
VC Charles Hudson on ‘the conversation no one has during an upmarket’ - makaroni1
https://techcrunch.com/2020/04/24/precursor-ventures-charles-hudson-on-the-conversation-no-one-has-during-an-upmarket/
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lifeisstillgood
These conversations are always the wrong way round. Being excited about
running a company is not enough - affording to do so matters. Restricting
founderdom to the already wealthy or the maniacally driven seems a dumb idea.

My conjecture is that more successful companies are founded during downturns
because more founders are forced into the process by circumstance.

If we want to increase the successful startups in the world, increase the
number of people who can afford to do so. We are seeing paycheck protection
programs across the globe - why not use some of the same cash as giant seed
funds.

~~~
aaron-lebo
Do startups really cost as much as we act like they do? I mean, yeah, if
you've got 10, or 30 or however many engineers, it's gonna be expensive, but
there are a lot of projects that can be bootstrapped and really don't take
many people. Instagram can be built by a single person working nights. You
probably aren't going to get a unicorn out of that, and you'll obviously have
to scale up, but it's cheaper than it has ever been. Tech is almost free these
days.

The disconnect between how cheap/easy new tech is these days and how few
interesting experiments we've seen in the last decade, especially in the web
space, suggests that it's something other than the money. We're just not
really building things because VCs and startup mantras have convinced us we
need a million dollars to do anything and it's just not he case.

Do bootstrappers have an advantage in an environment like this? They've always
had to tighten their belts, so they should have some advantage relative to
these bigger ventures that have bills/investments to pay for.

To respond more directly to you, your conjecture should be pretty easy to
test, look at metrics like the stock market plotted against when successful
companies are founded. The data are there.

To provide an example, I'm bootstrapping. I haven't made more than 40k a year
last decade, got student loans, about to get out of school, don't have a job,
got limited funds to fall back on. This economic crunch isn't any worse for me
than the past 10 years, so if the idea is it can't be done, thus far I'm doing
it. Odds are I won't succeed, but it's doable. If I was making 100k and had
connections, it may be easier, but I also wouldn't have the time available.
Cheap machines, free OSes, and a decade of HN and other free resources don't
cost much. Everyone's sitting at home, anyway. Not much better to do, not much
to lose.

~~~
tpxl
Startups don't cost anything, unless you make them so. Chasing scale for the
sake of scale is stupid. If you're actually selling something that's not fluff
you get a couple of customers, improve your product then roll out when you
need to.

I'm running a startup right now. The first year cost 0 for me and my partner
(besides gas). All the engineering work was done on my gaming PC and the
feedback from potential clients was gathered by my partner.

After we got something going, it cost us about 2k for servers (256GB RAM, 50TB
storage, 32 CPU cores total) and around 4-5k for graphical product and website
design in the next year.

If we're lucky, we're getting a contract this year netting us about
100k/yearly revenue, which will cover all costs + good wages (we were on
no/minimal for two years) + another engineer (bus factor of 1 is not fun).

Disclaimer: What I wrote applies to software B2B startups, hardware startups
almost necessarily cost a lot, B2C may be harder, but still not that hard if
you're not selling fluff.

~~~
qppo
How did you pay your rent if you didn't give yourself a salary?

~~~
tpxl
I had a full time job on the side, plus I lived with my parents.

~~~
blaser-waffle
> plus I lived with my parents.

So you were paying for it, just in a different way.

------
bsder
> startups that merely survive won’t be judged merely against their peers that
> also survived; they will also compete with brand-new startups for capital
> and companies that didn’t need to hunker down during lean times.

This is so totally against history as to be laughable.

Sure, some very small single digit percentage of good VCs will be making hay
and throwing money at companies.

Most VC's are sheep. With nobody to follow, the majority of VC's will simply
hold onto their money. After an implosion, there will be _zero_ new companies
competing against you for at least 6-12 months.

Even better, some ideas that couldn't get their heads above water when there
was too much chum can finally breathe and take off.

A lot of the most successful tech companies got that way because they exited
the other side of an implosion.

~~~
H8crilA
Yeah this guy is so bad.

Amazon thrived because of the dotcom bust. Not the bubble but the bust, which
took out their ~entire deeply uneconomic competition.

There's no better time to create a sensible business than when all the non-
economic actors and their VC donors are taken out. Infinite money makes it
impossible to do so because you'll be undercut by "blitzscaling" and other
creative forms of capital destruction.

------
rgbrgb
> Are you excited and prepared to run this company for the next two years?

> startups that merely survive won’t be judged merely against their peers that
> also survived; they will also compete with brand-new startups for capital
> and companies that didn’t need to hunker down during lean times.

Interesting perspective here. It definitely cuts both ways.

The converse is that if you're able to find product market fit in a down
market, you'll have a lean and focused operation for the upswing to
accelerate. For most companies that will mean a product people really want,
and in the surviving case, probably profit and optionality.

~~~
hef19898
Which raises the question for the surviving start-up, with a lean operation,
customers and profits, why this company would need and want VC money. Unless,
of course, the only measure of success is VC investments.

~~~
simonh
The classic answer is in order to scale up rapidly before a competitor springs
up, out-grows them and dominates the market. That's not necessarily a concern
for all companies though I suppose, depending on the market they are
addressing.

Every company will be in a different situation. For some it might make perfect
sense to tough it out, but for others that might not make sense. If you're
burning cash, why do that for 2 years when it's pretty clear you're not going
to be able to make any progress over that time? You'd come out of the down
turn with a stack of debts any possible competitors won't have. In a few years
time if the business case still make sense, you might even be in a position to
try again.

------
vladislav
If you're doing something for which the opportunity cost of waiting two years
is not very high in the first place, perhaps it's not worth doing at all.

~~~
irjustin
> As Hudson put it, “there’s never been a better time to maybe fold.” That’s
> because, he explained, startups that merely survive won’t be judged merely
> against their peers that also survived; they will also compete with brand-
> new startups for capital and companies that didn’t need to hunker down
> during lean times.

Not sure how you got from his core idea, but how do you even guess to measure
that?

~~~
vladislav
Great companies require a great deal of conviction. Waiting two years because
it's harder now isn't a conclusion one draws from such a standpoint.

~~~
hef19898
Timing is important. If head winds are too tough right now, delay the launch.
If there is no choice, unemployment etc..., then start it now.

As you said, start ups are hard already, no need to make it any harder with
bad timing.

Also goes the other way round, if the right timing is _now_ , do it _now_.

------
rmason
Some of the biggest wins looking back are companies that got started during
either the dotcom bust in 2000 or the recession in 2008-2009. So what he's
saying is contrary to history.

Though it's true you have to really love the idea you're working on. I've seen
people with what they thought were clever ideas for which they had no real
passion fail again and again.

IMHO the people who have it the hardest are those trying to find product
market fit in this environment as it has to be absolutely brutal.

~~~
aaron-lebo
Do you have any specific examples of those companies (2000, 2008-2009)?

~~~
code_duck
AirBnb, Pinterest, Square and Uber were founded 2008-2009.

