[HN Gopher] A startup doesn't need to be a unicorn
___________________________________________________________________
A startup doesn't need to be a unicorn
Author : MattSWilliamson
Score : 492 points
Date : 2025-04-07 08:42 UTC (14 hours ago)
(HTM) web link (mattgiustwilliamson.substack.com)
(TXT) w3m dump (mattgiustwilliamson.substack.com)
| atemerev wrote:
| "In fact, if you pitched this pathway to a VC, I'm sure they'd
| ghost you quicker than their last Hinge date." -- oh they will,
| fr
| ilrwbwrkhv wrote:
| Also the other thing that I realised after working with a bunch
| of VCs is that they are all incredibly dumb. Few VCs are founders
| themselves and you will have better luck with them but the
| majority of VCs have simply no idea about product and technology
| and they are simply pattern matching. What that means is that
| they will cargo cult everything and if your startup doesn't fit
| the mold they will not respond to you favorably and the sad part
| is that the actual 10x, 100x returns that their VC firm needs
| comes from those type of investments but they simply cannot see
| them.
| rvz wrote:
| This.
| caseyy wrote:
| We also have a problem with VCs that want start-ups to scale
| quickly, even though this often builds incapable teams. We then
| say, "Oh, it's because they stopped being in founder's mode,"
| whereas in reality, the team is so malcomposed and mismanaged
| that it could not build even a simple product.
|
| This has happened a lot in games. Now, VCs have almost stopped
| pre-seed and seed funding in this industry. The global annual
| VC funding in games is about $1B, about 1.5 Call of Dutys. This
| is down from around 12B in 2022.
|
| One could say they threw the baby out with the bathwater
| because while many executives were abusing the found-scale-exit
| business model and taking investors' money, many were also not.
| It's pattern-matching through and through, very little due
| diligence.
| DrScientist wrote:
| A long time ago - our director of research at a startup used to
| call VC's carnivoruous sheep ( dumb, flocking, but will eat you
| alive ).
|
| Ironically he is now a VC - but a very successful one.
| morgante wrote:
| This is way too broad of a statement.
|
| The smartest person and the dumbest person I've met
| professionally are both investors.
| bitlad wrote:
| Yes, this is so true. I hope all our competitors follow this
| advice.
| mg wrote:
| Hopefully, over time, we will get better and better in creating
| the world of software from small interoperable pieces that can be
| maintained by small teams or even solo entrepreneurs.
| mschuster91 wrote:
| Yuck, we already got enough OpenSSL and other foundational
| projects that have a bus factor approaching (or being) 1.
|
| Just today I learned that the unzip program hasn't had an
| official release since 2009 (!) and everyone ships a different
| set of patches for it.
|
| Relevant xkcd 2347 [1].
|
| [1] https://xkcd.com/2347/
|
| [2] https://news.ycombinator.com/item?id=43608052
| Etheryte wrote:
| Well yes, that's called a regular company. Not sure if I'm
| missing something here?
| cjs_ac wrote:
| 'Be a normal person/company and do normal person/company
| things,' isn't talked about very often, and it can be useful to
| be reminded that it is a pathway that can lead to success.
| muzani wrote:
| It depends very much on your definition of success. Many who
| grew up upper middle class would define survival as failure.
| palata wrote:
| Who talked about survival? If you think that anything other
| than becoming as rich as Mark Zuckerberg is "survival",
| then you're in for a treat.
| CharlieDigital wrote:
| Life is too short and the works is to big for that kind of
| mindset.
| aloner wrote:
| lifestyle businesses provide far more than "survival"
| foobahify wrote:
| A million investment doesn't sound regular. Basically if you
| raise a mill for 33% you value yourself at $2m. That is without
| PMF or revenue!
|
| This seems like pulling a fast one on VCs if you then pivot to
| bootstrapping a nice family business. That ain't why they threw
| $1m at your PowerPoint.
|
| In "dragons den" style traditional business they'd offer you
| $50k for 50% at that stage. Maybe.
| senko wrote:
| Regular companies aren't given $1m they don't have to pay back.
|
| They have to get loans and founders are usually on the hook if
| the venture fails.
|
| This is different from what the article advocates.
| jimmydddd wrote:
| I run a small 20 year old service business in the US. Just
| getting a $300K line of credit from a bank required a lot of
| paperwork and both the company and me personally being on the
| hook. It took about a month to secure. In contrast, on a
| different occasion a secured a personal home equity line of
| credit for $100K in a bout 5 minutes.
| rambambram wrote:
| Was there a mortgage right in the mix in your second
| occasion?
| Cthulhu_ wrote:
| At least some years ago, browsing HN's comment section felt
| like it was a different world, separated from reality. I think
| some people need this kind of grounding reminders every once in
| a while.
| esafak wrote:
| Russ (VC): Why would you go after revenue?
|
| Richard (CEO): Because... to make money?
|
| Russ: No. If you show revenue, people will ask how much, and
| it will never be enough. The company that was the hundred
| x-er, the thousand x-er, becomes the two x dog. But if you
| have no revenue, you can say you're _pre-revenue_... you 're
| a potential pure play. It's not about how much you earn, it's
| about what you're worth, and who's worth the most? Companies
| that lose money. Pinterest, SnapChat, no revenue. Amazon has
| lost money every fucking quarter for the last twenty fucking
| years and that Bezos motherfucker is the king. There's no
| revenue. No one wants to see revenue. Go!
|
| Richard: Oh, um, I just thought that mainly the goal of
| companies is to make money.
|
| Russ: Yeah, no no no, that's not how it works. I don't want
| to make a little bit of money every day, I want to make a
| fuckton of money all at once. ROI. ROI!
|
| -- Silicon Valley, "Bad Money" (2015).
| https://www.youtube.com/watch?v=BzAdXyPYKQo
| rmnclmnt wrote:
| One of the best shows of all time, both extremely sarcastic
| but so on-point at the same time. We laugh because we know
| it's true
| dehrmann wrote:
| Part of it was Mike Judge (Office Space, among others).
| Part was that they did _really_ good research. They
| nailed lots of little details about VC, technology, tech
| businesses, the locale, and industry.
| 65 wrote:
| If you read enough comments about AI or LLMs on here you will
| realize the people of Hacker News do live in a different
| world from reality.
| conductr wrote:
| I've been on here long enough to see it with every tech
| hype cycle in the past ~20 years. Self driving cars, VR,
| bitcoin, then generically 'crypto', web3, now AI/LLMs,
| probably a lot I'm missing right now... It's funny how the
| optimist control the narrative in the beginning then the
| pessimist start chiming in around the time the hype starts
| to vaporize. The AI/LLM cynicism is rising right now it
| seems.
| nottorp wrote:
| > It's funny how the optimist
|
| s/optimist/gullible
| sanderjd wrote:
| I guess I have a different view on this... I feel like
| you left out that the past 20 years has also seen
| enormous success in this industry, even to a historically
| unprecedented degree.
|
| You listed a number of things that have been super hyped
| flashes in the pan that never really panned out (or in
| the case of self driving cars, have taken way longer to
| pan out than people expected), but you didn't list the
| things that were super hyped and then became big
| successful sectors.
|
| I remember when I thought "web 2.0" was overhyped, but
| now it's just the water we all swim in. I remember when
| that went from blogs to being social media, and I thought
| that was way overhyped too, but it turns out it was a big
| deal. The cloud was overhyped, "big data" was overhyped,
| SaaS was overhyped.
|
| And it's true that all of these _were_ overhyped! But
| they also turned into real business sectors.
|
| It's certainly difficult to predict which hype-y things
| are going to mature into sustainably large markets, and
| which are going to fade into obscurity, but a model of
| "things that are hyped are doomed" is not predictive.
|
| My own prediction is that AI tools are both overhyped and
| also very promising. I have no illusions that this
| prediction could be totally wrong. And even if it's
| right, I'm even more uncertain what the successful
| business models are going to be after the dust settles.
| We'll see!
| conductr wrote:
| > It's certainly difficult to predict which hype-y things
| are going to mature into sustainably large markets, and
| which are going to fade into obscurity, but a model of
| "things that are hyped are doomed" is not predictive
|
| Perhaps this is where we differ. I offered a list of
| things that, granted IMO, were all hype with little
| substance. Or perhaps just on a timeline so long that
| many people got the hype timing wrong.
|
| Your list was mostly things that were obvious winners.
| They were mostly building steam with real world use cases
| and trending hard before the buzzwords got associated
| with the movements (eg. Web 2.0 and saas). These were
| obvious enhancements to the status quo. I'm not sure they
| were overhyped as they did very much become the defacto
| standard for their time. It doesn't mean they will hold
| that title for ever, but tremendous economic value falls
| under those umbrellas. I'd argue intrinsic value too
| (unlike crypto).
|
| AI/LLM might do that in some regards. But doing it in a
| way that makes lasting business sense is still tbd. AI
| eating the world, still very much tbd. So I do think we
| agree on this point.
| mediaman wrote:
| There is a happy medium between "AI eating the world" and
| "AI is a scam," that is generally best described as "AI
| performing valuable but often boring services within
| enterprises."
|
| We don't often see that because it gets totally drowned
| out between cynics and moralist scolds battling vapid
| hype-bros and pumpers, and also because it's boring.
|
| It turns out there's actually a lot of tedious
| classification, OCR, entity extraction, and enterprise
| search to be done.
|
| Amusingly much of the money made in SaaS was also in
| boring products!
| jurgenaut23 wrote:
| Actually, the rest of the comment section shows that this is
| still the case, at least to some extent.
| phendrenad2 wrote:
| Well, this is YCombinator, after all. VC-funded startups do
| still need to be ~unicorns.
| chamomeal wrote:
| That's pretty much what I took away. I guess the difference is
| that in my mind a "regular" company gets its funding via a
| loan. The post is from someone who got into YC.
|
| But yeah "building for profitability" sounds a lot like... good
| business!
| edanm wrote:
| It's not a "regular" company, because it's still raising angel
| investment, presumably from the tech/startup ecosystem.
|
| A more common route for non-tech-startup companies is to get
| money via debt - in other words, borrow money from a bank or
| financiers. That's a different model to with different
| risk/reward characteristics, but it's how most non-innovative
| entrepreneurship is done, I believe - things like building
| restaurants, buildings, etc.
|
| This is indeed a "middle path" in terms of raising money by
| selling equity, but selling a smaller amount of it for less
| money, which keeps more ownership stake and control in the
| hands of the founders, but necessitates slower spending cause
| they raised less capital.
| troupo wrote:
| > because it's still raising angel investment, presumably
| from the tech/startup ecosystem.
|
| > A more common route for non-tech-startup companies is to
| get money via debt - in other words, borrow money from a bank
| or financiers.
|
| What do you think angel investors are if not financiers, and
| what do you think those investments are if not debt?
|
| The only difference is that in the software- and software-
| adjacent world everyone expects a 100-fold return on their
| investments.
| edanm wrote:
| > What do you think angel investors are if not financiers,
| and what do you think those investments are if not debt?
|
| No, those are _equity_ investments, usually. It 's a
| different thing with different rules.
|
| Equity investments give the angel investors ownership of
| the company - equity. This is either direct selling of
| shares of a company to angels, or (more typically nowadays)
| via instruments like convertible notes, which convert to
| equity in future funding rounds. Other than this ownership
| stake, they are typically not entitled to anything else.
|
| _Debt_ investments, on the other hand, don 't give any
| ownership to the financier. They only entitle them to
| receive some future payments from the borrower.
|
| These are completely different things, and large companies
| often use a mix of both. But in startup-land, the typical
| investment is done via equity.
| summarity wrote:
| Here's a model that exists in Germany, which I like:
|
| You can present a business plan to the state's investment bank
| and apply for several financial aides, including:
|
| * 1.5 years of universal basic income for you plus up to 2 other
| people. It's a tiny amount of money, but the point is to free you
| up to invest your actual time an money into the business. You do
| not have to pay this back.
