
Forget VC Money, Fund Yourself - BioGeek
http://www.inc.com/resources/finance/articles/20040801/noVC.html
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jwecker
A meta-business model that doesn't get discussed enough- and practically never
by VCs- is simple revenue based growth. I know business leaders who absolutely
swear by it and won't touch anything else. From their perspective, if it's not
making money and in the black when it's small, making it 10x that size won't
necessarily make it better. It's a well tested and respected business model if
you're product and team can pull it off.

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python_kiss
While I agree that VC funding is not necessarily required to spark a startup,
I do however believe that it can serve wonders in terms of building
connections and publicity. Prominent bloggers, such as Michael Arrington and
Peter Cashmore, hunt for news relating to startup fundings. Moreover, a VC
firm brings high level connections from people with real experience in this
game (Vinod Khosla, Ram Shriram, etc).

Almost all sufficiently large startups eventually require Venture Capitalists.
So there is no hard and fast rule on this; just take the money when it makes
sense.

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jwecker
True. And to clarify my comment, it is also a _slow_ way of growing in many
cases. I've just seen so many people willing to burn through other peoples'
money without a thought that the idea often appeals to me.

The real principle here is the golden rule of spending money- no matter what
the source is: put yourself in the investor's shoes (even if there isn't one).
Pretend it's your $10,000 or $5mil and you're investing in a company that you
have little control over- would you be pleased with how it is spent?

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danielha
If you can't get someone else excited about your product, then you might be
approaching it the wrong way. But there are many reasons why VCs might not
want to get their hands in. They might deem it as a me-too or as a novelty not
worth exploring. But there's no way they can completely estimate the web
community. If you have a firm belief that you offer something someone else
does not, or you implement it better, do it. Fund it yourself. The true reason
you should give up on your idea is if you cannot sell it to yourself anymore.

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volida
I don't understand why so many people think of a "me-too" a bad thing. This
way we would have only one automobile brand, only one clothing brand and the
list goes on...

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Nick_Smith
1\. Because nobody can start a car company without hard knowledge and
expertise, whereas any idiot who can talk can con VCs into funding a me-too
and blind them with hype. 2\. Because the Net moves so fast that the me-toos
are ready just as the idea is outpaced 3\. Because the people who propose the
'me toos" emanate a vibe of conformity and foolishness.... so if the person is
an idiot we say "me too" if the person is smart we say "oh that tech whiz."

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volida
photo.net was 1999, flickr 2004, zooomr 2006...my point is that the pie is so
big the many folks can have their piece, because nobody can have it all. about
the car industry comment...most of the folks that made a so called "me-too"
car company, was in the beggining of that industry, that is 80-100 years ago.
Yes, its hard to make a new brand but Pegani Zonda seems to have done it in
21st century so good that it can compete with Ferrari. With your thinking
people shouldn't be programmers because there are too many of them. <br>

I will just aggree that if you can do it better then just do it.

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dmnd
Are you sure nobody can have the whole pie? Some domains have significant
network effects, which work to prevent competitors from developing a useful
service. E.g. eBay.

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volida
Ebay bought its Chinese clone for hundreds of millions of dollars, which
afterwards collapsed because after moving the servers outside China the
service's data were going through word filtering (e.g. during login) and there
were failures...

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pashle
Something just felt right when I read, "The best possible way to finance your
business is from free cash flow. If you can meet your capital needs without
selling equity or without taking on personal debt, do it. It's that simple."
Clif Bar, Patagonia and Ben & Jerry's come to mind. Not tech, I know, but it's
really cool when a young company can maintain it's mojo, it's buzz, far longer
than most people could even dream of. If equity is sold, you're answerable to
someone, and you lose control over keeping it's mojo. Whatever it takes to do
work you love, with people you love, I'm for always.

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papersmith
VC money can be a good thing if you know exactly what to do with it. Google
used the funds to buy servers which they couldn't afford before, but in the
end it turned out to be money well spent. But if you just raise the money to
live up to the convention, then you should think again. The worst thing you
could do is to go on a spending spree just to look busy.

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immad
Some products require scale or critical mass before they can be profitable.
This is especially true for many website based on advertising models. Also
ventures based around getting big partnerships (e.g. licensing deals) may
require the prestige of VC backing before you can get through the door.

Secondly you might have an option of growing organically for 3 years and
hoping that no one else enters the market and that its still buoyant in that
time or growing fast with VC support. I am not saying it's not possible to
grow fast without VCs but I am sure it helps. I think it just comes down to
what business it is.

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Nick_Smith
I bet YCombinator must feel a bit strange having this as the highest voted
story ;)

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pg
Not at all; we're not VCs. We just do seed funding. That is a very different
world.

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volida
I asked few days ago if its possible for someone to get a green card if I got
funded by YC. I read the reply that is not enough. From the US immigration web
site they site is possible and on some other sites it sais that
500,000-1,000,000 dollars is required as investment for someone to get green
card.

My question is, would you risk to accept someone for funding, and wait until
he finds invenstors through you, so that he could use these money as
invenstment and also get a green card?

The thread is not available so I thought asking you here...

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michelle
Forget VC Money, Fund Yourself...well, if you don't believe in your product to
put your own money or time into it, how can you expect someone else to invest
in it themselves?

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dangrsmind
I think this advice is somewhat misguided. I'm currently on my seventh start
up. I started two previously myself with my own money, but my current employer
is VC and angel backed. (I am the chief scientist) Relying only on your own
resources such as credit card debt or a second mortgage on your home can be a
very risky proposition.

Not just because you might lose your investment, but because by using your own
money you are creating a situation of immense pressure. The risk of losing
your home might lead one to make some bad decisions regarding the business.
You have o be very careful here.

My second self funded company eventually did take about $100,000 in angel
money. But we started with only $50,000 of the two founders own money and we
operated the business for four years with no other investment. We eventually
sold it to a public software company for $2 million dollars. This might seem
like a pretty decent investment, but at the time (mid 90s) it failed to
attract the buzz that seems to feed VC investments.

It also depends on how much capital you really need. Typically entrepreneurs
underestimate this, but of course it is also possible to fool yourself the
other way. You have to be very realistic about this to make the right
decisions. My current venture requires us to installhardware in our customers'
facilities, so it is somewhat capital intensive. Only someone who was very
wealthy could self fund such an enterprise.

In the end VC money spends the same as any other money, so deciding where you
get your funds should be a business decision similar to deciding who to hire
or what product to develop. You should interview your investors as they
interview you. But few entrepreneurs do this. They act desperate, and this
often becomes a self fulfilling prophecy.

On another note, in my experience, entrepreneurs shouldn't expect most VCs to
deliver anything more than money. Of course they all tell you about the
benefits of their strategic connections and so on, but in my experience it is
very rare that these bear fruit. One exception would be a venture fund
targeting the specific industry you are developing your product for. These
funds often do have real valuable connections to bring to bear and can help in
ways that vanilla VCs can't.

