Ask HN: Did anyone's life ever gotten more comfortable after accepting funding?

96 points by tehayj 9 years ago | 53 comments

We have an unfair advantage in a fast growing market and could now get outside capital for this. As an alternative we could just keep rolling with our little team, scale like we already do and make good money and don't blow this whole thing up like our investors would want us to do. We will be financially independent either way in a few months. We just want to be happy and don't have a more busy life. We don't have experience with outside investments. Is a scenario in which we use the funding to hire a great team that more or less replaces us unrealistic? Sure, its nice to see our project at the next level but only if this doesn't make life even more busy.

jacquesm 9 years ago |

Investor goals and founder goals are rarely aligned. If you want to go for world domination and would rather risk everything to achieve that and possibly end up with nothing at all then go the investor route. That will increase your chances of ending up with nothing, but it will (perversely) also increase your chances of success.

If you're already happy at your current level just grow it organically and don't look back.

Remember: happiness is the ability to be content with what you already have, not with what you could do.

I wrote about this years ago, shameless blog post plug:

http://jacquesmattheij.com/three-roads-to-the-top-of-the-mou...

Best of luck, whichever path you decide to take.

tehayj 9 years ago | |

Thanks a lot! I also spoke with a friend who already received funding and we will simply keep growing our own way but also work with some lawyers who go out and find a buyer for the company.

jacquesm 9 years ago | | |

> also work with some lawyers who go out and find a buyer for the company.

Hm. You realize that this may be a bit premature?

You're in the midst of your growth curve, I'd go a bit further before thinking about selling the company, especially if you want to remain 'happy'. Selling a company usually means there will be some strings attached, for instance, you might end up working for the acquiring party for a set period (possibly years...), and you will lose autonomy, which is one surefire way of becoming less happy.

On top of all that you'll have to negotiate a deal (preferably one which does not leave you with a bunch of illiquid stock but with a nice pile of cash), and that too will take a lot of organization and knowledge.

I'd suggest you do everything you can to read up on your situation and what your options are before you commit to any moves.

ido 9 years ago | |

take note that the slow/"safe" way also has its own risk - that someone will discover your currently-secret goldmine and overtake you due to having more resources/connections/investment.

jacquesm 9 years ago | | |

Or even worse: that instead of competing with you on quality and reach they start giving it away, before inevitably going bust. They'll destroy the market for you anyway...

But that risk always exists, even for funded companies these risks are present. It's an arms race and if your opponent reaches for the nuclear option you have to be very patient and stable if you intend to wait them out and they may even succeed.

togilvie 9 years ago |

I think you've answered your own question. Taking outside money will make life busier, increase pressure, and create investor expectations that may be different from your own.

Bringing in an investor that would be willing to replace you with a new management team is a Bad Idea(tm). It's also a bad idea to try to mislead your investors and replace yourselves.

Outside money can be great if you want to build a really big business and need the capital to win the market. But there are tons of businesses that are better off using revenue as funding.

One of the drawbacks of the tech media is how few people talk publicly about the businesses where the founders would have been much better off if they'd only avoided funding.

asifjamil 9 years ago | |

> But there are tons of businesses that are better off using revenue as funding.

Any specific examples?

nthnclrk 9 years ago | | |

You mean literally the majority of all successful businesses that have ever existed?

tim333 9 years ago | | |

Fog Creek is an interesting example partly because it's written up and also because it's kind of a hybrid where they've remained self funded but spun off VC funded ventures in Trello and in some ways Stack Exchange http://www.foundersatwork.com/joel-spolksy.html

wslh 9 years ago | | |

If you are asking about large private companies take a look at this US list: http://www.forbes.com/largest-private-companies/list/#tab:ra...

matiasp 9 years ago |

This mentality is not compatible with venture capital.

You want a life-style business. And that is absolutely fine. Investors want you to be very busy, scale the business and build a large company. Is the only way they can make their money back.

(I work for a venture fund in Dubai)

jacquesm 9 years ago | |

> You want a life-style business.

A non-funded company is not by definition a 'life-style business'. That's pretending there are only two choices whereas in fact there is a huge continuum ranging from mom-and-pop operations all the way to enormous privately held conglomerates.

If you work for a venture fund you should know that the choice is slightly more complicated than funded and life-style businesses.

Being 'happy' does not mean someone wants a 'life-style' business, it simply means they want a healthy work-life balance and that says nothing about the eventual size of the company.

jventura 9 years ago |

I'm running a one-man show trying to reach profitability on a niche market so that I can later do some serious research in the area. As it is a very small niche, quite uninteresting for investors, it's good for me since I would never have the freedom to do independent research if I was to accept their money.. The downside is that I'm burning my own money, but I can do whatever I want and even quit if I get bored!

