What we're seeing is that growth is able to happen in spite of the frothy VC environment, not because of it. So if it is possible, then why would you have to seek funding? If you think getting VC money is good because you should get VC funding (or because getting some will get you press in TechCrunch) then you're thinking about it all wrong.
You should seek VC money if you need the money (with a very serious definition of "need"). If you don't, why would you:
* Have a boss (outside of your customers)
* Give up a board seat
* Give up control of your company (and possibly eventually a majority of that control)
If you need enough money that doing the above 3 things is less painful than basically your business dying, then yes, you should seek funding. Actually I want to emphasize the "less painful" part. Don't read this as "if your business will die otherwise, seek funding."
Sometimes you should let a business die. If family is important to you and raising VC money and working even harder to keep someone else happy will possibly end your marriage, and ending your marriage is more painful than keeping this startup alive, you should probably let the startup die.
And that's okay!
What matters is you seek VC money for a very specific reason, and it is vital for you and your business for the right reasons.
I agree with the parent, raise VC money only if you absolutely need money.
that has some nice benefits around getting decent legal counsel, banking, recruiting, etc. everyone treats 'foo ventures' backed companies with more consideration by default.
otherwise..meh..most of the people they are really excited for you to meet (i.e. bring on as VP whatever), aren't that interesting. and while yes, you may get a few forced sales because you share a VC with someone, in some sense thats strictly less valuable than organic growth.
the VC is always going on about how valuable they are going to be to you...the reality is that if you aren't going to fulfill _their_ vision for your company soon enough, they will do everything they can to restructure the company so that someone else can.
Just move money around in a big circle.
Most VCs will not give up a seat, and most companies have absolutely no leverage.
The overwhelming majority of startups need funding to survive, this throws off the balance of control. The only startups that can dictate funding terms are the ones that have no real need to raise. Of course there are concessions, but relinquishing a board seat is not a common one.
Conflating something like a deodorant company with a pure play tech startup just doesn't make any sense to me, especially when the intent is to analyze and compare funding models, performance and exits. And even if you consider new SaaS companies, there are thousands more Bingo Card Creators out there than [insert unicorn here].
A cafe for example can scale to be a well run efficient cafe, maybe even opening additional locations. Scaling a cafe chain globally is a generational endeavour with a staff of tens of thousands.
A company that makes cafe POS software can scale to thousands of cafes globally with a few years with less than a hundred staff.
A deodorant company that sold for $100 million less than 3 years after founding is absolutely what I would consider a startup.
That said, I think the article positioned their definition of startup by comparing bootstrapped/less-funded companies to Honest (also referenced Honest's challenges vis a vis Seventh Generation).
If there's one thing all start-ups should conspire to abolish, it's liquidity preferences. Somewhere along the line, they all decided that putting their capital at risk in exchange for a potentially large return, wasn't a good enough arrangement. At that point they stopped being real investors and became financial engineers looking to play the angles to remove risk from their position and shift their risk to everyone else. You don't need venture capital that bad, such that shooting yourself in the face is the only way to go. Just say no.
Sadly this seems to be the game being played by literally every person and their grandma these days. We need a mentality shift as a society in order to find real innovations and growth again, or else, well we're just digging our own graves really.
Liquidation preferences are not the norm in the normal seed/A/B rounds etc. right now. At least not in the silicon valley VC ecosystem.
Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it.
Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000.
MVNT raised Money.
It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly.
The common denominator here is the direct to consumer model with the use of growth hacking via social media campaigns and the rise of such social media platforms.
I.E. Make product that people want to buy and market it efficiently on social channels.
That seems incredible. I guess I just don't understand how you could custom brand and design a physical product, find manufacturers and fulfill their MOQ's, store all of your product and market it for $6,000. Either way, I understand you approached this sector with a technology first mindset, and it's been a really impressive business model.
I've approached similar D2C products in different markets using your method but the initial costs just to get a product to market before advertising is usually close to about 10 times higher.
My co-founder and I also have engineering/design/product backgrounds so we didn't need to hire anyone to build our initial dotcom or product. We ran it all for the first 1.5yrs before we could afford to hire our first customer service team member in 2014.
Marketing expense was also kept to almost zero, branded search primarily, until around 2014.. we had to rely on word of mouth/organic. This forced us to build in such a way to keep costs low while ratcheting up the value prop which has translated into an efficient process we still have now. Our spend of advertising as a % of net rev is estimated at less than half of our next heavily funded competitor.