|
| * up to 20k EUR in "consulting fees", for which the bank will
| contribute up to 50%. Again, you don't have to pay it back, but
| obviously you need money for them to match.
|
| * discounted loans, amount depends on business plan outlook
|
| I've worked with an accelerator that helps founders write the
| required pitches and plans for this program. And while the
| majority don't make it (because they mostly realize their idea
| won't actually hold up to business planning scrutiny), some do.
| And those don't become hyperscaling unicorns, they become normal
| companies, growing organically as stable, solvent employers in
| the region.
|
| Every once in a while a VC would stick its head in and encourage
| the startup to take on VC funding, and for an even smaller
| percentage (one in my time doing this), this worked. But for me,
| the organic growers are the best success story.
| adamcharnock wrote:
| Do you have a link for any more information on this? This
| sounds interesting.
| summarity wrote:
| I was working with the "ego." programs in particular:
| https://www.ib-sachsen-anhalt.de/gruender/gruenden-in-
| sachse...
|
| This might be different from state to state. There are also
| EU grants you can apply for, which might contribute to
| employee salaries. Those are somewhat difficult to navigate
| and apply for, but sometimes worth it to bridge the salary
| gap between a "normal" German company and FANG.
| bryanhogan wrote:
| Not sure which one the original comment is talking about, but
| look into "Grunderstipendium" / "EXIST Stipendium".
|
| Then there are also more scholarships based on other
| criteria, e.g. your state or if you are at an university,
| many universities also have some sort of entrepreneurial
| scholarship which will then also help you get the larger
| scholarships afterwards.
| bryanhogan wrote:
| Are you talking about the "Grunderstipendium"?
| summarity wrote:
| Yes, ego.-START: https://www.ib-sachsen-
| anhalt.de/gruender/neue-existenz-grue... (just of the
| programs)
| bryanhogan wrote:
| Maybe the ones I meant are for NRW (Nordrhein-Westfalen)
| only:
|
| - https://www.xn--grndungsstipendium-n6b.nrw/
|
| - https://www.foerderdatenbank.de/FDB/Content/DE/Foerderpro
| gra...
| kakoni wrote:
| So Founder's scholarship: 2,000 euros per month for a
| period of max. 18 months?
|
| Wow, much better than I expected. How difficult is it to
| get this scholarship?
| summarity wrote:
| Not at all. Here's how you'd go about it:
|
| * for each medium to large University, there will usually
| be at least one person, if not an entire org of people
| that will guide you through the process, manage comms
| with the bank and help you to frame the business plan.
| These institutions (what I referred to as an
| "accelerator" in my OP) are publicly funded. You do not
| pay them.
|
| * prepare your business plan (milestones, market
| research, financial plan) - at this point you can also
| utilize other financial support (e.g. matched funds for
| market research)
|
| * you nominate a "mentor" - this is meant to be an
| independent expert that will serve as an informal advisor
| and secondary contact for the bank. There's no liability
| involved, and usually this is an industry expert, or
| professor, etc.
|
| * bank accepts the business plan and starts payments
|
| * during the scholarship, the bank will keep in touch
| with you and the mentor to check in on your business plan
| milestones. This is mostly an anti-fraud check.
|
| It's important to realize there's an alignment of
| incentives here:
|
| * you want to start a company and get financial support
|
| * the accelerator advanced its mission (get more startups
| going)
|
| * the bank advances its mission (create more value in the
| local region)
|
| * the business plan and milestones unlock ultra-low-
| interest follow-up financing if you need it, since the
| bank has already been involved for 18 months and knows
| the potential/liabilities of your business
|
| This all sounds like a lot, but I've seen founders go
| through the entire process in just a few weeks of
| planning. And much of the work, like business planning,
| is what you need to do anyway.
| kakoni wrote:
| Thanks for the clarification. So few question about this
| investment bank and their startup-loans (IB-
| Grundungsdarlehen).
|
| 1) Are those difficult to get? Do you need to put lots of
| collateral into use?(like putting your personal
| assets/home as guarantee?)
|
| 2) Are the interest rates really in the range of 2.99 to
| 6.12%? For new company?
|
| 3) Is it expected that you personally pay back the full
| amount if the company fails?
| fastball wrote:
| And yet Germany still doesn't seem to have much more startup /
| entrepreneurial success than any other European country. What
| gives?
| summarity wrote:
| What are you looking for in particular? The model is geared
| towards slow, sustainable growth. And that growth might also
| not need to exceed a certain level. So you're unlikely to
| hear about many of them. Not all are in tech or software,
| many are focused on German-only (or DACH region) research,
| industrial development, etc. I think that's fine.
| fastball wrote:
| Presumably you'd want to see that such initiatives are
| increasing the number of sustainable businesses created,
| per capita. Is that the case?
|
| ---
|
| EDIT: Some quick searching indicates that the startup rate
| (per capita) in Germany is about 1.1%, while the USA is
| 1.5%. Not a huge difference, but the USA doesn't have any
| of those initiatives afaik.
|
| Just wondering what actually moves the needle and how to
| better create a society that is entrepreneurial, and not
| just in a "billion dollar social media unicorn" kinda way,
| but businesses that provide actual tangible value.
| Definitely recognize that the "quality" of businesses being
| started in Germany could be higher, but I think you
| actually need to measure these things and understand what
| interventions actually make a difference. It is a similar
| issue with UBI in general: while it sounds nice and might
| be necessary if our "AI is the future" overlords get their
| way, you do actually need to back up the promise of "UBI
| will unlock human creativity" with some amount of hard
| data, imo.
| DarkWiiPlayer wrote:
| > Some quick searching indicates that the startup rate
| (per capita) in Germany is about 1.1%, while the USA is
| 1.5%. Not a huge difference, but the USA doesn't have any
| of those initiatives afaik.
|
| I believe there's differences between east and west
| Germany, so if you look at the west specifically, the
| gamp might get a little bit smaller.
|
| Beyond that, Germany doesn't have as much of a startup
| culture as the USA, which is precisely why we need to
| incentivise people in a way that others don't.
|
| > Just wondering what actually moves the needle and how
| to better create a society that is entrepreneurial
|
| Willingness and awareness, where the latter is probably
| easy to fix but the former is a bit trickier: You need
| those people who have the ability to pull it off to want
| it in the first place.
|
| And there I guess it splits into a) the benefits of
| entreprenaurship b) the benefits of employment and c) the
| cultural influence on how these are weighed against each
| other.
|
| So tl;dr: a) make starting a company attractive, b) make
| employment suck more and c) convince people that
| independence beats security.
|
| Employment in Germany is definitely a lot cozier than in
| the US, so unless we want to get rid of that, a) and c)
| are the options we have. If you want to achieve it
| without propaganda, then all you can really do is a), and
| that's what these programmes are already doing.
|
| I think reducing buerocracy and offering good social
| safety nets so a failing business doesn't translate to a
| ruined life are the way to go, at least in the short
| term.
| fastball wrote:
| Or maybe having a social safety net has the _opposite_
| effect you think it does, in that anyone starting a
| business without one is going to try that much harder to
| make sure their business doesn 't fail, as otherwise
| their life is ruined. Someone _with_ a safety net might
| be happy to give up after some minimum of effort because
| they know they 'll be fine. Necessity is an incredibly
| strong motivator for people.
|
| Not necessarily saying that relying on the specter of
| ruination would be the right choice (if the above was
| true), but I don't think you can reduce it to such
| simplistic levers.
| marcinzm wrote:
| > Some quick searching indicates that the startup rate
| (per capita) in Germany is about 1.1%, while the USA is
| 1.5%. Not a huge difference, but the USA doesn't have any
| of those initiatives afaik.
|
| It sounds like these are small businesses and not
| startups. The US has 10% small businesses per capita.
| fastball wrote:
| My brief research was looking at new business
| registrations per year.
| mr_mitm wrote:
| There was even an expression coined for this phenomenon in
| Germany: https://en.m.wikipedia.org/wiki/Hidden_champions
|
| We have lots of SMEs that are world leading in their niche,
| but most people have never heard of them.
| CalRobert wrote:
| Is slow growth sustainable?
| pintxo wrote:
| Germany are also very risk averse. So we need such programs
| even just to counter this risk aversion.
| piva00 wrote:
| Entrepreneurial success they definitely have, it's just not
| in-your-face tech/digital stuff, it's lots of Mittelstand
| companies focusing on niches, like in high-precision machines
| that are then used for precision manufacturing (optical
| lenses, chemistry reactors, etc.).
|
| What gives is that it isn't a primarily marketing-driven
| consumer-facing entrepreneurship so you don't hear about
| Peter Huber Kaltemaschinenbau, or Rational AG-like
| companies[0].
|
| [0] https://www.chargeurs.com/wp-content/uploads/2020/01/The-
| Bes...
| muzani wrote:
| Have you heard of Rocket Internet? It's one of the most
| successful models in the world. They may avoid the US market
| and such, but most of the unicorns in Malaysia are backed by
| Rocket. And most of the people who stay and start their own,
| backed by YC or whoever, are usually ex-Rocket. They hit 10%
| growth per week, even at unicorn sizes.
|
| I would anecdotally put Germany at #3 globally just for
| Rocket alone, with US and China ahead of them.
|
| There's lots of successful non-Rocket startups from Germany
| too, but most are boring stuff like agriculture, grocery
| delivery, pet stuff, etc. We normally don't take note of
| startups until they're Stripe-sized or something.
| kaashif wrote:
| Is there any way to put numbers to this success? As in, by
| what metric is Germany #3?
| thom wrote:
| Isn't Rocket's reputation that they just steal ideas from
| other startups and create cheap clones of them? Not a
| terrible business to be in, but not massively inspiring or
| globally reproducible.
| muzani wrote:
| I'm not a big fan of Rocket, but I think that's an unfair
| way to put it. I'd say they're similar to what Bezos
| would be like if he had to start from Europe lol.
|
| They take an existing model with a lot of potential and
| focus on implementation. They had a golden period with
| e-commerce because e-commerce is heavily logistics. And
| they do it in the hardest places, because the harder it
| is, the more they can sell the company for.
|
| Back when Lazada started, Indonesia had terrible credit
| card penetration. Roads were not suited to delivery; heck
| they built their own logistics because the local
| logistics were not suited for e-commerce. There's a lot
| of complex laws on hiring, or incorporating companies
| there (which are nicer now).
|
| China won't do it. They don't want to build companies in
| 6 different low income country with a total of 500m
| population or so. Normal people would just target the US
| or EU, which has more people and more money.
|
| But Rocket goes into these countries. They have a lot of
| emphasis on leadership. They drop a scalable playbook for
| the locals. They grow it fast until it hits a cap before
| they sell it off to something like Alibaba. They do have
| some dark patterns as well. Whatever caricatures people
| have of China, Rocket does it better - they work longer
| hours, work people harder, build things for extreme
| scale, do what the Chinese won't.
|
| It is not the funding model that GP speaks of. But it is
| a fairly successful model of creating and exiting
| startups. It's quite autocratic to my understanding. I
| don't have that kind of work ethic and I feel like
| there's a hint of envy when people call them copycats.
| They don't have a good presence on the English Wikipedia
| though.
| datavirtue wrote:
| It is a New Pied Piper...
| nicbou wrote:
| German bureaucracy is a constant hindrance. Your first year
| in business is pure compliance work, and waiting for various
| paper-based processes to complete.
| aleph_minus_one wrote:
| > And yet Germany still doesn't seem to have much more
| startup / entrepreneurial success than any other European
| country. What gives?
|
| Too much bureaucracy.
