out their
product and see traction.

It's smart, because the discount for the follow-on was pre-negotiated, so
investors get perhaps a more favorable discount if the company is a run-away
success, and the entrepreneurs were able to buy peace of mind, and could count
on the money regardless of macro-economic forces.

~~~
AndrewKemendo
_They ended up raising a very large seed round (1MM+) from a VC and pre-
negotiating a follow-on of equal size, should they need it._

So my guess is that these founders were either already successful previously,
were well connected or had already bootstrapped quite a bit of the technology
that would underlie the product (ie patents, team, etc...). Any or all of that
the case?

~~~
danieltillett
Yes it would be nice to know what the background of the founder were here. I
have a feeling they were not three 22 year olds on their first startup.

~~~
rjtavares
I would argue that three 22 year olds on their first startup shouldn't be
building a product that can't be validated by the market in one or two years.

~~~
AndrewKemendo
Define validate. That is kind of the crux of my question. If it means
"profitability" then that is a different threshold than "users." I am trying
to figure out what PG is trying to describe.

~~~
pbreit
It's pretty obvious when it happens but it's most definitely not
profitability. Rapidly growing usage (ie, traction) with an envisionable
business model is usually sufficient. While the revenues themselves are not
strictly necessary, it does help to demonstrate the ability to collect them.

------
super_sloth
"Although your product may not be very appealing yet, if you're a startup your
programmers will often be way better than the ones your customers have or can
hire."

Is this really true? I'm very sceptical.

Does anyone have any evidence to back this up?

~~~
michaelochurch
Actually, it's more like this.

There are good programmers in the enterprise (meaning, say, investment banks
or large corporations or governments) but they generally fall, ambition-wise,
into one of three categories:

(1) those who want to become managers or software architects (or, in finance,
quants and traders) and will define and oversee work but delegate the dirty
bits. This would be fixable (they could oversee a team of mediocrities, who'd
be grateful just to be employed) but they generally don't have the patience
for that.

(2) those who want to do highly-theoretical R&D work that doesn't necessarily
solve any immediate problems of the business.

(3) those who have a specialty (say, deep neural networks) and want to be in
the umbrella of a large organization that can protect it. Pull them out of
their specialties and they'll try to leave.

In other words, these supposedly stodgy non-technology companies _do_ ,
contrary to stereotype, have good programmers (I've worked in a few) but the
ones who are at all decent have career strategies that they expect to be able
to implement in their full-time work. They won't work on "just anything" and
if you stick them with the random muck that comes from the line of business or
zealous "product people", they'll either leave or slack in order to learn new
skills on the clock, and the project will be done poorly or even abandoned
mid-flight.

The appeal of the $3000-per-day consultant is that he'll work on what he's
told to do and he doesn't expect you to consider his career needs. He's not
going to do a shitty job and leave after 6 months because the people
allocating the work don't care about his career; that's what the money (4-6x
typical salary) is for. He gets his education and career advancement on his
own time and dime (but earns a premium to account for his unpaid work). And
while he might not be a great (2.0+) programmer, he's better than anyone in-
house who could actually be assigned a bad project without political friction
or high departure risk.

The average Bay Area startup programmer, like the average software consultant,
isn't great; but he's far better than the corporate serfs who get sloshed
around on the worst projects. He might be 1.4-1.5; so Goldman's R&D engineers
and it top quant-coders will be better, but he's a relative colossus compared
to the in-house peons (0.7-1.2) in back-office IT who'd get assigned to grody
projects based on internal processes.

(Of course, not all the work that consultants do is undesirable. You also have
the specialists and those with elite levels of skill. My point is that a
"mercenary" consultant will power through the ugly projects for the pot of
gold, whereas in-house people expect investment in their careers.)

