Ask PG: How important is the 'sexy' startup?

8 points by samlev 14 years ago | 8 comments

I've been reading HN for a while, and thinking about start ups/business ideas for longer. One thing that keeps showing up are these 'sexy start ups' which seem to be make-or-break ventures. They're trying to bend the rules, they have no initial revenue plan, but they want to change the world and go viral while doing it.

There's all this talk of businesses which take off like a bat out of hell, and that that's what VC funds are trying to catch on to - the next big thing.

My main question is this: how important is the 'sexiness' of a start up idea to getting funding? Would you be more inclined to throw money at something that could take the world by storm (even if there's no clear future funding model for it), or something that probably won't become a household name, but will probably turn a profit?

Don't get me wrong here - I love that there are VCs who will willingly throw money at something that just seems like a crazy idea, but (and maybe it's just the HN culture) it seems to be that if your idea isn't a bit crazy, then you'd better self-fund.

So yeah, how important is it to you that a start up is trying to do something new, crazy, and sexy?

AznHisoka 14 years ago |

Sexiness only matters when it comes to PR. It'll be hard to get featured in Mashable, TC, or any other popular blogs if you aren't providing something cool or attractive.

if you're doing an enterprise startup, it doesn't really matter though.

ig1 14 years ago |

It's nothing to do with sexiness and all to do with statistics. Roughly 80-90% of angel funded startups will fail to provide a return to their investor, so those 10% that succeed will have to provide a 10x return to the investor just for the investor to break even.

If you've no chance of getting 10x+ growth (within 3-5 years) then from a portfolio point of view you're a failure before you start, it makes no sense to invest in you.

japhyr 14 years ago | |

> If you've no chance of getting 10x+ growth (within 3-5 years) then from a portfolio point of view you're a failure before you start, it makes no sense to invest in you.

Who do you go to if your company is not likely to grow 10x, but is very likely to become profitable? For example, your project fills a defined need, you demonstrate the ability to pull it off competently, but you don't anticipate exponential growth.

I am not very familiar with investment models. Is there a non-VC model that is more appropriate for this kind of startup?

ig1 14 years ago | | |

You're unlikely to get professional investors interested, so your other options are:

1) Bank loan - unlikely because you're too high risk unless you're willing to personally guarantee it.

2) Strategic investment - get an investment from someone who cares about things other than about the financial return. This could be other complementary industry players or an angel who really cares about your space.

3) Investment from your customers, if your startup solves an important problem for your customers they may well be willing to invest in your startup because they need a solution rather than for direct financial returns.

weebro 14 years ago |

In my opinion it's HUGELY important.

My thoughts; sexy =

1.) Free press, lots of it, results in free traffic and traction SO increased chance of success. As an investor, getting behind an 'animal' capable of producing either viral growth or free press (helping reach users) delivers a product with free marketing built in and that is a huge overhead ticked off with growth potential beyond most ideas.

2.) Investment is easier to raise, you get more of it, faster, at a better deal and from better investors SO increased chance of success.

3.) 'Sexy' tends to attract A Class employee's, who in turn attract and build an A Class company with the potential to execute the idea or pivot SO increased chance of success.

4.) Directly related to No. 3 is the increased retention of staff. Again, hiring, knowledge and skill loss, downtime, etc can kill a startup so this is a huge advantage.

5.) Company moral - It's a lot more fun to work long hours on an idea that could change the world. It is more rewarding and so going the extra mile, maybe even for a lower wage, can result. Maintaining company focus and moral is vital to success.

6.) Finally, Users. If it's sexy it's sticky. If it's 'viral' it can grow fast, become addictive and present users a product they just love.

Sex sells. Really, a better question is what defines 'sexy'. It's the job of the founder(s) (entrepreneur) to communicate the vision to the press, investors, potential employee's, current employee's, etc. The skill is in making the idea appear sexy. Many successful companies simply took an existing idea and put a 'sexy' image on it, sold the idea better, resulting in 1-6 and bang, you got a winner.

As for being new, innovative, it's obvious that's important. And as for Crazy, well, what's sane about any startup?

xsistor 14 years ago |

Quite interested in this question myself. Was pondering this very same thing last night and this morning. I also wonder if the quick-startups-trying-to-go-viral runs counter the original spirit of Silicon Valley with the likes of Microsoft, Apple and even Google

dirkdeman 14 years ago |

I think any sensible VC would have a carefully balanced mix of a few high potential, yet outlandish ventures and a good part of promising but more traditional startups.

j45 14 years ago |

Ideas don't have to be sexy. The business model of subscription Billing can also be sexy.