|
| Many people in Germany do hate it; there even exist quite
| some people in Germany who would really deeply from their
| heart love to see the politicians dead who are responsible
| for the whole bureaucratic mess (which are lots of
| politicians).
|
| EDIT: nicbou gives a similar point:
| https://news.ycombinator.com/item?id=43609839
| cardanome wrote:
| Bureaucracy is crazy in Germany. Forget about doing anything
| online, paper and in person only.
|
| Founding any form of limited company is expensive and
| complicated. Want to put a website online? Have fun putting
| your full name and address in the imprint. Want to offer some
| courses that teach X? Yeah, no, you need a license for that,
| mate!
|
| Also being self-employed you lose most social benefits. You
| need to get private healthcare, you need to save up for
| retirement and so on. Getting back into public health care
| later on can be a bit complicated.
|
| So my advice is to keep working part time on a job that gives
| you health insurance and everything and work on your company
| in your free time.
|
| Germany is also one of the least friendly countries for
| expats. And I say that as a native Germain. Officials will
| refuse to speak English to you. Yes, refuse. Most people know
| how to speak English but often can't be arsed to do so. Plus
| general xenophobia and people being very tight-knit and not
| open to making new friends.
| aleph_minus_one wrote:
| While I completely agree with many of the points that you
| made, I disagree with some:
|
| > Bureaucracy is crazy in Germany. Forget about doing
| anything online, paper and in person only.
|
| The latter point has nothing to do with bureaucracy.
|
| > Germany is also one of the least friendly countries for
| expats. And I say that as a native Germain. Officials will
| refuse to speak English to you. Yes, refuse.
|
| For example in the USA, they will refuse to speak German
| with you. So what?
|
| In my opinion there actually exist good reasons for this:
|
| 1. A lot of legal, bureaucratic German terms have no direct
| analogue in English (and their word forming sometimes
| depends on subtle grammatical features of the German
| leanguage).
|
| 2. For official purposes, it does not suffice if the clerk
| can somewhat speak English; he/she rather has to be fluent
| in a way that is "negotiation-safe" ("verhandlungssicher";
| I know that this German term is usually translated with
| "confident in business discussions", "business fluent",
| "language proficient", but all of these translations don't
| catch the subtlety of the German term).
|
| > people [are] not open to making new friends.
|
| The German word "Freund" (commonly translated with
| "friend") has a different meaning than the English "friend"
| - the relationship goes much deeper. I don't think that
| Germans are not open to making new "Freunde", but if you
| want to have shallow, superficial relationships, Germany is
| not the ideal country. Vice versa, if you want to have deep
| relationships, you will likely be annoyed by the USA.
| cardanome wrote:
| > For example in the USA, they will refuse to speak
| German with you. So what?
|
| Actually they would most likely be delighted to show off
| their German if they knew any. But that is besides the
| point. English for better or worse is the current
| international language.
|
| I can found a new company in Estonia in literal minutes
| without speaking a single word of Estonian and without
| being physically present in the country because the whole
| process is digital and in English.
|
| If you want to attract international talent you have to
| adapt.
|
| > The German word "Freund" (commonly translated with
| "friend") has a different meaning than the English
| "friend" - the relationship goes much deeper. I don't
| think that Germans are not open to making new "Freunde",
| but if you want to have shallow, superficial
| relationships, Germany is not the ideal country. Vice
| versa, if you want to have deep relationships, you will
| likely be annoyed by the USA.
|
| Yeah, Americans have only superficial friendships, only
| us Germans know the value of real friendships. (Sarcasm)
|
| You are not wrong about there being subtle cultural
| differences but it isn't an either or. You can value deep
| friendships but still be friendly towards acquaintances.
|
| In the end it doesn't matter the reason. If expats feel
| like Germans are acting coldly towards them and have a
| bad time in Germany, that is what they are feeling. It
| doesn't matter if there are good reason for that or if
| Germans didn't even intend to act coldly. It just fact
| that Germany is often seen as one of the least friendly
| countries for outsiders. Not everyone, some do find it
| easy to integrate but most don't.
|
| I sick of the chauvinism is see from other Germans. Our
| culture isn't better or worse than others. We certainly
| have many areas we could improve.
| openplatypus wrote:
| > I can found a new company in Estonia in literal minutes
| without speaking a single word of Estonian and without
| being physically present in the country because the whole
| process is digital and in English.
|
| Bad example. When you incorporate in Estonia, if you come
| through eResidency, they are very clear and very open in
| stating that ANY interaction with tax office and/or
| judicial system WILL be and MUST be performed in
| Estonian.
| cardanome wrote:
| Is that an practical issue? I imagine you wouldn't
| interact with the tax office anyway as you fill the taxes
| them electronically and as for the judicial system, you
| are going to need an Estonian lawyer anyway.
|
| Genuinely asking. Wondering if someone has experience
| doing business in Estonia. It looks pretty nice in the
| prospectus so would love to hear what the reality is.
| aleph_minus_one wrote:
| > I can found a new company in Estonia in literal minutes
| without speaking a single word of Estonian and without
| being physically present in the country because the whole
| process is digital and in English.
|
| > If you want to attract international talent you have to
| adapt.
|
| Calling English "international" is like calling Spanish,
| Chinese, Russian, Arabic, French, Portuguese, Turkish or
| German "international". Internationality is not
| "English".
|
| > You can value deep friendships but still be friendly
| towards acquaintances.
|
| I insist that Germans are typically _not less friendly_ ,
| but they are indeed less warm (compared to, say, people
| from South American countries, and also some South
| European countries). This is coherent with your claim "If
| expats feel like Germans are acting coldly towards them",
| which I would not consider to be unfriendly. Indeed: what
| is considered to be "friendly" differs a lot between
| countries.
|
| > Not everyone, some do find it easy to integrate but
| most don't.
|
| If you don't want to learn German, it will likely be hard
| (or at least much harder) to integrate. The problem
| rather is that many people invested years, sometimes
| decades, into learning English and US-American customs
| instead of learning German and customs of German-speaking
| countries. Thus the situation that your mentioned people
| don't find it easy to integrate is in my opinion
| partially self-inflicted.
| awongh wrote:
| > For example in the USA, they will refuse to speak
| German with you. So what?
|
| In the USA many official government forms are made in
| several different languages.
|
| This may not always be the federal government (probably
| less likely these days), but in California you can cast
| your vote in like 5 different languages (maybe more)?
|
| This would never happen in Europe. It's simply less
| friendly to diversity.
| aleph_minus_one wrote:
| > This would never happen in Europe. It's simply less
| friendly to diversity.
|
| In Germany, six minority languages are protected:
|
| * Danisch (Danish)
|
| * Nordfriesisch (North Frisian)
|
| * Saterfriesisch (Saterland Frisian)
|
| * Romanes (Romany)
|
| * Niedersorbisch (Lower Sorbian)
|
| * Obersorbisch (Upper Sorbian)
|
| Source: https://www.bmi.bund.de/DE/themen/heimat-
| integration/gesells...
|
| This means in the respective German regions you can also
| speak to the administrative agencies in these minority
| languages.
| awongh wrote:
| The difference is that in the USA people are willing to
| add languages just based on the languages the people
| there already speak.
|
| Edit to add: In Germany this might mean you could
| interact with the government if not in english, then also
| arabic, turkish or vietnamese.
| jamil7 wrote:
| > You need to get private healthcare
|
| No you don't, you can stay in the public system.
|
| > you need to save up for retirement and so on
|
| You can still contribute voluntarily to the public pension
| if you want to but the majority of self-employed people
| here don't as this is seen as a feature not a bug.
|
| Part of the concept of being self-employed in Germany is
| that you're opting out of the welfare state and are
| responsible for taking care of yourself. With the potential
| upside of better raw earning potential.
| muzani wrote:
| These things do work and created a few unicorns here in
| Malaysia.
|
| The catch is that they're usually very bureaucratic as it's
| public funds, and the more corruption, the more rules there
| are. Someone might say, come in from New Zealand to get a
| grant, then the condition becomes "must be 51% locally owned".
| A conglomerate creates a sister company to get the grant and
| then it becomes, "parent company must be less than 3 years old
| and have under $500k revenue". The rules just keep stacking on
| until agile is basically banned lol
|
| Companies funded this way were actually one of my income
| sources when I was freelancing, but sadly most don't continue
| on unless there's a Series B later on.
| amazingamazing wrote:
| > These things do work and created a few unicorns here in
| Malaysia.
|
| Which ones?
| nottorp wrote:
| You still need the 25k to register a LLC or whatever the
| acronym is in Germany, right?
| summarity wrote:
| No that's for a full GmbH. You can start with an "UG", which
| realistically needs maybe 1500 EUR to get registered and up
| and running. Then, a certain percentage of the profit is
| contributed towards the 25k (of which in turn only 12.5k have
| to be deposited in cash) each financial year. If the
| threshold is met, you can convert from UG to GmbH.
| zwnow wrote:
| Always go for GmbH. UG will make you account for everything
| with your private money. If something goes wrong in your
| business you'll be dirt poor.
| x2rj wrote:
| You are confusing UG with something like GbR. UG is
| basically a baby GmbH with constraints of the name of the
| company and how much money the associates can extract
| from it (until the company got 25kEUR captial and can
| become a normal GmbH).
| dividuum wrote:
| That doesn't sound correct. UG is identical to the GmbH
| in that regard. Do you mean a GbR?
| zwnow wrote:
| Ahh might have confused it with one of the other forms
| then... It's been a while since I had to learn all that
| stuff.
| openplatypus wrote:
| Only up to 25k.
|
| UG allows you to incorporate for 1eur (600eur with
| accountant, notary, etc) and you are liable only up to
| level of full GmbH which is 25k.
| datavirtue wrote:
| What a morass.
| ChadNauseam wrote:
| This sounds crazy to me. What is the EUR25k for? Hell, what
| is the EUR1.5k for? Is there some advantage to this system
| when compared to the US one where I can start an LLC for
| $35 or a C-corp for a couple hundred?
| tiluha wrote:
| You need 25kEUR to register a GmbH, but you can nowadays
| register a UG which only requires 1EUR and can later be
| converted to a GmbH
| harha wrote:
| Which will cost many thousands in admin per year
| b-mmxx wrote:
| Can you elaborate on what you mean by that?
|
| Annual admin costs very much depend on how complex the
| business is, no? The primary recurring obligation for a
| UG is the mandatory retention of 25% of annual net
| profits until the share capital reaches EUR25k, enabling
| tax-neutral conversion to a GmbH.
|
| What I could think of for UG with idea on converting to
| GmbH, you could have:
|
| - UG setup cost (fairly low compared to GmbH)
|
| - UG/GmbH accounting & tax compliance
|
| - Commercial register updates
|
| - Notary fees for structural changes, and eventually the
| conversion process
| ido wrote:
| I run a small (software) startup in Berlin, the
| administrative cost is more like EUR1000/year (of course
| increasing the bigger your business gets) .
| Propelloni wrote:
| First, it is sufficient to only pay 50 % of the stock
| capital at registration of the GMbH, ie. 12500 EUR.
| Obviously you also have less operating capital then.
|
| Second, the money is not gone. It is right there in the
| company's account. You use it to pay company bills.
|
| The only thing annoying about German GmbH is that it can
| take 6-8 weeks until you get your tax id and registration
| numbers. You can, of course, already do business with the
| name postfix "i.G.", ie. instead of "Foobar GmbH" you write
| "Foobar GmbH i.G." and done.
|
| EDIT: typo
| nottorp wrote:
| > Second, the money is not gone. It is right there in the
| company's account. You use it to pay company bills.
|
| That's fine if you start a restaurant or small workshop
| and need money for salaries, materials etc, of course.
|
| It's a barrier to entry when you can start something
| digital only with just a person or three putting in sweat
| equity and zero to very little actual cash.