In other words: yes, Goldman can hire great people. But if you want to hire
someone great to do a project where 99% of the work is mediocre (and the 1% is
extremely careful and requires an expert) you want the $3000/day consultant
because Goldman can't get anyone good who's in-house (and not getting a
consulting salary) to do the work. One might ask: why don't they pay an
internal person $3000 per day, as they would a consultant? The answer is that
it'd have him out-earning his boss and they'd often end up promoting someone
not on traditional definitions of readiness (increasing scope, leadership) but
because he took on an icky project.

~~~
jisaacks
Can you please explain the numbers 2.0+, 1.4-1.5, etc. when referring to a
programmer's skill. I have never seen this before.

~~~
michaelochurch
Roughly speaking, it represents the transition from an adder to a multiplier.
A 1.0 programmer is competent at "adder" tasks (scripts, bug fixes, features)
but not yet ready for infrastructural work. A 2.0 programmer is highly
competent as a multiplier. It goes from 0.0 (complete beginner) to 3.0 (global
multiplier) but most (probably 99%) professional software engineers are
between 0.8 and 2.2, with a median around 1.1-1.2.

This is more up to date than nostrademons's
link:[http://michaelochurch.wordpress.com/2013/04/22/gervais-
macle...](http://michaelochurch.wordpress.com/2013/04/22/gervais-
macleod-23-the-shodan-programmer/)

Also, from Quora: [http://www.quora.com/What-do-the-top-1-of-software-
engineers...](http://www.quora.com/What-do-the-top-1-of-software-engineers-do-
that-the-other-99-do-not/answer/Michael-O-Church)

~~~
orbifold
Reminds me of Landau's logarithmic rating of physicists by productivity from 5
to 0, with 0 being Newton, 0.5 Einstein, etc.

~~~
michaelochurch
This isn't general enough to apply to computer scientists, nor do I intend it
as an all-purpose ranking for software engineers. It's an approximate measure
of a generalist's professional development. It's not really applicable to,
say, machine learning experts.

------
graycat
Of course, all across the US, crossroads, villages, and towns up to the
largest cities, millions of US entrepreneurs, often sole proprietors, have to
make money enough to pay suppliers, the rent, taxes, insurance, the
bookkeeper, the accountant, the lawyer, employees, and take money enough home
to support the family, the cable bill, the wireless bill, for dear wife, a
late model SUV for her work as family taxi, the groceries, the home
furnishings, and the lawn service, for junior, running shoes, a bicycle, a
computer, and school clothes, for dear perfect, precious daughter, violin
strings, a new iPhone 6, new school clothes, new dress up clothes, white
furniture for her bedroom, a new prom dress, and save for college, retirement,
etc.

So, millions of sole proprietors do that.

So, maybe it's not too much to ask of venture funded entrepreneurs to do
similar 'budgeting'.

Still, it can be easy for such entrepreneurs to be fooled by venture firm Web
sites that emphasize that they have been in the shoes of entrepreneurs and
know what they are going through, are committed to their entrepreneurs,
through good times and bad, through thick and thin, etc.

Still, the the importance of planning is old: In early aviation too many
smoking holes taught the possibilities of head winds, bad weather, and
mechanical problems and, thus, the importance of flight planning reserve fuel,
alternate destinations, at least two of radios, each of the fire wall
instruments, etc.

------
jdoliner
> I try to resist coining phrases

Is this because you feel it's pretentious to do so?

I feel like having a concise name for a concept is one of the most important
steps to broad understanding of it and always try to come up with good names
for concepts that I want to be able to talk to people about. You might be
doing us a bit of a disservice by resisting this.

~~~
itazula
"Survival of the fittest" is an example of a coined phrase gone wrong, wherein
a sound bite subsumes what it is supposed to only represent.

------
K2h
Without some revenue, every company is on a direct course for disaster - by
default. I think that the first pitfall some make is to look at investment
money as revenue, cash coming in. But its a big giant fallacy.. it is not
money from normal operations. Until you sell a product and have money coming
in from it you are on borrowed time. This can be intentional and calculated
position of building a product and bringing it to market when it is ready, but
I get the impression that many don't plan or execute their way out of this
fast enough.

