DHH represents the other side perfectly here: http://www.youtube.com/watch?v=0CDXJ6bMkMY
I think that's an important question that potential startup founders need to answer before diving in. $20k/month coming in from a lifestyle business sounds less stressful than being CEO of a startup with a billion dollar valuation.
It is also a lot more likely.
It's not really about just being a lifestyle business though. The point is that there is so much opportunity out there right now that you can just be a few people, with no outside capital and make way more than $20k/mo. I would think followgen was one example of that. I'd be surprised if they weren't doing way more than $20k by the time they shut down the v1 service.
Even if you want to go it alone, this guy is going to making way more than $20k a month soon, if I guess right: https://www.baremetrics.io/
The business has only been operating for 4 months..and has been profitable from day one.
Although this was successful from day one, it was a result of 2 or 3 pivots over 3 years. All of the failures and successes from those pivots were fine-tuned and put into the current company.
Having a SaaS product with monthly subscriptions would be my ideal, but you gotta know what people want and will pay for and how to find them.
Then, you are entering a market where people already pay for stuff, and they can hopefully understand why yours is better. If you get their attention, you have a good chance of starting to build a subscriber base.
Being unique and new is great, but it's a incredibly tough way to get off the ground.
Thanks for the heads up.
That's still unnecessary aggressive and irritating. Like most "Are you sure you want to leave this web site?" dialogs that pop up when I close a tab.
Not the best way to give users a good last impression of your site.
Still completely unacceptable.
(EDIT: as in, your site is giving a value proposition and I don't accept it if it includes a massive popup)
Writing "Still completely unacceptable." makes you come across as though you were ripped off in some way..
Why even bother if the argument you're making isn't even remotely associated with reality?
What part of what I said gave you the impression of entitlement? I didn't say "I deserve to read this without ads". I said "I stopped reading because you put a massive pop-up that filled the entire screen and prevented me from reading it, I don't find that acceptable, and so closed the tab".
Would it be better to have no feedback about why people are bouncing?
Your complaint - which is unrelated to the content of this article - is now the top comment.
I agree with you, but there are probably a lot of things we agree about, which are also not related to the content of this article.
And regarding whether your complaint is doing the author a favor? You know, it's probably not. You're just going to discourage him from writing, because then he doesn't have to deal with HN's abuse.
I think it's myopic to dictate what is and isn't up for discussion, to say "well that's not the point, just ignore it." If the ad is so distracting and off-putting that the user doesn't even get to the content, that is pretty important.
And if that post rises to the top, the message is that a substantial amount of people are having a similar experience.
It's not about your feedbacks content (I agree with you!) it's how you worded it.
Leveraging our exclusive "Exit-Intent" technology, Bounce Exchange™ is leading the paradigm shift in automated customer acquisition.
I think they actually used one of those parody startup-speak generators.
Frankly, can't believe they managed to patent detecting and responding when the pointer drifts to the top of a web page.
Well, joke's on them. My tabs are off to the side, and I use keyboard to close the window anyway ;)
EDIT: Found one typo in the blog where it says "4) How Much are You Willing to Get Dilluted?". Should be Diluted right ?
EDIT 2: Typo has been fixed.
Having said that, the rule of thumb is that you want at least 12 months of runway, and that's at the rate you want to go at. It takes typically around 6 months (if things go well) to raise VC money (unless they come to you - which is pretty rare).
From what I understood, Groove had 8 months at the current runway - before hiring the additional people they want to bring on board. That's typically when you start raising before you go into the danger zone with your runway. Also, considering the current perceived drought of Series-A funding, a $5M offer for a business generating $16k monthly is an outlier.
Of course, I hope Groove does well and never needs this money. Also, it's possible the deal terms were not favorable, though it's not mentioned specifically in the post. If that was not the case, in my opinion they had a chance to significantly derisk their business and they choose not to take it. Time would tell if their gamble pays off or not.
Geeze, stop right there.
If you need the money, IT IS TOO LATE.
You get money because you can use it, not because you need it.
Sorry if this comes off as a rant. I was at a dysfunctional start-up once and I guess it comes out at odd times.