| notpushkin wrote:
| Why not try Estonia instead? You'll need to get an
| e-signature card ("e-Residency") which might take about a
| month, then you just submit an online form and get your
| company number the same day. Mimimum capital is 1 EUR,
| and the fees are about 400 EUR for setup and 100 EUR/yr
| for virtual address.
| https://www.e-resident.gov.ee/eresidency-germans/
|
| The downside, of course, is that you probably won't get
| any direct(-ish) subsidies from Germany -- although any
| pan-EU options should be on the table.
| Propelloni wrote:
| > Mimimum capital is 1 EUR,
|
| If you are talking about an OU this is often repeated and
| technically wrong (the best kind of wrong). One, actually
| the minimum capital requirement is 0.01 Euro per
| shareholder, and two, Estonian courts are pretty clear
| that in an OU with less than 2500 EUR capital the
| shareholders are personally liable to cover the
| difference between share capital and 2500 EUR to
| trustees.
| notpushkin wrote:
| Yeah, you're technically right (the best kind of right!)
| -- on both counts.
|
| However, if I understand everything correctly (IANAL),
| personal liability is basically the same. If you go for
| 2500 EUR capital and your company becomes
| undercapitalized, you'll still be personally liable for
| any claims against your company, no?
|
| (But personally, I just like how this opens opportunities
| even for people for whom 2500 EUR is a serious amount of
| money. Granted, you probably shouldn't open up a company
| in this kind of situation, but at least you can!)
| Propelloni wrote:
| The barrier to entry is the idea that you need a limited
| liability corporation to start something digital by the
| seats of your pants. You can always start as a GbR
| (virtually no costs, spend a day at your city's
| administration to get a tax id). I mean this in the most
| charitable way, what kinds of liabilities are you afraid
| of in that scenario?
|
| Once your idea gets traction and money comes in you
| hopefully will be able to spare the 1 EUR you need for an
| UG. Anyway, I recommend investing into founding a GmbH as
| soon as possible, not for liability's sake but
| marketing's. You will not make inroads into corporate
| procurement without a "proper" incorporation.
| nottorp wrote:
| > I mean this in the most charitable way, what kinds of
| liabilities are you afraid of in that scenario?
|
| Why do you think I know all the kinds of companies one
| can register in Germany? :)
|
| I'm not even german or in germany, just keeping myself
| informed. You never know when it becomes useful.
|
| Up until today I only knew of the GmBH. Now I know of two
| more types.
| mentalgear wrote:
| Good to see startup strategies which help build stable, solid
| middle-sized companies.
|
| Germany has a great success story by the name of the
| "Mittelstand" (SME businesses), which means a big part if the
| market are small to middle enterprises. This is far more
| consumer-friendly and innovative, as more competitive as it's
| not relying on a few big players like in the US that might also
| collude with each other.
| earthnail wrote:
| Small business owner here. Only works if you can carve out a
| niche. Lots of software areas have clear scaling benefits and
| then you just can't compete as a small company.
|
| That's why MS Office continues to dominate after decades.
| marcinzm wrote:
| That just sounds like traditional small businesses. Which is
| cool but re-branding them to "startup" seems silly. The US has
| 35 million small businesses and maybe 1 million would qualify
| as startups.
| flir wrote:
| You said this below, too. What's the difference? In my mind a
| startup is just a newly established business, but you seem to
| have a different vision?
| marcinzm wrote:
| Startups aim to grow quickly.
|
| Every single definition highlights that difference versus
| traditional small businesses. Trying to re-brand small
| businesses into "startups" for the cool name factor just
| seems silly to me. If you're making a sustainable small
| business then call it that. Don't call it a startup. You'll
| get more customers that way as well and more relevant
| business contacts.
|
| People care about startups because of the high growth rate.
| Renaming a small business to a startup achieves as much as
| slapping a porsche logo onto a honda civic. The civic is a
| solid car but you won't make people'd heads turn with that
| logo on it or not.
| javierluraschi wrote:
| From your point of view, when does a startup is no longer
| a startup? Seed, Series A, B, C, pre-IPO? Can you be a
| startup after IPO?
| marcinzm wrote:
| That's another reason I find the re-naming of small
| business to startup so silly. Putting a billion dollar
| company and a family small business on the same label is
| silly just because were started recently. Some startups
| are worth billions the second they are created.
| Personally I think startups generally stop being called
| startups when they get old enough or go public. Then they
| get other labels such as a private company or a public
| company.
|
| The point of labels is to quickly give a lot of relevant
| information about some entity. This helps customers,
| investors, clients, future employees and so on understand
| the entity quickly.
| esperent wrote:
| > Startups aim to grow quickly
|
| Maybe this is a US centric definition. It's definitely
| not what I mean when I talk about a startup with European
| or Asian tech founders.
| jasode wrote:
| _> Maybe this is a US centric definition._
|
| It's a common definition for new companies that intend to
| grow quickly beyond a small/medium size and very often
| associated with funding from VC.
|
| 1st paragraph from
| https://en.wikipedia.org/wiki/Startup_company :
|
| _> A startup or start-up is a company or project
| undertaken by an entrepreneur to seek, develop, and
| validate a scalable business model.[1][2] While
| entrepreneurship includes all new businesses including
| self-employment and businesses that do not intend to go
| public, startups are new businesses that intend to grow
| large beyond the solo-founder.[3] During the beginning,
| startups face high uncertainty[4] and have high rates of
| failure, but a minority of them do go on to become
| successful and influential, such as unicorns._
|
| The characteristics in that paragraph don't apply to new
| mom & pop restaurants, dry cleaners, new law practices,
| etc so most people don't usually label them as
| "startups".
|
| But there is no Global Language Police that everybody has
| to obey so if some folks wants to label their new
| neighborhood coffee house a "startup", nobody will stop
| them.
|
| EDIT to REPLY: _> If you keep reading we get to: "Unlike
| an entrepreneur, a start up founder doesn't have a major
| financial motive." I'm not sure that is in line with the
| YC program._
|
| I see that you're referring to a LinkedIn article that
| someone added to Wikipedia. I agree with you. That
| Linkedin blog by Japjot Sethi has bad heuristics and
| should be removed as a citation. The Wiki user that added
| it in May 2019 has been flagged and blocked for bad edits
| to Wikipedia: https://en.wikipedia.org/wiki/User:Sensate8
|
| https://en.wikipedia.org/w/index.php?title=Startup_compan
| y&d...
| 9rx wrote:
| _> The characteristics in that paragraph don 't apply to
| new mom & pop restaurants, dry cleaners, new law
| practices, etc _
|
| I fully expect the founders of those businesses
| originally have dreams of their business becoming the
| next F500. But when validation fails...
|
| _> and very often associated with funding from VC._
|
| If you keep reading we get to: _" Unlike an entrepreneur,
| a start up founder doesn't have a major financial
| motive."_ I'm not sure that is in line with the YC
| program. It is clearly focused on the huge exit.
| marcinzm wrote:
| > I fully expect the founders of those businesses
| originally have dreams of their business becoming the
| next F500. But when validation fails...
|
| I take it you've not met many such people or business
| owners. No one except the utterly delusional would think
| a mom & pop restaurants, dry cleaners, new law practices,
| etc. would become a F500 company. Amazingly people start
| companies for reasons other than becoming a F500 company
| one day.
| overfeed wrote:
| > No one except the utterly delusional would think a mom
| & pop restaurants, dry cleaners, new law practices, etc.
| would become a F500 company.
|
| Do they fail at achieving F500 status at a higher or
| lower rate than "startups"? Who then is delusional -
| those who have realizable visions, or the strivers who
| dream of unicorn-status and still fail.
| 9rx wrote:
| _> No one except the utterly delusional would think a mom
| & pop restaurants ... would become a F500 company._
|
| The F500 has quite a few restaurants on the list. Other
| than maybe Starbucks, it seems all of them have humble
| "mom & pop" beginnings.
|
| Who opens a business thinking _" I hope customer response
| is so poor that I will struggle and never be able to
| grow"?_ That is often the outcome - but when is that the
| dream?
| whizzter wrote:
| Replying here because nesting,
|
| Regardless of if the startup intends to hit it big or
| remain smallish, a startup is really something that's
| appropriate until it's operating for profits rather than
| growth and/or growth in it's market niche naturally slows
| down due to saturation.
| flir wrote:
| Gotcha, thanks. I always thought it was "first 3-5
| years". Could be an example of word meaning diluting as
| it goes mainstream - hacker being the ur-example.
| ("Semantic bleaching" is the jargon term, apparently).
|
| I was wondering when the first use of the term in its
| modern sense was, so I just glanced at Google Books and
| found this from 1805, which is just too good: "a startup
| was a coarse kind of half-boot with thick soles; [...]
| its use is now superseded by that of the modern
| spatterdash." [spats?]
|
| By 1949 I've got this: "But startup businesses, and even
| mature businesses in some localities, may face financial
| constraints" -- Agriculture Information Bulletin, Issue
| 664, Page 113. I can't find anything pre-WWII.
| lelanthran wrote:
| > What's the difference? In my mind a startup is just a
| newly established business, but you seem to have a
| different vision?
|
| A commonly accepted answer to this question is _" The exit
| strategy does not involve 100X[1] valuation"_
|
| [1] Pick the appropriate multiplier.
| 9rx wrote:
| The dictionary defines startup as: "a newly established
| business."
|
| Your take is typical on HN, but not the common
| interpretation.
| lelanthran wrote:
| > Your take is typical on HN, but not the common
| interpretation.
|
| TBH, it appears to be the commonly accepted answer to the
| question asked, but that doesn't mean it's a commmon
| interpretation.
|
| To be even more honest, I'm not really sure how I'd
| classify the difference either; there's a lot of blurring
| of lines there.
| datavirtue wrote:
| If you are dealing with funding rounds and recaps, you
| are a startup. I know of one that is twenty years old.
| Scarblac wrote:
| But then, _this is_ HN.
| 9rx wrote:
| Hence the hourly reminder that most people don't think
| like the HN crowd does.
| bpicolo wrote:
| > You do not have to pay this back.
|
| There's a very big key difference from standard small
| business here
| zwnow wrote:
| It's also connected to so much bureaucracy that you almost need
| to hire someone for that alone, because you wont have as much
| time for your actual business. Founding a company in Germany is
| so much unnecessary paperwork its crazy. Single handedly the
| only reason I will never try it in my home country.
| i_am_a_peasant wrote:
| Some still do it. And while I would never start my own
| company in Germany. Working at a startup in Germnay is going
| pretty well for me so far. 1.5 years in.
| zwnow wrote:
| Ye been working in a startup as well. I just witness all
| the appointments my boss has to go through and I could
| never do that. But I'm also the type of person not picking
| up their phone when it rings.
| flessner wrote:
| Actually just founding the company is the easy part nowadays.
| You can do it online or let a notary work it out for you.
|
| It's just everything else that's dreadful.
| earthnail wrote:
| Small German business owner here. I still find the notary
| egregious. But yeah, the admin afterwards is facepalming.
|
| Had a startup in the UK before; that was a walk in the park
| in comparison.
| martin_a wrote:
| Not true.
|
| Go to your hometown administration, pay 35 Euro and leave 15
| minutes later with a "Gewerbeanmeldung" which enables you to
| start doing business right away.
| greenavocado wrote:
| You are lying by omission.
|
| The Gewerbeanmeldung typically registers you as a sole
| proprietor (Einzelunternehmer) or GbR (partnership). Most
| tech startups need a limited liability structure like GmbH
| (similar to LLC) or UG. Those require notarized founding
| documents, minimum capital requirements (EUR25,000 for
| GmbH), and a commercial register entry (Handelsregister)
|
| The simple Gewerbeanmeldung structure is problematic for
| venture capital because most VCs require a corporate entity
| structure (GmbH/UG) and converting from a simple structure
| to a proper corporation later can trigger tax consequences.
