Can anyone explain, what is the rough amount of runway that a company should need? For instance, are there rough estimates expected for when a company should be able to reach profitability depending on product type?

I was watching the How to Start a Startup lecture on how to raise money (http://startupclass.samaltman.com/) and was astonished about how many rounds of funding VC's expect to give out after seed funding (A, B, C, D rounds, the letters seem to keep going).

I'm thinking of bootstrapping a company and easily also see the appeal of getting funding, in order to hire a team and get the product out faster. But why are so many rounds necessary?

Is there some business or economics theory out there that would explain the amount of runway needed for each business or product type? For instance, if I were launching an ice cream truck tomorrow, I'd expect profitability in the very short term compared to say, something like SpaceX.

But- the investors in these "private investors" such as Hedge Funds, PE funds or even late stage mutual funds (Rowe Price / Fidelity...) are LPs such as pension funds. The money in these pension funds are that of the common man again right?

So the common man is taking a longer term view & getting a better return through alternative investment vehicles (PE funds etc).

That is a good thing overall right? We complain about public markets being short term. But then we also complain about common people taking a long term view via LPs investing in late stage funding.

From the article: If the private investors are wrong, employees, founders and a lot of hedge funds could be in for a reckoning. But if they’re right, it will be you and me wearing the frown — the public investors who missed out on the next big thing.

To ask an admittedly naive question: is it possible to get funding and remain private? Does that even make sense?

Obviously investors want to make money, can profits at a private company serve that function? Or are tech investors mostly (only?) interested in > 100x ROIs?

“We probably need to fundamentally rethink how do private companies compensate employees, because that’s going to be an issue,” said Mr. Kupor, of Andreessen Horowitz."

Many of these private IPOs restrict employees to selling shares back to the company at say 10% of the vested allotment. This forces people to the secondary market. Also new language in options agreements try to prohibit secondary market selling.. So it is basically a mess and practically impossible to get information.

At least most of the unicorns have extended the 30 day exercise after you leave issues. Don't join a startup that doesn't give a longer (e.g 2-10 year) time frame for buying your vested options. Odds are post series A you won't be able to afford them unless offered a private liquidity event and then you can only sell some small percent anyway.

Wow. I get that private money is easier to deal with but disparaging the public markets as 'unwashed masses' seems rather uncouth. I expect leading a public company requires quite a different skill-set than a private company and the 'scrutiny' is a necessary part of that (information release etc).

On one hand, I sympathize with Ms. Morrill's position. I could see myself running a 50-person tech company. By the time it was public, I'd be looking for a replacement and planning to cash out. I hate having to justify my own work to people less intelligent than I am, and that becomes your life when you're the CEO of a publicly traded company.

"Unwashed masses" was off the mark and probably unneeded-- the actual enemy isn't 100-IQ average Americans (who, since it's 2015 and not 1347, are probably as clean as we are) who prefer fishing over running tech companies-- no one has a problem with them-- but management consultants and VC-land celebrities who think they're what I actually am (Dunning-Kruger) and are just so hilariously not, but somehow end up in charge despite their intellectual mediocrity. Still, I understand her sentiment completely and I feel the same way. If I'm CEO, then as soon as my job is begging for permission to do great work and justifying time and expense to inferior copies of myself who have no insight but all the power, instead of just fucking doing great work, then please cash me out and fire me.

On the other hand, I don't think that the VCs are, on the whole, better than the mainstream business elite. Person by person, they're worse: less intelligent, less capable, far more immature, and a hell of a lot worse in terms of organizational and social insight. The steel company CEO may not understand Haskell, but he fucking knows how to lead people and run a complex human organization. The typical Sand Hill Road VC doesn't know either and is, therefore, pretty fucking useless except for the fact that he's a gatekeeper to the man-child oligarchy that holds all the cards. The main benefit that you get as a private company (cf. Ms. Morrill) isn't that you're accountable to a higher quality of people (because VCs are not that) but that you're accountable to fewer people and, therefore, have a better chance of drawing only aces. If you're accountable to as many people as you are, once public, the probability of drawing all aces becomes really low-- and the 3's and 4's (which are found in both decks) often have better social skills and become the dominant decision-makers.

The major reason why VCs want to keep companies private, furthermore, has nothing to do with "long-term vision". Sand Hill Road is essentially taking equity-market strategies (namely, insider trading and market manipulation) that have been illegal for nearly a century on the public market, and applying them to private markets. If you use inside information to beat up the public market, you go to jail. If you pick up a phone and tell your buddies to dump their Quuxbin stocks all at once you can corner it on the cheap and put your underachieving, favor-dependent friends into executive positions... then you're guilty of market manipulation and go to jail. That kind of stuff happens (legally or at least quasi-legally) all the time in Silicon Valley.

