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Blog Post: The Problem With Investors


#1

I know I’m preaching to the converted, but I just wrote this post On Entrepreneur By Design about my reasons to go down the bootstrapped road instead of raising money. It’s all based on my personal experience raising 2M$ for a startup that ended up imploding. Not gonna do that again, that’s for sure!

So what’s your personal experience raising money from investors? Any juicy stories?


#2

Thanks for the blog post, I agree with a lot of what you said there.

I worked for a startup that raised more than $40 million in the daily deal space. Had a lot of good things going for us (great tech team, brands-everyone-knows for clients), but once the daily deals space cooled off and the investors/management team were forced to take a serious look at the numbers and the remaining runway, a decision was made to “exit”, and not in a manner that worked out well for the employees.

I don’t have any hard feelings against the investors, they had to make the right decision for themselves. But I work hard and I feel passionate about what I build. I ended up feeling that if you’re going to work your ass off to build something you think is great, you want what you build to last. If investors are holding the reins, that’s no longer up to you.

I believe VC is a necessity in certain industries, and in general can work out really well if the founders are in the right stage before they look to raise, but generally I think the “startup == VC” culture has gone way overboard.


#3

Thanks for the feedback, Matt. What burns me is that with investors, it’s all or noting. Having a profitable (but not huge) business that supports several employees is not enough – they need that Facebook/Twitter/Groupon/Google rocket ship & are willing to wreck the ship for a shot at getting it.

My current startup has been years in the making and only now getting clients + revenue, but I’m much happier with the slow pace and the ability to run things as I please.

I sometime missed the interaction with my old team (specially when debugging alone), but I quickly get over that when I think about the payroll I had to sustain and the stress that came with it.


#4

Hey @xecretcode and @mattm. Just wanted to let you know that I featured this post and both of you today on the Snappy blog. http://blog.besnappy.com/2014/05/cost-vc-money-loss-control/


#5

Hey @alyssamazzina, good post. It’s almost like I’m internet-famous. :wink:

Thanks for letting us know about it.

Not to get all meta by citing a blogpost that cites this thread, but I like this quote:

This is the biggie. VCs aren’t unintelligent. Nor are VCs evil (not all of them anyway). They’re not even necessarily misaligned with you. What they are doing is optimizing for a very specific outcome. Share that alignment, or don’t take their money.

(quote originally from http://modelviewculture.com/pieces/five-reasons-not-to-raise-venture-capital)


#6

Hey @alyssamazzina, nice blog post! Lots of reasons not to go the VC route. Totally agree with @mattm’s assessment. Keep on doing a great job at UserScape!


#7

I wrote a blog post on why I don’t want to be the next Amazon or Facebook With a mortgage and young family to think about, I just couldn’t take the risk.


#8

Great post Kevin! People think investors & VCs reduce risk, but they don’t – they are more risky. They don’t want a business than can support “just” a handful of people while being profitable. They will shut you down because you don’t fit their business model – they need a unicorn rocket ship.

And as you mention on your blog, there are the risks to your personal life and well-being. Divorce, depression & stress – all this to be the next Amazon. No thanks! I’m with you 100%! :slight_smile:


#9

I loved this article and your writing style.

I’ve never heard Jody’s story before that’s crazy :frowning:. Thankfully I’m bootstrapped


#10

Thanks for reading, @michaeljcalkins! Yes, the suicide of Ecomom’s Jody Sherman was a huge wake up call for the VC-backed tech community. The thing is, Jody had been a successful entrepreneur & consultant in the past. His mistake was to believe in what Amy Hoy calls entreporn – the idea that life is not worth it unless you build the next Amazon, Facebook or Twitter. Yeah, thank goodness your a bootstrapper! :slight_smile:


#11

Great post. I think so many people forgot when you get investor money you are just trading a company manager for a manager in the shape of a VC.

I think it really comes down to why you want to be an entrepreneur. Is it for freedom or mass wealth?