|
| At each investment round all shareholders must appear
| before a notary or provide notarized power of attorney, the
| entire investment agreement must be read aloud by the
| notary, changes to company documents require notarization,
| and each notarization costs thousands of euros and creates
| delays.
|
| Major decisions which are likely to affect shareholders
| require formal shareholder meetings with proper notice
| periods. Unanimous consent is often required for key
| decisions. Capital increases must be executed through
| complex formal processes. Registration with the commercial
| register takes weeks. Minimum nominal values of shares
| restrict flexibility. Required reporting to tax authorities
| is extensive. I can go on and on. And don't even get me
| started about German employee stock option plans.
| martin_a wrote:
| > Most tech startups need a limited liability structure
| like GmbH (similar to LLC) or UG.
|
| Meh, do they really? Only if they want to go the VC
| route. But in this topic we're talking about more healthy
| ways to build and grow a company and for that you don't
| need a GmbH or GbR to start.
| greenavocado wrote:
| You are effectively locking yourself out of the outside
| investment route if you choose to do this.
| mikigraf wrote:
| And open up for liability
| jermaustin1 wrote:
| Is this really true? I'm in the US, and have a
| corporation in the US. I am shielded from liability
| through the corporate veil, but I also have a $50/mo
| $2M/incidence liability umbrella. I honestly have no idea
| if either are necessary, in 20 years of "doing business"
| I've never had a single liability needing to be covered
| by insurance or the veil.
|
| I think it's wise to have, just in case, but even in
| lawsuit happy America where I have had to fire multiple
| clients mid-project due to various reason. I've never had
| blowback or even the treat of a suit. We all just went
| our separate ways.
| siva7 wrote:
| Yes, it is true for germany. You're only somewhat
| shielded from liability with a GmbH/UG.
| immibis wrote:
| Lawsuits are more common in Germany than the US. Possibly
| because the procedure is different, with lower overhead,
| and penalties are not reduced for reasons like: you don't
| have the money to pay.
|
| I believe Germany is generally heavy on liability and
| light on ways to avoid it. If you damage someone's
| property, there may be a procedure to confirm that you
| damaged their property, and then you must pay the value
| of the damage - as well as the court fee because you
| didn't just pay it upon asking. No ifs or buts. You
| cannot avoid paying it in any way, including the clever
| use of paperwork to avoid paying it. That's why there's a
| high bar to form a GmbH. As you correctly pointed out,
| good insurance can also limit your effective liability. I
| think such business liability insurance products are very
| common in Germany.
|
| After reading that, for all the talk the USA has about
| "personal responsibility", it doesn't seem that serious
| about it, does it?
|
| I haven't been sued either, and I live in Germany. I did
| pay someone $100 to replace something I accidentally
| broke, and walked away with the broken thing. No court
| was involved there and I didn't bother to claim
| insurance.
|
| Limited liability is something you should always _want_ ,
| and if it merely costs a $30 filing fee and some forms,
| you should get it, but it's obviously jurisdiction-
| specific and in Germany, with the much higher
| requirements, it's obvious that they really only want
| medium to large businesses to have it (though this isn't
| a direct rule, I think).
|
| From this thread I just learned about the
| Unternehmergesellschaft (haftungsbeschrankt) which is
| apparently a GmbH that can be formed for less than
| $25,000, but instead, you have to set aside 25% of your
| profit until you have $25,000, at which point you can
| convert to a normal GmbH.
| grandempire wrote:
| > I've never had a single liability needing to be covered
| by insurance or the veil.
|
| That's how insurance works. You don't need it often and
| maybe not even your entire life, but if it happens and
| you aren't covered it will ruin your life.
|
| If this description is not accurate for the situation
| then you probably don't need insurance.
| codethief wrote:
| > > Most tech startups need a limited liability structure
| like GmbH (similar to LLC) or UG.
|
| > Meh, do they really? Only if they want to go the VC
| route.
|
| Funnily enough, a German friend of mine and his buddy got
| accepted into YC some years ago and apparently YC handed
| them the funds before they had even incorporated or
| anything, so at least from the point of view of German
| law they were essentially a partnership (GbR). Not sure
| how that even worked, especially in terms of delineating
| what the entity actually was that they and YC owned
| together. Did YC own 7% (standard deal) of... _them_?
| (Without incorporating you are personally liable after
| all.)
|
| Anyway, from what my friend told me they had a whole
| bunch of cash lying around on a personal account for
| quite some time lol
|
| Then again, this was before covid - money was incredibly
| cheap back then.
| Kwpolska wrote:
| > And don't even get me started about German employee
| stock option plans.
|
| My landlord and greengrocer want hard cash, not stocks of
| a startup that may collapse next month.
| Bewelge wrote:
| That feels like an exaggeration. I did that last year. They
| took several months to process the registration itself.
|
| And this was just to freelance as a developer. In my case I
| was allowed to start while they were processing the
| registration. But had it been something that would require
| their permission, I'd have to wait several months before I
| could start my business, while they wave through a form
| that basically says "I'll be selling goods".
|
| I'm not one to blindly hate on all bureaucracy. But in this
| case it feels unnecessarily complex.
| nudpiedo wrote:
| This might depend on where you live and the kind of
| business... last time I made an Unmeldung online I needed
| to call after a week waiting and they literally told me
| that in person would be solved the same day. And it was.
| Fokamul wrote:
| Comparing to what country? A lot of EU countries has big
| administration.
| k__ wrote:
| Technically, you can just ask your co-founder if they want to
| found a company with you and if they say yes, you did it.
| Bewelge wrote:
| I agree that the process is unnecessarily complex, but I also
| think hiring someone for that would be the wise choice in
| most places anyway.
|
| And even in Germany hiring someone for that would probably
| amount to paying 500-1000EUR for the whole registration of
| the company instead of doing everything yourself and only
| paying the 100-200EUR notary fees. It's not as bad as you
| might think.
|
| > I will never try it in my home country.
|
| May I ask, where would you try it? As I understand it, it's
| not really possible to found in a different European country
| while you're still living in Germany.
| zwnow wrote:
| I never thought about founding my own company while living
| in Germany. I hate this countries bureaucracy to the core.
| If I ever wanted to found one, I'd first move out of
| Germany.
| echelon wrote:
| It's so easy (relative to this) to just go grab a SAFE. No
| strings, no bureaucracy. You can structure your endeavor
| however you want. And you can sometimes do it with just a
| conversation.
| pembrook wrote:
| > _but I also think hiring someone for [government
| paperwork] would be the wise choice in most places anyway._
|
| I'm not sure if you've ever tried founding a business or
| fundraising in any other non-Germany country, but this is
| an insane thing to say imo.
|
| Is this why Germany has no globally relevant software (or
| hardware tbh) companies founded in the last 40 years?
|
| Are we sure we want to be holding up this model as an
| example of "a good one"?
| dinoqqq wrote:
| You probably missed SAP then.
|
| > The company is the largest non-American software
| company by revenue and the world's third-largest publicly
| traded software company by revenue. As of December 2023,
| SAP is the largest German company by market
| capitalization.
|
| https://en.m.wikipedia.org/wiki/SAP
| codethief wrote:
| I suppose OP specifically excluded SAP as it was founded
| more than 40 years ago.
| fsndz wrote:
| SAP is kinda of a monopoly no ? The software is bloated
| and complex to use. The UI is dated but everyone still
| uses it because it is so embedded into the core arteries
| of businesses.
| bgnn wrote:
| Siemens is also huge in software.
|
| AUTOSAR alliance is an organization based in Germany
| defining automotive ECU software architectures. Most
| automotive SW development is happening in Germany.
| ks2048 wrote:
| > I'm not sure if you've ever tried founding a business
| or fundraising in any other non-Germany country, but this
| is an insane thing to say imo.
|
| In the US, people also tell you pay an expensive lawyer
| to deal with government paperwork.
| whatever1 wrote:
| Don't forget the accountant. Once you start payroll
| things get an order of magnitude more complex.
| vaidhy wrote:
| Why should there be a globally relevant software company?
| How about locally relevant software companies? If it is
| successful enough to pay for its own expenses and decent
| income for the employees/founders, it is a good business.
| haileys wrote:
| > Is this why Germany has no globally relevant software
| (or hardware tbh) companies founded in the last 40 years?
|
| Ableton, Native Instruments, SoundCloud, TeamViewer
| jpfr wrote:
| I just founded in Germany. The paperwork is ... okay.
|
| Not much more crazy than tax returns or internal accounting
| you need to do in any jurisdiction.
|
| But yes, running any organization is a lot of work.
| toomuchtodo wrote:
| Is there an opportunity to streamline the paperwork
| mentioned to reduce friction for founding in Germany?
| hijodelsol wrote:
| Yes, there are ways to buy up existing "empty" companies
| with a bank account, commercial registration, etc. If you
| want to found a new one, there are also services that
| will prepare all paperwork and set up appointments with
| notaries, etc. for you for affordable prices Day to day
| operations do generally not require much else than
| bookkeeping and accounting which you can almost fully
| outsource (though accountant fees are not cheap, however,
| doing it yourself is also not to hard if you have the
| right software and do not sell thousands of different
| products) unless you are in specific industries There are
| a few unnecessary fees and it takes longer than it should
| to get started but for most businesses it does not really
| matter and is limited in scope when it comes to time and
| money needed
| DiggyJohnson wrote:
| This makes it sound like a lot of unnecessary work...
| hobofan wrote:
| There are already services that do that, e.g. firma.de[0]
|
| But in general, not really. I also just founded a GmbH in
| Germany, and the paperwork really isn't that crazy, and
| for the more complicated parts you'll generally will want
| to have a tax advisor you are going to have a long-term
| relationship with (rather than a one-off founding
| service). I considered using a founding service, but
| ultimately, most of the "hard parts" about the process is
| in understanding what agency you have to talk to for what
| parts, which you'll have to learn anyways if you want to
| run a business in a way that doesn't land you in jail, so
| the benefits of such a service are marginal.
|
| The only real way to streamline it would be to deregulate
| the process (e.g. getting rid of notary requirement).
|
| [0]: https://www.firma.de
| codethief wrote:
| Having gone through the process of incorporation myself,
| I agree with everything you said: Yes, there is some
| paperwork you'll have to take care of and a bit of a
| learning curve to everything but not outrageously so. It
| can all be done within ~2 weeks (including roundtrip
| times for mail). Yes, that's still a lot more than it'll
| take you in e.g. Estonia (where you can do everything
| online in a few minutes from what I've been told) but it
| really would be the least of my worries, compared to
| actually running the company.
|
| That being said, I do think the process could be
| simplified drastically. Not necessarily by getting rid of
| the notary requirement but 1) through digitalization and
| 2) by streamlining (possibly centralizing) the whole back
| and forth between notary (official incorporation &
| signing of articles of incorporation), bank (getting a
| business account + obtaining proof you actually put the
| money in that account that you're claiming to have during
| incorporation), local court (registering the company,
| including articles of incorporation), tax authorities
| (getting a tax ID and sales tax ID), local authorities
| (getting a business permit), local chamber of commerce
| (paying dues for mandatory membership), Federal Gazette /
| federal company register (submitting your initial balance
| sheet).
| notanormalnerd wrote:
| This is my general opinion with regards to bureaucracy in
| Germany. All the data is most likely already there and
| all the technical challenges have been solved in the
| meantime. Why do I have to do the runaround from office
| to office, when they are physically connected by a piece
| if wire (aka the internet).
|
| There is a reason why we have so much bureaucracy in
| Germany (1. because we like it) and second because it is
| supposed to provide trust, trust that every company I
| deal with is legit, trust that the system knows who is
| participating. Without trust nobody would make business
| or business would be very hard, because you would have to
| price in the risk of not having trust.