~~~
001sky
Having money 'around' tends to make people complacent...people on the outside
can't tell the difference between earnings and investment...and this tends to
play tricks with people (and their minds( on the inside as well.

------
danielweber
_They 'll all lose their jobs eventually, along with all the time they
expended on this doomed company_

They were getting paid, right? I'm not losing time I work at a company that
will eventually fail.

~~~
njyx
I think it assumes you want to be a part of something which makes a long term
impact. If you just want a pay check, you probably aren't at a startup (or at
least not for the right reason).

------
GreenPlastic
How do you keep your employees in this market if you're lowering salaries
across the board?

~~~
awjr
I'd suggest technology is a key attraction. People involved in startups are
there not only because it might get big, but also because the technology they
are using excites them.

------
wazoox
This is the story of the first startup I was participating into, back in 2000.
The boss (and main investor) ruined himself (selling his Porsche, mortgaging
his home, selling stock he should have kept...) while trying to get investors
interested in a 0.1% done prototype of a project 10 years too soon (basically
we were busy inventing the Cloud and Big Data). Sad story.

------
fit2rule
I've never been one to lean on investors as a solution to problems. Its far
better to build your company on the basis of the immense amounts of help and
good you are doing your customers. If you're not doing that, and its not a
principle focus for how you're going to produce revenues, then its not
business but rather an academic experiment.

Investment is very important, though, for various big-growth reasons, but
mostly to extend reach beyond what the business-as-organism is capable of
attaining independently. Better to grow strong by remembering who really pays
the bills: true customers.

Too many startups conflate investor/customer in strange ways before they
realize there is actually a relevance to how much of the company is your
company.

------
proveanegative
Is becoming ramen-profitable before you raise your first round a possible
solution to this problem?

~~~
danieltillett
If you can become profitable without raising funds then why raise funds?

~~~
patio11
A very commonly heard refrain in the Valley is some variant of: "Would you
rather own 100% of a company worth $1 million or 40% of a company worth $200
million?"

Money is used to purchase acceleration. It's not totally crazy, although it
implies very different trade offs as compared to running one's own business
without investors.

~~~
danieltillett
The problem here is risk is ignored. If I were to rephrase the question as
"Would you rather own 100% of a company with a 50% chance of success or 40% of
$200 million company with a 1% of success?" then the answer we get is very
different.

~~~
steveklabnik
This is true. One can draw their own conclusions about those who say such
things, and why the risk element is elided when they say it...

------
raymondgh
Does anyone have tips for quickly and responsibly finding a spot on the
slippery slope of consulting? We have found our few distractions so far to be
too distracting.

~~~
breck
I do. Shoot me an email.

------
danieltillett
Isn't the problem that the founders have to spend like drunken sailors to show
"traction" to have any chance of getting more funding while their investors
give them so little money that the runway is then incredibly short? There is
very little room for error here.

~~~
jdoliner
Why would you have to "spend like drunken sailors" to show traction? I think
you make a much more compelling for having traction if you can continue to
grow while spending like a sober sailor.

~~~
tptacek
This is a meme about the evils of venture capitalists, that their expectations
are so uncalibrated that it's more important to act the part than it is to
play the part. It might even be true in a lot of cases, but that doesn't make
the strategy any sounder, right? You should just write off those investors.

(My take on this is very secondhand, unless you count experience from 1999.)

~~~
danieltillett
It certainly doesn't make the strategy any sounder, but why are highly
intellegent founders who have far more to lose than any investor getting
caught in this pinch? This seems to be the missing question from Paul's post.