If you want an education, go to the MD&M West show and sit on the parking shuttle bus and listen. There are a zillion of these kinds of companies all hawking almost exactly the same products looking for some marketing and sales "edge". None of them are solving "we're actually technically better".
Kudos to these companies for finding that marketing and sales edge, but I don't really consider that to be a "startup".
Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback or service. The stores resell (middlemen adding to the customer cost) with little to no customer feedback passed back to the brands. The supply chain was very difficult to break into because it was guarded from new direct to consumer entrants.
It seems like these guys generated a tremendous amount of money for themselves and orders for the businesses based on which company they gave the OK to.
You guys seemed to stay out all that, which I really respect, but it looked like some competitors really went to lengths to get that "edge" in this product category.
It's very frustrating because so many people fall for the reviewers as "experts". I remember when the first of them, a blogger, called me to interview us. "I'm writing an article about you guys and btw you should setup affiliate links because more bloggers will write about you".. we setup links naively and had no idea what was about to happen. The blogger then wrote about a competitor, and then another, rebranded as an "expert mattress review site" and before we knew it we aided in launching a digital version of a mattress salesman who is paid commission. Later several other expert site clones popped up. They are SEOd to the max and I don't see them going away for awhile. We shut down our affiliate links realizing it made zero sense and was a mistake/incongruent with our values and mission. We were downgraded in the reviews the next week.
What I found really interesting was that some of the new look-alike brands that paid big kick backs leveraged the reviewers to speed track their growth without needing to rely on adwords/organic word of mouth.
I've yet to see any of the affiliates actually use real science/data or ASTM testing methods. It's "opinion based." We just ignore them knowing we'll lose some % of traffic and just stay focused on the customer.
Rasing money takes a lot of energy.
Since we started Tuft & needle in 2012, we've been bootstrapped and have been growing very fast while being profitable. We didn't view this merger as something that we needed to do. But it was something that we knew if done right and everything aligned with our goal of completely disrupting (converting it to being customer focused) the mattress industry from beginning to end, we would do it.
This wasn't a typical acquisition. Tuft & Needle combining with Serta Simmons was a merger operationally, legally, and financially. My co-founder Daehee and I structured the deal with Serta Simmons in such a way that we would have maximum impact towards accelerating the transformation of the industry. Daehee and I will be joining the executive team of the combined company, leading with the goal of both internal and external transformation. Our team in Phoenix will be not only be focused on growing Tuft & Needle, but also for dusting off Serta Simmons' other brands and implementing everything that we've learned and built to the other brands.
Regarding quality, what's really exciting for us is that through this merger we will be able to accelerate our product, feature and service roadmaps for Tuft & Needle. What we could do in 5 years we can now do it almost immediately. Specifically regarding quality and pricing, this is actually best case scenario for our customers, because we'll have access to more efficiencies to make our value and innovations even better.
Again, thanks for your support. This is going to take a lot of time and a lot of work. What we expected and hoped from our customers is cautious optimism that we can then validate and prove over the coming years that this merger was definitely the greatest step we could have taken for our customers and the market as a whole.
reasons are :
1. we want to stay flexible and put out a variety of businesses that might not be similar except in that we're leveraging our skills to build them. From my experience in venture funded startups - once you take funding for that business - radically changing direction or adding unrelated businesses seems impractical.
2. we want to keep full control and ownership - so that if an opportunity arises to sell the business we can do it with minimal hassle.
4. we're skeptical of our own ability to raise vc; and worried about all that that exercise entails - especially the potential distractions.
 "Yukon Data Solutions" is our first; we have a few other analytics related businesses in the pipeline; but also, interestingly some direct to consumer products that sort of fall into the "fashion" category.
having read this article and buffer.com's recent buyout of investors, it shows that there are potential alternate routes to success. i can understand the nature owner not feeling good in the beginning when everyone around him's talking about billion dollar valuations and series a, b, c funding, but it seems he sold for several hundred million which seems like sweet vindication. obviously most small businesses fail and eventually need some sort of funding whether from a small business loan or bootstrapping, etc, but it's manageable.
Not saying VC doesn't have a place in the world, but I get the sense that a lot of founders pursue VC just because that's what startups are "supposed" to do.
The success of the portfolio is what matters to the firm, and the returns are what matter to the LPs.
It is what it is, so entrepreneurs should use it for what it is. The hype over the past decade has been ridiculous.