| zwnow wrote:
| Tax returns is once a year, which is okay. I see my bosses
| having to do paperwork every week...
| the_clarence wrote:
| I have an LLC in the US and have to deal with tax stuff
| all the freaking time
| tptacek wrote:
| You deal with essentially (probably exactly) the same tax
| issues any freelancer would deal with, right?
| erikerikson wrote:
| Mine is almost certainly almost the minimal case, except
| for someone running in Delaware. Federally, I file
| quarterly 941s (employee tax withholding), annual 940
| (unemployment) and 1020 (tax return). In Delaware I final
| annually (stamp tax). I then file locally for Washington
| (excise tax) and Seattle (licensing tax).
|
| I believe a freelancers wouldn't file employee tax forms.
| They frequently roll their filings into their personal
| taxes.
|
| [edit: this is for a C corp]
| cweagans wrote:
| I've had a couple of LLCs in the US (now and in the past)
| and they've been pretty hands-off as far as paperwork/tax
| stuff go. More or less, just keep good books and file/pay
| quarterly taxes and that's about it. I'm curious about
| what you've run into?
| tptacek wrote:
| Creating a company in the US doesn't require tax returns or
| internal accounting. (But perhaps you meant European
| jurisdictions).
| thuanao wrote:
| It does if you're actually incorporating (C or S corp).
| You'll need to at least file both federal and state
| returns. And in many cases you'll need to pay money even
| if your business earned $0.
|
| An LLC setup as a passthrough can get away with filing
| personal returns, but that only works for small freelance
| operations. Once you've got payroll or investors it's
| constant paperwork hassle.
| trollbridge wrote:
| Payroll is relatively simple for a basic LLC. You can use
| a service like Rippling or a local CPA to do it for you.
| Usually costs around $40 per month per employee.
|
| S Corp filings are drop dead simple. The tax return may
| take a CPA's help if your structure is complicated or you
| want to get the absolute best tax breaks possible.
|
| Yes it could be simpler - jurisdictions like Estonia
| figured this out.
| tptacek wrote:
| Having payroll is always a tax hassle, but I've been at
| passthrough-structured LLCs with employees and mid-high 7
| figure revenue (at some point, you start filing as an S
| for your LLC).
|
| But can we get back to the original thing here? Creating
| an LLC in the US is trivial and does not require
| accounting.
| gamblor956 wrote:
| In terms of tax craziness (most crazy to least):
|
| 1) India. Lots of conflicting laws. Lots of conflicting
| paperwork. And as a foreign company you'll probably pay
| more in bribes ("voluntary non-disclosed payments to ensure
| success") than you would in taxes, because the alternative
| is that they send the police after your local employees and
| maybe try to have the local court seize your property.
|
| 2) EU. The VATOSS is straightforward, but the income tax
| systems are not. Within the EU, France is the worst,
| followed by Belgium, Denmark, and Germany. Portugal and
| Ireland are very chill about tax returns. For the bad
| countries, there is lots of paperwork. Literally every
| transaction must be documented. On both sides. And they
| will ask for the documents when they audit. And they will
| challenge any cross-border transaction that results in
| reduced local income.
|
| 3) Africa. I've only dealt with South Africa, Nigeria, and
| Egypt. South Africa was the easiest to deal with, and
| Nigeria was surprisingly business friendly other than the
| constant requests for bribes. Egypt should have been
| straightforward (and there is a bit of language barrier),
| but the bribes were not optional, even to file basic tax
| returns.
|
| 4) South America. There's a lot of it. So much of it. In
| Brazil, you need certified letters just to send and receive
| money...including tax payments. And there's a lot of
| requests for bribes in other countries. But once you get
| past the language barrier and the logistical hassle, it's
| actually quite straightforward and logical. If not for the
| military dictatorships and drug gangs, South America would
| be a good place to do business (from a compliance
| perspective).
|
| 5) USA. Lots of laws. Lots of jurisdictions. But all
| relatively straightforward. It only gets complicated if you
| choose to minimize your tax burden (or maximize your
| refund) by taking advantage of the many, many
| complications. If your only source of income is W2 income,
| you could finish your tax return in 15 minutes.
|
| 6) Canada. Even Quebec, which insists on doing everything
| in French.
|
| 7) Australia. It's the least complicated tax system I've
| dealt with, and the easiest to work with as a taxpayer. The
| ATO is also quite easy to reach...I'm almost always able to
| get a human on the phone within 5 minutes.
| jagger27 wrote:
| > Canada. Even Quebec, which insists on doing everything
| in French.
|
| Quebec would be the one place in Canada where you're
| expected to do business in French. Maybe New Brunswick?
| Even right across the river in Ottawa you'd have no
| reason to use French in any official capacity.
|
| Sure, you might want a FR/EN selector at the top of your
| site since Quebec is a big market (within Canada).
| jjcm wrote:
| Huge +1 to Australia, speaking from a salary worker PoV.
| So many of the Australian digital services are absolutely
| fantastic. As an American who was working there, there
| were often situations where I thought I did something
| incorrectly because my mentality was, "if it was this
| easy, I did something wrong and there are more steps".
|
| It often literally is that easy.
| shafyy wrote:
| I have founded multiple companies in Germany and in the US.
| Sure, in the US you have services like Stripe Atlas that make
| it a bit easier. But still, I would not say it's much crazier
| registering a company in Germany compared to the US.
|
| Of course, it helps if you have a bit of an idea of legal
| concepts and accounting, but to be honest, that also makes
| sense, since you are starting a business.
|
| This is not to say that we should not work to make it less
| bureaucratic in Germany (and other countries).
|
| I agree that applying to loan and grant programs within
| Germany, and especially EU, are a super pain in the ass. I
| definitely see some potential there.
| tptacek wrote:
| You can essentially create an LLC in Delaware (from
| anywhere in the country) as easily as you can create an
| Amazon account, so that's a big claim.
| epolanski wrote:
| You can create a full blow corporation in Delaware from
| Europe in an easier way that you can open here.
|
| Anyway, the benefits go beyond how easy it is to open,
| the most important things are moving forward with things
| like stock options, issuing shares, creating preferred
| ones, etc, etc, taxes access to funding, etc..
| tptacek wrote:
| Are they? With a founding team? You can just boot up an
| LLC and have a short operating agreement with 4/1 vesting
| and equal allocations.
| coffeebeqn wrote:
| You'd just be moving the complexity around if you did
| that. If you're residing and working in Europe then
| having your company in the US will cause all kinds of tax
| and logistical issues that you're probably not qualified
| to deal with. Probably much less so than dealing with the
| local paperwork. Everything your company does will now be
| scrutinized and has to fit through two separate tax and
| legal systems. Nothing simple about it
| shafyy wrote:
| You still need to deal with business registration, taxes,
| accounting and so on.
|
| You can also create a GmbH in Germany by downloading a
| few free templates from the internet and making an
| appointment with a notary. It's a bit more expensive than
| creating an LLC, but not significantly (maybe a few
| hundred dollars).
|
| Especially since most of the cost come from running the
| business (tax filings, accountings, business
| registrations) and not the initial founding costs.
| kakoni wrote:
| So KFW (state investment bank?) has a thing called StartGeld
| (startup loan). I've wondered about few practicalities 1) What
| sort of collateral does bank expect from you? 2) Can you really
| get 125ke or more like 10-20ke? 3) Interest rate is a single
| digit number? 4) Can you really get 10 year payback periods?
|
| Reason why I'm asking is that in Finland(where I live) these
| startgeld terms seem like a dream come true for entrepreneur.
| To give you an example;
|
| 1) Tradiotional bank wants collateral for the loan. For a 5kEUR
| loan, 5kEUR in deposits are needed. 2) There a lots of
| Swedish/Norwegian "loan-houses" advertising their services for
| companies, with interest rates are somewhere between 23-30% per
| annum.
| skeeter2020 wrote:
| Parts of this feel a lot like Canada's SRED program, which is
| intended to be a subsidy for technology research but the
| expected bureacracy has spawned an industry of consultancies
| that work solely to find marginal & questionable activities
| within companies that qualify. It can be worth it for a company
| to jump through the hoops - especially if they get something
| while another company does all the work - but it's an
| incredibly inefficient way to grow tech businesses.
| morkalork wrote:
| SRED and other grants/tax rebates is lifeblood for small tech
| companies here. Also, you know you're a senior dev when you
| make the yearly pilgrimage to meet with SRED consultants with
| architecture diagrams in hand!
| nickff wrote:
| SRED is a waste of time for companies actually doing R&D,
| and a profit center for consultancies getting 50% of a
| pizza joint's write-off of a ski-doo.
| coretx wrote:
| Only applies to people with a degree. Institutionalised
| nepotism. Just like how your chamber of commerce keeps out the
| competition. Typical western decay/corruption. Closing the
| ranks and drawing in other peoples money.
| openplatypus wrote:
| Which land?
|
| Last time I checked and looked for different support scheme all
| that was offered in Berlin was some 90s style support for
| office equipment (we are fully remote) support or 1/2 salary on
| an intern.
|
| Truly pathetic back in the early 2024.
| summarity wrote:
| SA, links are below.
|
| Berlin has different programs. An equivalent scholarship is
| available through ESF+ funds: https://www.foerderdatenbank.de
| /FDB/Content/DE/Foerderprogra...
|
| I've also been part of HTGF and bmp funded startups in
| Berlin, and those two are the most active players in seed
| funding, if more traditional capital-for-equity is what
| you're looking for. Both are also experienced with augmenting
| their investment with EU and state (IBB) funds.
| nullderef wrote:
| How can I learn more about this? Is it the EXIST program?
|
| I looked into programs like this but they seemed to require so
| much bureaucracy that I'd be better off without them :(
| summarity wrote:
| I posted a bunch of links further downthread. There are also
| likely non-profit/public institution in your state that will
| help you navigate this. Of course they can't write the
| business plan for you :)
| gf000 wrote:
| Can non-German citizens apply (citizen of another EU-country,
| though)? I am planning to move to another EU country and
| Germany is one strong contender, and this would make it even
| better.
| summarity wrote:
| Not for these specifically, but most of them are funded by EU
| grants. The current ESF funding period runs until 2027, so
| you'd need to research which pathways to funding exist in
| your country and how to apply.
| fwip wrote:
| Nitpick - if you need to apply and it comes with conditions,
| it's not UBI. Perhaps a better word would be stipend?
| thelock85 wrote:
| This is somewhat akin to the U.S. government's SBIR grant
| program. Phase I (generally $250-500K for a year)to develop and
| pilot novel tech. Phase II ($1M) to develop scalable tech. And
| Phase III to go-to-market. (I'm being intentionally brief here
| as there is a lot of variability between participating
| agencies).
|
| Because each award solicitation is closely aligned to the
| industry needs associated with a given agency (DoD, DHS, HHS,
| NSF, DoEd, DoEnergy, DoCommerce, USDA, EPA, DoT, NASA), you are
| on a fast-track if you can get into Phase I.
|
| It's a ton of paperwork and bureaucracy --probably even more so
| under current administration-- but still a great
| alternative/addition to VC that doesn't take equity and forces
| you into technical clarity.
| joelfried wrote:
| That sounds amazing! As a founder I'd be over the moon for it.
| cmgriffing wrote:
| I would love to know of some of the companies you know of that
| have gone this route. Maybe nothing we've heard of, but still
| sounds interesting.
| muzani wrote:
| I usually compare them as sharks vs bottom feeders. Either you
| become the predator that eats all the big fish. Or you go
| somewhere the big fish won't go.
|
| There's the 'crab' model, but this isn't for startups. They're
| old, companies like Yahoo who have a moat and can't leave it.
| They're at evolutionary peak or rather a local maxima. They're
| too difficult to change and a major change would make them too
| vulnerable.