What I'm saying is that you should align your "strategy" with your own goals. If you guys are growing organically, are profitable and don't have crazy goals like trying to conquer the world, then welcome to the sane side of the equation! Leave the crazy working hours and unrealistic goals to those with the big egos.. If lots of money and being powerful is what matters to you (I think it should be considered a disease), then go for it as well..

joelrunyon 9 years ago |

"Outside money is expensive" - http://nathanbarry.com/profit/

elmar 9 years ago | |

this is a great real life bootstrapping example. I personally think the best of both worlds is to take funding but still continue with the mindset of a bootstraped company, but you have to choose your VC's carefully.

elmar 9 years ago | | |

looks like the article now as is own discussion thread

https://news.ycombinator.com/item?id=12000311

twidlit 9 years ago |

Why not just take a loan from a bank? That way you can spend that hiring and managers to let you off the hook of day to day operations.

forgetsusername 9 years ago | |

>Why not just take a loan from a bank?

Precisely. Is the startup world so financially uneducated that they see taking venture capital as the only means of raising capital, or worst yet, some sort of duty?

The post practically says the company is awash in money, which would mean there are multiple ways to raise cash. The real question is why are you raising money?

sharemywin 9 years ago | |

if there no cash flow or assets banks are hard to work with. Unless you want to risk your house etc.

FlyingSnake 9 years ago |

>We will be financially independent either way in a few months. We just want to be happy and don't have a more busy life.

I think you answered it yourself. Investor money is like a debt, and try to avoid it as much as you can.

xando 9 years ago |

I've been / I am in similar place right now. Since I don't have anything solid as an answer. Few comments. Please read this.

http://www.aaronkharris.com/investors-and-their-incentives

As few people noticed, The content of the question displays way of thinking that is incompatible with VC.

My approach right now is to find an angel investor who could spend reasonable amount of time with me. Effectively a mentor, to help me with answers for question like yours.

tehayj 9 years ago | |

Thanks, that was interesting.

womitt 9 years ago |

In the scenario you've described, I would never take the funding.

Investors have an insatiable appetite for more money and they tend to push founders to work more even if they are exceeding expectations...

DelaneyM 9 years ago |

tl;dr: Know what you're going to do with every dollar before you raise it (early). Also, VC investment isn't the only investment; if you won't have breakneck growth consider private equity.

I dislike having investors, as a general rule. They meddle. However, when you take investment it's important to do so intentionally and purposefully.

Good fundraising: "With X thousand dollars we can hire Y developers to build Z feature, which we project to generate a positive net return within N months."

Bad fundraising: "Who-hoo, we're funded! Let's buy some Aeron chairs and kitchen snacks and move to The Mission!"

In your situation: if you have an unfair advantage in a fast-growing market, and you can increase your edge and get more customers/revenue/value with investment quickly enough that the investment pays for itself, then consider it. If the features/hires/investments you could make with that money also fill you with excitement and anticipation, then do it.

If you don't want to be busier and you're happy with what you have, stay far away from investors for both of your sakes. They'll get frustrated by having a "zombie company", you'll get frustrated by their frustration.

Finally, consider pursuing alternative investors. There are many smaller-scale private equity firms (or individuals) which are more comfortable with making investments to generate steady, predictable & consistent cashflow. They might be better aligned with your personal goals.

tehayj 9 years ago | |

Thank you. Everyone who seeks funding should probably understand this.

We are fine in terms of money, I just had this (misguided) idea that getting funding now helps me to be even less involved in the project but since my decisions made this a success I think we really look to sell the whole thing.

Before we do this we will keep growing it for a little longer and try to make everyone replaceable. It doesnt matter much for us anyway. We just want to get done with the making money part of our life and will get there regardless if we sell or not until the end of the year.

julius 9 years ago |

Sounds like you want to profit from your unfair advantage, but you are not interested/motivated (any more) in doing the work (eg. more interested in focusing on private life and/or other projects to be more happy).

So you need to find someone who is interested enough in your unfair advantage that he is willing to be responsible for investment AND operations (AND giving you some money now).

In case your unfair advantage is really that good, have you considered selling the company. Keeping some shares.

jagtodeath 9 years ago |

Raising money will, without a doubt, make your lives more busy.

I've never heard of anyone successfully using investor money to hire people which replace them. Even so, hiring people is incredibly time consuming, and you will have to manage them.

If you're profitable and your goal is to reach financial independence, in this market I would not raise. If your goal is to make as much money as possible and lose all sense of work life balance, then raising money may be for you.

diziet 9 years ago |

If you're going to be financially independent in a few months -- ie, the founding members of the team will have a bank balance of >5 million us dollars, great! Don't take funding (or take it for very little dilution on your own terms).