For example, if you need $$$ to build a nationwide network of warehouses, or to get your new electric car through safety testing, or as a bond for your new bitcoin bank's banking license, or to order the first batch of widgets from your manufacturer, you "need the money" because you can't achieve your business goals without it, but you aren't in a desperate hurry and you can shop around.
If you need the $$$ to meet payroll and keep the lights on and the rent paid, but your business plan basically calls for you to keep doing what you're doing, you probably don't have a lot of time to shop around for investors.
If you're not in either of those categories raising more capital now is optional, and you've got to consider whether it's worth what you'll have to pay for it.
Spending a thousand dollars on every employee to keep them comfortable while they sit at their desk and work for your company all day?! The epitome of profligate spending! A shining example of decadence! For shame, for shame!
As much as it is celebrated and desired in the valley, a large number of businesses don't have the mystical hockey stick as a viable option for growth. Throw enough money at it and any business can hit the hockey stick, but it won't last for too long. For every big exit that we read about, there are probably ten companies out there that attempted it and failed.
Fixing now. Thx.
"Needing the money" probably needs to be defined here. If you're going to the VCs because you "need the money" as in the lights will go out pretty soon, unbutton your slacks and bend over because you are in no position to negotiate.
On the other hand if you "need the money" because, in spite of the fact that your runway looks very very healthy, you can foresee a point well down the line where you will actually need the money then that's a much better scenario to be going to a VC.
Question on convertible notes: doesnt a 1M seed round on a note suggest that a second round needs to happen? How do the investors feel about not having a second round to set the price and convert to equity?
"By the way... now that you've seen our numbers, if you're interested in a buying a small piece of equity in our company, leave your email address and we'll let you know terms."
Is there any downside to an approach like this? Setting your own terms and then selling equity if you find people interested?
Taking on ... 300 small investors is a nightmare. They require far more work on average per dollar invested than larger investors do.
No other reason is needed. If you don't need the money, and if you believe in the business, you don't need to justify turning down external investment. In fact, I'd argue that turning down money is harder than accepting it
How does this funding actually work? From what little I know (the stock market) you'd sell an equity stake in your company for a certain amount and you have money in your personal bank account.
But it sounds to me like all these funds somehow go back into the company?? how?? what am I missing?
However, the way funding events work in real life is that new shares are created by the company and then sold to the investors.
As a very math-simple example, I have 1m shares in my company, and I own 100% of them. Some VCs want to take a ~33% share of the company for $5m. My "board" (me) creates 500k new shares, and sells/gives them to the investors for $5m. Now there are a total of 1.5m shares, of which I own 1m, and the VCs own 500k.
EDIT: sometimes, though, a founder will sell part of their shares to the VCs during a funding event. That's usually to help give the founder a little liquidity and cash.
However, I just wanted to keep the example simple, I thought it was easier to talk about creating shares than deal with the "who owns the unissued shares" notion.
But yeah, that's a good clarification.
I had never thought of the company itself creating more shares, this is what I was missing in my thought process.
VCs everywhere will always prefer to work with their lawyers to make sure this goes in their favor. it pays to use your own lawyer so that all of this stuff happens on your own terms.
lawyers are responsible to the party who pay their fees, so watch out if anyone seems overly generous with helping you out with legal bills.
If Evan Spiegel and Bobby Murphy weren't taking $10 million+ off the table during funding rounds they'd probably be far less likely to turn down a $3 billion offer. It is fairly common for founders to trade personal stock for cash during a funding round.
Perhaps you mean during initial funding? It is absolutely possible - and common - for founders to take money of the table during secondary funding rounds.
If you want to know more, read Venture Deals. It's very thorough and well written.
I turned down 5 million so that I could practically name the investor, get attention for my startup, and still make page 1 of HN.
I wonder how investors feel about posts like this. If you are an investor, would it change the way you feel about the CEO or the company?
edit: I'm not losing sleep over someone hurting the feelings of venture capitalists by publicly saying he didn't take their money when offered. Just as I doubt they're losing sleep over the companies they turn down.
Of course, my best recourse is to read each one as soon as the announcement shows up in my e-mail client's inbox!
And I love these blog posts. So much information and facts about how they try to grow. Please keep going.