| namaria wrote:
| An ecosystem analogy should draw attention to the fact that
| most biomass in most ecosystems is not in the apex predators
| but in the lower trophic levels. Apex predators are a useful
| regulatory mechanism for the ecosystem, not the be all end all
| of natural selection.
| muzani wrote:
| Yup, the analogy falls apart. Basically don't eat unicorn
| food.
| submeta wrote:
| Trying to be a unicorn killed many otherwise good products. For
| instance Evernote. Or Wunderlist. Or Soundcloud.
| tptacek wrote:
| I mean, by the time Evernote died, they were an SFBA skyline
| company, not a startup.
| jillesvangurp wrote:
| I live in a country (Germany) that is famous for having a lot of
| "mittelstand". These are basically family owned businesses. Some
| large German companies fall under this. Aldi and LIDL for
| example, which are super market chains that at this point have a
| global presence. And some large companies (Bosch, Siemens, VW,
| etc.) are actually a multitude of smaller companies. Much of the
| German economy is smaller and bigger specialized companies doing
| their thing. Only some of them are public companies.
|
| What these companies have in common is that they start small and
| then grow organically. The main issue from a VC point of view is
| not that these aren't good companies but that it can take decades
| for them to turn into big companies. But from the point of view
| of the people founding these businesses, it's a good, honest way
| to succeed in life.
|
| There's nothing wrong with the principle of starting a company to
| make money from whatever it is you do at whatever scale you are
| doing it. But it should drive your decision making as to whether
| or not you give chunks of your company away to an investor. It
| might stop being your company if you do.
|
| Also, if you go down this path. Stop calling yourself a startup.
| It scares away customers. They don't want to hear that you are a
| flaky wannabe that is still figuring it out. They want to hear
| about your other customers and how awesome whatever it is you are
| selling is. They want to be re-assured that it is safe for them
| to enter into a multi year customer relationship with you.
| Projecting that you are new to all this company stuff and might
| not be around in six months is exactly the wrong message for
| them. They don't want to hear about what you are going to do,
| they want to hear about what you have done already. The stuff
| that gets VCs horny will scare away customers. If you are
| pitching customers and VCs at the same time, make sure you have
| two very different pitches. And if you are going to pitch VCs, it
| actually helps if you have customers. The more business you have
| the stronger your negotiation position.
| debarshri wrote:
| I was part of mittelstand once.
|
| I think it is very hard to compete in the market where lot of
| things are subsidized by VC money. The new VC backed companies
| have more money for marketing, subsidized sales wherein older
| orgs are hard to move.
|
| Esp. for german orgs, they are very hierarchical, getting an
| innovation out is hard. Add union to the mix. Their margins are
| razor thing. It is a struggle. I can imagine back in the day,
| they moved the innovation needle.
|
| Lot of these companies are often bailed out by the government
| as they employ alot of people.
| paulddraper wrote:
| Yes that's not how Germany produces OpenAI or Space X.
|
| But it's how you produce a lot of other things.
| PaulRobinson wrote:
| Only psychopaths with other people's money to burn want to
| produce OpenAI or Space X.
|
| I think if you want to produce a sustainable business that
| lasts a long, long time, and provides a good product to a lot
| of customers, and employ a lot of good people and provide
| them with a good living, you want to do this, not that.
| paulddraper wrote:
| So...VCs
|
| (:
| epolanski wrote:
| I see your point, but at the end of the day you look at the 30
| biggest companies in Germany by market cap and they are
| essentially the same after decades which is not really a
| symptom of a dynamic economy (for good and bad).
| senko wrote:
| I do like the idea in general and feel there's a lot of room for
| improvement between the (VC / bootstrapping) extremes.
|
| However, the middle path from the article presumes the existence
| of VCs willing to join you on that path. The article waves this
| away with:
|
| > angel investors are generally more open to a 2-3x ROI
|
| For a $1M round you'd need to find 10-20 such angels (assuming
| $50k-$100k average check size) willing to accept small upside,
| for which you'll have convince them there's commensurately
| smaller risk. This will probably mean you have some revenue and
| some sense of where PMF might lay or some kind of brand/pedigree.
|
| Do not underestimate the value of YC brand and being able to
| present on Demo Day gives you. A random Jane from Ohio building
| her tech company would have a _lot_ harder time finding those
| 10-20 angels, to put it mildly. I 'd be more careful when
| extrapolating path-dependent success into a general strategy.
|
| That said, my gut feeling is there's room for the next Paul
| Graham to fill that space - somehow.
| mfld wrote:
| That is what I was wondering as well. Where can I find
| investors willing to invest up to $1M with an expected 2-3x ROI
| on typical VC terms? In particular, for pre-revenue ventures.
| And how can you keep that 90%+ equity with 10 angel investors?
| zipy124 wrote:
| For smaller amounts of monies such as PS250k or PS1mm, it is
| much easier to get funding, since a decent amount of countries
| offer tax relief to the investors for example in the UK through
| EIS, SEIS, or even VCT. These offer advantages to angels over
| the VC's.
|
| In addition the whole point of this piece is that you are
| generally looking to grow slower, thus having smaller capital
| requirements and burn rate.
| nico wrote:
| > This will probably mean you have some revenue and some sense
| of where PMF might lay or some kind of brand/pedigree.
|
| > Do not underestimate the value of YC brand and being able to
| present on Demo Day gives you
|
| Except to get into YC you also need to have very good traction
| and a plan to 10x that quickly
|
| The two exceptions to that I've seen are: 1) you've had a good
| exit before, 2) you graduated from Stanford, Yale, Harvard, or
| similar
|
| So for people with neither of the above, finding 10-20 angels
| might actually be more doable than getting into YC. Although,
| once you've done that, YC is a lot more likely to take you in
| tptacek wrote:
| I can't speak for YC, but as an operator: the primary reason
| to go to YC is to smooth a path for later fundraising, and if
| you plan to fundraise, you need something like a 10x
| trajectory, because VC portfolio math doesn't work for
| companies without it.
| YetAnotherNick wrote:
| Also almost always angels profit either from secondary in next
| rounds from VC or acquisition or IPO. In general it is very
| hard to return back 2-3x in say 2-3 years without going to VC
| for next round.
| Oras wrote:
| Someone investing $1M for 10% might better off buy gold or a
| property.
|
| It sounds good for me as a founder, but from investor point of
| view, this is pointless. Why taking a huge risk for 10%?
| s_dev wrote:
| Because gold will appreciate reliably to an extent but a
| company can appreciate in value far exceeding what gold can --
| that's the risk/reward trade off.
| Oras wrote:
| The chances of a startup failing is way higher than gold
| degrading in price.
| s_dev wrote:
| It sure is and many do choose gold for this reason. It
| depends on how much risk you want to expose yourself to.
| 9rx wrote:
| Hence why the potential upset of a business is so much
| higher. Risk vs. reward, as usual.
| jerrygenser wrote:
| Portfolio diversification
| anticorporate wrote:
| There are other good replies as well, but I would add to the
| list mission-based investing.
|
| I would easily consider a positive impact along with risk and
| returns when making an investment decision. Not everyone would,
| and not everyone should, but it is a part of the funding
| landscape.
| xandrius wrote:
| If for 1M I get 10%, the company is valued at 10M.
|
| Going from 10M to 20M is not a big stretch, and that would net
| me 1M already. More than gold appreciation I believe.
| pyb wrote:
| 1M "on paper", no cash
| Nemi wrote:
| 10M to 20M in what amount of time? This is not incidental, it
| is critical to determining IRR (Internal Rate of Return).
|
| If the company goes to 20M in 10 years, that sounds great,
| but is only a 7% compound rate of growth. I can get that with
| much less risk by investing in the S&P 500. And don't
| discount the risk. It is critical. A small business has a
| very large chance of 100% total loss. Compare that to the 500
| index, which has a very small chance of a 50% loss, max.
|
| To count for risk, I would look for a doubling (10M to 20M)
| in at least 2-3 years, min.
|
| You also have to think about liquidity. If you want to cash
| out, who is going to buy your shares at the price you want?
| This might not be as easy as you might think. I can liquidate
| 500 index shares in seconds. It might take a year or more to
| find a buyer for your 10% at the price you want.
| Obertr wrote:
| I'll send this to my competition thanks!
| ascendantlogic wrote:
| Why are you posting here when you could be crushing it(tm)
| delivering 100x value to your shareholders? You've already
| failed.
| WhereIsTheTruth wrote:
| VC culture gives you the USA, a failing empire and a "silicon
| valley" which hasn't seen silicon for 3 decades
| JSR_FDED wrote:
| A VC will build a portfolio of startups that each have the
| potential to do massively well. After that they don't care which
| of the portfolio companies lives or dies, as long as one explodes
| and compensates for the others.
|
| As a founder you care very much which of your companies succeeds,
| as you only have one.
| floppiplopp wrote:
| I was being called a unicorn in a professional setting...
| unfamiliar with the term, I immediately thought I was being
| insulted, because unicorns exist just in people's imagination and
| fairy tales.
| timestep wrote:
| Glad someone is talking about the option other than selling to
| VCs or ramen diet start ups. The tech community might have
| collectively forgotten the other option.
| shahzaibmushtaq wrote:
| True that, and your startup doesn't need to be a success in
| people's eyes.
| pjmlp wrote:
| Here is another one, the company doesn't need to have an endless
| exponential growth to have a sustainable business.
| istvanmeszaros wrote:
| I am a big believer in Seed-Strapping. You need some initial
| capital to get you started (can be as low as a few months of your
| own salary). But you should aim to bootstrap your solution.
| bob1029 wrote:
| Being forced to bootstrap with your own funds is the best
| bullshit business filter I am aware of. I also think it says a
| little bit about the founder's ability to maintain some amount
| of stability in their life and put their money where their
| mouth is. Everyone can come up with ideas. How sure are you of
| yours? Are you willing to use some of your own money to prove
| it out? No? Then I guess I'm not that interested either.
|
| The way I am trying to do this now is to only ask for money if
| I can obtain at least one paying customer who is willing to
| vouch for me. If I can't market an MVP to at least one small
| shop, I don't know why a non-fraudulent business partner would
| want to work with me. In any case, I wouldnt feel great about
| that relationship.
|
| I've done the burn someone else's fifteen million bucks thing
| on tech stack shiny rabbit chases. It's really not a fun time
| in retrospect. Mostly just a sick feeling all the way to the
| bottom.
| LikeAnElephant wrote:
| Totally with you. If the plumber in my neighborhood can start
| a business with all their overhead, then why can't I on a
| $5/mo Digital Ocean server?
|
| It really comes down to being willing to start small and grow
| within your means (even if that means a SMB loan or small
| investment).
|
| But if you can't find even 1 customer then it's likely you've
| started building without talking to actual customers.
| zupa-hu wrote:
| Seems like you are a startupper from Hungary? Shoot me a mail,
| I love getting to know other local startuppers. (in profile)
| neom wrote:
| The problem with this idea is that capital markets exist and
| capital seeks compounding. If there is a market to be addressed
| and it has size, someone will go in and displace you with a cash
| flywheel.
| tlogan wrote:
| I think the post is off.
|
| How exactly is a VC--or any investor, really--supposed to make
| money from a startup that's aiming for a "middle of the road"
| outcome? That just doesn't add up. In that case, wouldn't it make
| more sense to invest in something safer or more traditional?
|
| From what I understand, the very definition of a startup is tied
| to ambition. Founders need to be aiming for the moon--or at least
| something close to it. If you're not taking big risks with the
| potential for big rewards, can you even call it a startup?
| pc86 wrote:
| People use "startup" to mean "start up business" and not
| "business that is aiming for rapid, borderline-unsustainable
| growth and very likely requires hundreds of thousands,
| millions, tens of millions of dollar to even start thinking
| about achieving it," which is what the actual definition is.
