

Ask PG: The right reason to take investor money - wensing

In your "Ramen Profitable" essay you wrote:<p><i>Ramen profitable means no more than the definition implies. It does not, for example, imply that you're "bootstrapping" the startup—that you're never going to take money from investors. Empirically that doesn't seem to work very well. Few startups succeed without taking investment.</i><p>So the question becomes--when is the right time, and what are the right reasons, to take invesment?  In what situation is taking investment optimizing for success (for a web startup in particular)?
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pg
If you're doing a true startup (meaning a company designed to grow fast, not a
consulting company or a niche product company), it's usually a good idea to
take investor money. The most basic reason is that it lets you grow faster.
Some investors also supply expertise and connections you couldn't buy.

Some times tend to be better to raise money than others. You might not want to
raise money when (a) you're in the middle of a big project, or (b) you can't
get decent terms.

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noodle
where do you draw the line on niche companies in the definition of a "true
startup"? seems like YC has invested in quite a few niche-specific companies.

just curious, don't mean to threadjack too badly or nitpick.

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pg
Market size, basically. A company making software for, say, cataloguing
butterfly collections wouldn't be a startup.

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noodle
so if you have a niche that is sufficiently large or profitable, then its not
an issue?

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pg
Yes, but people probably wouldn't call it a niche market in that case.