The Sand Hill Road cartel (or, as I prefer it, man-child oligarchy) shows us a parallel universe in which pump-and-dump is the norm and businesses soar or fail not according to market demand for their (typically uninspiring) products, but based on the fluctuating needs of self-interested, careerist investors. This is not only ethically problematic, but it also contributes to the geographic concentration of technology funding, which has become toxic (both for the residents of the Bay Area, who pay obscene rents, and for the capital-deprived "flyover" rest of the country). See, anyone who wants to know why VC is so Bay Area-centric need only pay attention to what the VCs are actually doing. Because so many of the conversations that VCs have would utterly fucking ruin them if ever printed, they have to work face-to-face. That doesn't mandate a specific area (e.g. San Francisco) but it does require geographic concentration.

We see it with Amazon. That company has goals. It has expensive goals. Sometimes it doesn't make money for a few quarters. Ever damn time there is minor hullabaloo about how Amazon needs to focus on making money. They should cut jobs. Get more automation. Stop working in various Cloud offerings. Reduce their R&D. All of this is because a company shouldn't, apparently, focus on 5 to 10 year plans.

If I ever get out of my depression and really work on my startup, I won't IPO on anything that I actually care about. I'll plow through the early years living like a college student on Ramen if I have to. Then the company is mine to do with as I please. I know that there will be policies that won't please the market (for example 10% of the net to charity, primarily local to Palatka and Putnam county Fl).

I'm glad to see a possible trend in the tech industry of becoming entrepreneurs rather than rock stars. Don't get me wrong, I bet fame and its trappings are fun. Unfortunately they don't seem to really benefit the company or the product.

1 - https://en.wiktionary.org/wiki/unwashed_masses

The real issue is that for small caps, startups, tech, solar etc. stock markets are basically casinos. Any little murmur or rumor is an excuse to dump the price 20% in a day and then after everybody is scared shitless buy the thing back.

I used to day trade quite a bit and I can assure you that the majority of the people trading these companies don't know or care what the business is. These days many of them are robots.

So if you are trying to build a business then you want calmer long term hands to prevail, not traders.

Stock market volatility resulting from irrationality of certain classes of investors (% weight depending on the sector), in extreme cases, can break even a healthy company.

Here's an upvoted, but vile, close-minded, comment from another thread:

The [general populace] are lazy, and if given money, will sit watching reality TV and stuffing their face with ice cream.

The arrogance of techies is getting obscene, but the reality is we lucked out on enjoying mucking around with computers and now we're starting to believe we deserved it all along...

What she's saying about "scrutiny of unwashed masses who don't understand my business" hits the mark. With "unwashed masses", she's not complaining about average, 100-IQ Americans who'd rather go fishing than run tech companies. No one (who's worth taking seriously) has a problem with such people. She's complaining about the management consultants and serial board members who haven't actually done anything for 20 years who (because they think they're intellectual leaders, when they're not) toss out imbecilic suggestions like "Cut R&D, set up stack ranking, and give a speech about 'tough culture' to scare people" when the Q2 numbers come out a little soft. There are a lot of utter fucking morons in the business world with a hell of a lot of influence and power. Some are in tech, some are outside of it; but it's true that when you go public, the probability that drooling rubes will have the power and influence to force your hand on "tough decisions", when you should actually be leading from the front and doubling down on R&D and morale, goes up.

"Unwashed masses" isn't quite the right phrase, because it suggests low social class when the actual enemy is people of high social class and power who think they have intelligence and vision (rather than luck and social connection) to match it, but who are actually drooling, anti-intellectual, sheepish morons. Still, I agree strongly with her sentiment. Everything she's saying is valid. Where she and I may disagree is on the locus of the morons. I think that most of technology's leadership is just as bad as the mainstream business leadership (and I'm not sure that I buy into the distinction). Lucas Duplan and Evan Spiegel and Travis Kalanich weren't shit onto this world by Fenrir. Someone decided to make them founders. Their existence is testament to the existence of drooling rubes in the VC ranks. The difference isn't in the average quality of people (most VCs are fucking morons, just as most management consultants are) but in the number of people to whom you're accountable. If you're private, you're accountable to a couple lead VCs and there's a chance (less than 50% by definition, because most decision-makers are drooling rubes everywhere, but probably greater than 5%) that you got lucky and drew people who are actually worth a damn. If you're public, you're accountable to a much larger number of people, most of whom are talentless and overpaid and full of themselves, and you end up gaming short-term stats in order to keep them off your back.