
We’ve Gotta Stop Using “Lifestyle Business” as a Pejorative - iamflimflam1
https://sparktoro.com/blog/weve-gotta-stop-using-lifestyle-business-as-a-pejorative/
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brudgers
The term is pejorative in the world of venture capital and means little
outside of it. It's pejorative because in the world of VC investing, a
lifestyle business is not win-win. The founders get something good and the
VC's get "nothing:" unsustainable returns and no recycling of founders into a
new business. At it's core, the VC model of investment tries to align investor
and founder interests by using equity value growth as the vehicle for returns.

The downside of lifestyle businesses is that investments are made on the basis
of cashflows. And these are inherently adversarial. Returns for the investors
come at the expense of founders and vice versa. This means there is always the
potential to struggle for control. Investors in lifestyle businesses are not
inclined to write off an investment. They are likely to seek control when
payment isn't made.

Investments in lifestyle businesses follow ordinary investment logic. The
advantage of VC is that it does not. None of which is to say that one is
better than the other as a matter of general principle. Only to observe that
ordinary investment strategies tend to be adversarial at their core.

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pcarolan
I think people that believe in and run lifestyle businesses like the fact that
it’s a bit counter-culture. Not sure we need to do anything about that and if
we do, will it lead to ruining what’s great about it by popularizing it?