Edit. Changed how to who :)

~~~
tptacek
Founders aren't entitled to investor money.

Investors are looking for a particular curve. The slow burn, 7-figure exit
that founders want is almost useless to VCs. The model requires that the
winners pay for the losers. The VC has a finite number of at-bats every year,
and each one needs to potentially be an out-of-the-park home run. A company
that deliberately bunts is costing the VC an opportunity to recoup their
losses on failures, which is the majority of their portfolio.

Founders like to kid themselves about this, but if they raise from a big
institutional VC and plan on sitting on the money or executing on a "safe"
1.5-2x model, they're the ones being deceptive.

Safe, conservative plans are awesome. That's why companies should bootstrap.

There's a difference though between swinging for the fences and throwing money
away.

~~~
danieltillett
>Investors are looking for a particular curve. The slow burn, 7-figure exit
that founders want is almost useless to VCs. The model requires that the
winners pay for the losers. The VC has a finite number of at-bats every year,
and each one needs to potentially be an out-of-the-park home run. A company
that deliberately bunts is costing the VC an opportunity to recoup their
losses on failures, which is the majority of their portfolio.

This is the problem isn't it. Investors are basically saying unless you can
hit 30% month on month growth then we aren't interested in you, but if you do
what is required to hit this target then we won't give you the funding to do
this with a reasonable runway.

>Safe, conservative plans are awesome. That's why companies should bootstrap.

I agree 100%. Almost all founders should avoid taking VC money and just
bootstrap. This of course is not the sort of meme that is popular with VCs.

~~~
tptacek
No, _founders_ are accepting the amount of funding VCs give them. I don't love
VCs, but it's weird to blame them for this phenomenon. The VC model can't work
differently. Most companies fail, and the winners have to pay for the losers.

~~~
danieltillett
I am not blaming VCs, I am blaming founders for taking VC money when the model
they are giving it to you under is fundamentally flawed.

It is debatable if VC model couldn't be made to work better, but if this is
how they are going to play the game then you are better off not playing and
get on with bootstrapping.

~~~
nostrademons
But the _model_ isn't fundamentally flawed. Many founders just want to apply
it in situations where it doesn't work. VC money is useful when you have a
scalable, winner-take-all market that requires a large amount of capital to
build out a viable product that you can monetize. If any of those clauses
don't apply - the market is not scalable, the market is not winner-take-all,
or the capital requirements for monetization are not large - a founder should
not take VC. (Strangely, VCs are much better at telling founders when the VC
model doesn't apply: many will outright refuse to fund companies that don't
meet these qualifications.)

But for founders who _are_ attacking markets with those characteristics - the
existence of VC is a huge boon that can accelerate what would normally be a
lifetime process (eg. Walmart, Microsoft) into a decade or less (Google,
Facebook).

------
gcb0
caveat left out: the author makes twice more money if a startup takes one
round of funding instead of two :)

------
zak_mc_kracken
Can someone tell pg that he should stop putting hard <br/> every forty
characters?

One of the fundamental aspects of the web is that presentation is done by the
client, not the publisher. Please let me reflow the text as I see fit.

~~~
escape_goat
Challenge accepted!!

After opening the article, copy & paste the following line into the URL field:

javascript:a=document.createNodeIterator(document.getElementsByTagName('table')[0],NodeFilter.SHOW_ELEMENT,{acceptNode:function(node){return(node.getAttribute('width')&&node.nodeName!=='IMG')?NodeFilter.FILTER_ACCEPT:undefined;}});while(b=a.nextNode()){b.setAttribute('width','100%')}

Make sure your browser doesn't strip the "javascript:" at the beginning
automatically, there's a good chance that it might; in that case, you'll have
to type that in yourself.

------
Immortalin
Disappointing how few startups focuses on organic growth, most startups
nowadays prefer to clamber for the attention of investors instead.

------
zeeshanm
tl;dr :: nobody wants to board a sinking ship.

~~~
meowface
That is one key takeaway, but if you read the entire essay there are many
other useful points.

tl;dr :: tl;drs suck

------
jdawg77
This is awesome. Fully agreed with the, "don't expect to raise money to figure
it out." It's why we're consultants. :)