If your definition means being able to afford some level of living expenses, you're in a different boat.

avifreedman 9 years ago |

If you take outside investment to grow faster and are coming from a $300-500k+ job, you'll be getting less cash compensation for years unless you're in the VP Sales role or a senior seller.

If you grow more slowly you can avoid most investment, especially VC, you can pay yourself whatever you/the team/the board approves, which will likely be more if you build a great business.

And if you're not coming from a higher-paying job, you should be able to pay yourself over $100k post A, then high $hundreds (to rough market/at least cost of living) and perhaps a little higher, depending on city, stage, health of business.

We decided on the VC path and have been thrilled with it so far. A number of us will be taking permanently lower liquid comp packages for the next 5-7 years but the upside is the equity and fun of building and dominating a stale but important space...

logicallee 9 years ago |

Given this situation, you could potentially raise money from your users, which would be the best of both trade-offs you seem to have. They're not going to strong-arm you into work 120 hour weeks, can appreciate sane and modest returns, and you can do whatever you like. On the other hand, one thing they DON'T have is experience keeping companies from dying. Your institutional investors have that in spades. They've seen dozens of companies die, and they've seen why and exactly how. The reason they need to push you for an outsize return, at the expense of your comfort, is to make up for these. Your outcome and end game is good. Rather than ask if anyone's life ever became more comfortable, perhaps you should ask whether anyone regretted their exit, getting paid off after working hard and driven in part by an institutional investor?

As far as raising money from your users (which I don't recommend, but would unlock what you seem to see as the best of both worlds), I literally got an email about a service I use doing this today. When I got the email I didn't click the "Get shares today" button from the email (which wasn't spam and which I read carefully), but just now I did re-open that email and clicked the button to see where the "get shares now" went, as part of writing this comment.

Where they sent me was: https://www.seedinvest.com and which presumably you can find that coverage easily online (Forbes covered it, they claimed).

Personally, I don't know how I feel about having users invest. Regulation D and the idea of accredited investors had existed for very, very good reason. But there are examples for you to follow. I'm not sure if I can recommend it. It doesn't seem to be a good direction for most companies, and leads to poor outcomes for companies and for users. It also seems very ripe for scams, which a high level of transparency would help you prevent. At any rate it's an option. Personally, I recommend going with the institutional investor.

wslh 9 years ago |

If organic growth is working it says a lot about your startup and you are in a rare position. Plenty of startups can't even exist or run without outside capital. This includes the ones in news you read every day. But if you insist and like hyper growth I would recommend to try YC.

And, as a vendor witnessing a lot of startups for 14 years, I would also recommend to follow the organic route. You can see a lot of geniuses and killer products crash. Even one nine figure acquisition was not so great for the founders and they didn't get that much after working a few years as part of the retention.

If you want to be acquired in the future, follow the growth route too, since your valuation will be a multiplier of your revenue.

smoyer 9 years ago |

You imply you want a lifestyle business ... Continue to bootstrap the company. Investors want a home run which means you'll work in at an insane pace for some period of time so the investor' goals don't line up with your own.

eli 9 years ago |

We have great investors who have made the company stronger and allowed us to hire a bigger team faster. But they are more like angels, only gave a relatively small amount, and share our vision and especially our (long, indefinite) timeline for an exit. Very different from traditional VC.

puranjay 9 years ago |

Similar boat as you.

I've decided to not take investment any time soon (if ever)

The very fact that you're having doubts about this says that you really don't want outside investors.

If you're making statements like this:

> We just want to be happy and don't have a more busy life

Outside investment will just make you utterly miserable.

harel 9 years ago |

You sound like you're in a good position to begin with. Taking money is giving a bit of your soul for it. You'll end up infinitely more busy than you already are. Reach financial independence and keep at it as you are. It sounds like you are already making it.

saluki 9 years ago |

@DHH has the answer(s) and sounds like you already do as well.

Startup School Talk https://www.youtube.com/watch?v=0CDXJ6bMkMY

mszcz 9 years ago |

This question reminds me of a scene from Silicon Valley ;)

https://www.youtube.com/watch?v=4rmqJZCCFVI

chemcoder 9 years ago |

I have just recieved funding for my non IT startup. I think pressure to deliver has increased manifold.

NetTechM 9 years ago |

Fiscal pressure declines, investor pressure increases exponentially.

Bromskloss 9 years ago |

When it is all over, please come back and tell us what company it is.

jgill 9 years ago |

What is your company? Is it a product we'd use here?