
Markus Frind: "Do VC Backed Founders Actually Make Any Money?" - toffer
http://plentyoffish.wordpress.com/2007/07/02/do-vc-backed-founders-actually-make-any-money/
======
pg
He has a point, though he's wrong in a lot of details. It's true that one of
the best ways to make a lot of money out of a startup is not to raise too
much.

What he doesn't seem to get is that some startups actually cost a lot to
start. Loopt, for example, could not have been built without VC scale money.
If you want to do something like that (or Google), you need millions. And if
you succeed, you end up rich. Ending up with 10% of the company is not so bad
if the company is worth a billion dollars.

Also, his statistics are junk. That "government report" showing that most
small businesses are still in operation after 4 years has nothing to do with
startups. The small businesses they're talking about are plumbers and shoe
shops. The success rate is lower for startups. Which makes sense, because the
payoff, if the company succeeds, is much higher.

~~~
willarson
In general I would like to throw PlentyOfFish out as a bad data point. His
experience has been atypical, although he doesn't seem to agree.

He was a single founder, and he did everything himself... which is better
phrased as 'everything that got done, he did'.

He didn't have any plan or roadmap; he went along and did what he wanted to,
and it worked out well.

Much (most?) of his revenue comes from Google AdSense, which has not been as
generous to many other who have chosen it as their primary source of revenue
(this is largely helped by his site being lower on resources (some pictures
and a lot of text), instead of media intensive).

~~~
Tichy
Getting rich by doing a startup seems to be atypical. I don't see why that
data point shouldn't count. My impression so far is that "doing what you want
to do" is among the most promising strategies for success.

~~~
willarson
My point is that it is a bad point among successful startups, not that it is a
bad point among startups in general. Looking at startups in general isn't
particularly interesting for an entrepreneur compared to looking at those that
are particularly successful (or fail in epic flames).

Doing what you want is a good way to make macro decisions. Should I try to be
a dentist or a programmer? I like programming, I'll do that. Unless your
psychological makeup is perfect, it doesn't do quite as well for micro
decisions. Should I eat that chocolate cake? Well, I want to. Should I go to
work today? Nah, I'm tired. Should I drink that next beer? Why the hell not?

I guess it comes down to that I should have been clearer in drawing the
distinctions I was trying to make.

------
waleedka
If funding reduces your share to X of it's current value, then it should
increase the value of your company to, at least, 1/x of it's current
valuation.

For example, if funding reduces your 100% ownership to 25% (x = 0.25), then
you'll have to multiply the value of your company by 4 (1/.25) to end up with
the same valuation. If you think funding will push you beyond the 4x, then
it's a good deal.

------
staunch
Supposedly Kevin Rose has much more than 10% of Digg, same with Mark
Zuckerberg/Facebook. Didn't the Google guys maintain a lot of equity as well?
I think some people use VC as a crutch and other's use it as a tool. The ones
that do the latter seem to do pretty well.

------
ph0rque
"What would you rather own, 100% of something or 5% of a dream?"

This goes directly against what I've heard before: "a small piece of a big pie
is better than a large piece of nothing."

~~~
davidw
Someone should make a big collection of these pithy bits of advice that get
written up in bullet points, each one with the opposing bullet point that gets
brought up by some _other_ purveyor of wisdom.

I'm certain that for a lot of these people, their advice is not exactly
scientific, but more along the lines of "I did this and this and this, and it
all worked out", which is fine, but in a complex system like that, who knows
what caused what, and what is just noise.

One of the things I liked about 'Founders at Work' was that it was such a wide
array of people and undertakings, that it did actually give some insight into
things that were common to othewise diverse groups.

------
wschroter
The % that you get is only a small point of taking on money. It's all the
control and day-to-day mechanics that you are really giving up.