|
| VCs aim for 1 out of 50 investments to return 100x what they
| put into it, and the rest of them to die quickly and stop
| taking their attention. A company kicking off 5% returns every
| year is counterintuitively worse than flaming out immediately.
| tlogan wrote:
| In the tech and venture capital (VC) world, a startup is
| usually defined by its intent to grow fast and at scale.
|
| If you're using the term "startup" in a tech/VC context: Yes,
| high growth is core to the definition.
| felideon wrote:
| Isn't this the gap TinySeed tries to fill?
| tiffanyh wrote:
| "Startup" implies VC-backed company.
|
| And VC's invest in companies to get a 100x return.
|
| Which almost by definition means, if you run a startup - you
| _need_ to get it to become a unicorn for it to be successful.
|
| Otherwise, why take VC money ... and just bootstrap it instead.
| AbstractH24 wrote:
| I'm by no means an expert on this, but I never assumed
| "startup" implies VC-backed. I thought "VC-backed startup"
| meant that and "bootstrapped startup" meant not.
|
| That "startup" was an indicator of not being an incumbent in
| the space and using technology to disrupt things.
|
| But in an increasingly tech-first world, it does beg the
| question what separates a tech first SMB from a startup.
| the_bear wrote:
| I think there are two common definitions of startup, and
| neither require VCs to be involved.
|
| One (seen elsewhere in these comments) is any small business. I
| personally don't like that definition because there is a pretty
| big difference between a local coffee shop and the thing we all
| mean when we say "startup".
|
| The other one which is more common here is a company that is
| currently small, but the business model involves getting much
| much larger. There's a blurry line between a small business and
| a startup with this definition, but it seems to be a "you know
| it when you see it" type of thing.
|
| Companies like Mailchimp and Atlassian (in their early days)
| clearly qualified as startups even though they hadn't raised
| VC. You might say they're outliers, but so are the VC-backed
| companies that reach that level of success. If a small company
| is growing quickly and on pace to become a multi-billion dollar
| company, it seems weird to say they're not a startup just
| because they didn't raise money from the right people.
| jasode wrote:
| _> Companies like Mailchimp and Atlassian (in their early
| days) clearly qualified as startups even though they hadn't
| raised VC. _
|
| Even the Paul Graham essay defining "startups" the way he saw
| it said "VC funding" wasn't required:
| https://www.paulgraham.com/growth.html
|
| It's just that many _mentally associate_ "startups" with VCs
| and software tech because that's often how rocket-ship growth
| happens.
| carlosjobim wrote:
| Most venture capital is invested into companies with
| traditional business models, not extreme growth ventures.
|
| Most startups are still traditional business model. Every
| company was once a startup.
|
| My local supermarket was funded by the people living in the
| community, each buying a few shares. I don't think any of them
| expected 100x return.
| tiffanyh wrote:
| > Every company was once a startup.
|
| I disagree.
|
| Would you consider your neighborhood restaurant a "startup".
|
| Startup for many people implies "high growth".
| carlosjobim wrote:
| > Would you consider your neighborhood restaurant a
| "startup".
|
| Of course, they started at one point, didn't they?
| tiffanyh wrote:
| My 8-year child will be excited to know their lemonade
| stand is a "startup".
|
| I'll have to put that on their college application form
| as an achievement.
| 2d8a875f-39a2-4 wrote:
| Yeah your small business doesn't need to be a unicorn.
|
| But your small business that a VC has bought part of does.
| smjburton wrote:
| Although it's good to look into alternatives to bootstrapping vs
| VCs, the funding source isn't the only factor to consider.
| Balancing how quickly you need to enter the market and how much
| ownership you feel comfortable having over the final product will
| ultimately drive the decision on how to fund a venture too.
| roland35 wrote:
| If everyone was a unicorn, wouldn't that by definition mean they
| weren't unicorns??
| DamonHD wrote:
| Given the definition I know, of a valuation of >= USD1B, no.
| apparent wrote:
| That's why there are decacorns, because of unicorn-flation.
| _fat_santa wrote:
| > even a relatively small deal would produce a life-changing
| outcome for the founding team.
|
| I run a SaaS with a business partner and this is basically our
| thesis for getting rich. My saying around this is "This amount of
| revenue/profit will cause a company of 500 or 1000 to go
| bankrupt, but it will make a company of 5-10 filthy rich"
| ZeroTalent wrote:
| This is exactly what I am doing. I started another startup in
| February 2024. After a year, I crossed $1M in annual profit
| with three employees. I am not planning to scale humans.
| Profits are growing, and we don't need to hire more people.
| LLMs and scripting automation are doing the work of approx.
| 20-30 people -- this wasn't possible before.
| all2 wrote:
| I'd be curious to hear about how you are managing quality on
| LLM generated stuff.
| margalabargala wrote:
| They probably mostly don't need to be.
|
| Most SaaS companies are _not_ doing anything particularly
| innovative or novel. Most of them provide value via putting
| in the work to glue together several other APIs, automating
| something that previously was harder to script /automate,
| or simply applying an idea that another company pioneered
| to another market segment: "It's like Theranos but for
| barbers!"
|
| These use cases are generally so typical of the technology
| being used, that LLMs can do a lot of work to script things
| and it's usually pretty easy to QC.
| YetAnotherNick wrote:
| Sorry but I think your saying is wrong.
|
| > This amount of revenue/profit will cause a company of 500 or
| 1000 to go bankrupt
|
| Or more likely it would make them fire 995 out of 1000 and the
| remaining 5 could be almost as rich as you 10, and they have
| advantage of spending for few years on marketing and better
| development.
| dadrian wrote:
| You need to be a unicorn or you need to only take angel checks.
| This is not complicated.
| LikeAnElephant wrote:
| Or, you know, build a business that customers are willing to
| pay for...
|
| Spend less than you earn. Maybe get an SMB loan if the numbers
| work. This approach is older than the tech industry.
| 9rx wrote:
| Trouble is that there isn't much the consumer is willing to
| pay for anymore. They've become accustomed to devices like
| their phone where a single purchase fulfills an endless
| number of functions. The thought of buying much more is
| becoming a foreign concept. To complicate matters: For what
| they are not buying, they aren't saving up the money ready to
| deploy when something compelling does come around. They've
| decided to redirect that money into paying more for things
| like housing instead. Good luck chipping that away.
|
| There is still plenty of opportunity to build a business that
| sells to customers who are collecting those angel checks
| (directly or indirectly). But that is dependent on at least
| some businesses being funded by angels.
| LikeAnElephant wrote:
| I respectfully disagree that there's no business
| opportunity that people are willing to pay for.
|
| If your only target are developers or the tech industry,
| maybe, but there's a whole world of non technical business
| people with problems that have extremely easy (and boring)
| technical solutions.
|
| I've recently signed up my third customer paying $49/mo
| with a simple CRUD app. No targeted ads or landing pages. I
| literally walked into offices in my town and asked what the
| most annoying part of their job is and I made a prototype.
| They signed a 6 month commitment.
|
| They're amazed at my "computer skills" only because they
| don't know any better.
|
| Not saying I'll become insanely rich, but my goal is a
| reasonable living ($200-$300k) within 5 years.
|
| All this to say I think the opportunities in this market
| are there, but they look different.
| 9rx wrote:
| _> I literally walked into offices in my town and asked
| what the most annoying part of their job is and I made a
| prototype._
|
| Consumers don't have offices. You are looking at a
| business-to-business transaction, which is where we said
| there is still opportunity, in large part thanks to those
| collecting angel money.
|
| If you are going to disagree, surely you can provide an
| example of where you have sold to the consumer? Affirming
| that you could only find opportunity selling to other
| businesses too makes it seem like you _do_ agree.
| tptacek wrote:
| Literally every freelancer can tell you a story that
| refutes what you're saying here.
| 9rx wrote:
| The only real tech "freelancing", if we are to call it
| that, opportunities as it pertains to consumers is
| possibly in fixing someone's home computer/phone, and
| that is within the small set of things consumers are
| still willing to pay for. In fact, one's phone was
| explicitly mentioned. But it is unlikely that most
| "freelancers", within the tech sphere, are making a
| business out of that.
|
| Maybe we all have a grandmother tossing a few bucks out
| here and there when she needs help. Is that what you
| mean?
|
| But that's ignoring that freelancing itself is normally a
| business-to-business transaction _by definition_ , so
| your assertion is a bit strange if we are to stick to
| general understandings. What is the pet definition you
| are trying to use here that should change our
| understanding?
| tptacek wrote:
| Are we just talking past each other here? Are you saying
| that it's hard to bootstrap a pure B2C business using
| only B2C revenue sources? Because that's not what I'd do;
| I'd consult _to other businesses_. That 's what 37signals
| did.
| 9rx wrote:
| _> Are you saying that it 's hard to bootstrap a pure B2C
| business using only B2C revenue sources?_
|
| I said that consumers don't like to buy much these days,
| so business opportunities are effectively limited to
| selling to other businesses.
|
| But businesses can't absorb buying your wares if they
| can't sell to someone else in kind - eventually meaning
| the consumer. That is, unless they have angel money to
| burn. So what was also said is that even within the B2B
| space, you are bound to be dependent on angel money even
| if you don't receive it directly. Meaning, as it
| pertained to the comment that came before it, that
| _someone_ needs to accept the angel money to keep the
| house of cards standing.
|
| _> That 's what 37signals did._
|
| 37signals doesn't strike me as trying to tackle B2C in
| any meaningful capacity either. 'Hey' plays that angle a
| little bit, which is maybe what you are thinking of, but
| it is clear that selling to business is still the bread
| and butter even there.
| tptacek wrote:
| I think you should just take "yes" here for an answer
| because very obviously you can make lots of money
| freelancing/consulting to other companies.
| 9rx wrote:
| "Yes" doesn't explain your perspective, though. Obviously
| you can make money selling to other businesses. Nobody
| would think otherwise and the discussion that was taking
| place fundamentally wouldn't have been possible if that
| weren't the case. But what is it that you want to add to
| the discussion? That is what is not clear.
|
| You put in time to tell us something. It is no doubt
| interesting. But, unfortunately, it got lost along the
| way. I am still interested in whatever it may be.
| LikeAnElephant wrote:
| My broader point is that if you want to build a business
| there's a ton of opportunity if you're not overly picky
| on what that opportunity looks like. B2B, B2C, mobile,
| web, node, Python, PHP. None of it really matters.
|
| > You are looking at a business-to-business.. which is
| where we said there is still opportunity, in large part
| thanks to those collecting angel money.
|
| You might be mixing up opportunities within the tech
| industry with using tech to build a business within
| _other_ industries. Angel money isn 't really a "thing"
| for the latter, and that's where I'm pointing to
| opportunity.
|
| But by all means keep on pushing B2C if that's your
| passion
| 9rx wrote:
| > My broader point is that if you want to build a
| business there's a ton of opportunity if you're not
| overly picky on what that opportunity looks like.
|
| That point was already firmly established before you
| arrived. What were you hoping to _add_?
|
| _> You might be mixing up opportunities within the tech
| industry with using tech to build a business within other
| industries._
|
| Industry doesn't matter. An economy is all connected.
| What does matter is that at some point your sale needs a
| "final destination". If you sell to another business,
| they are going to need to pass the need on to the next
| hop. If they fail to do that, they will go out of
| business, and soon you will too.
|
| That means either a consumer, someone with angel money to
| burn, or government (which is, as it pertains to this
| discussion, basically the same as angel money). Angel
| money keeps _a lot_ of these B2B businesses alive. You
| might not need to accept the angel money directly, but
| someone needs to in order to support the system we have.
| LikeAnElephant wrote:
| Sounds like you've got it figured out then. Best of luck!
| 9rx wrote:
| No. I remain unsure about what you were trying to add.
| You must have had some kind of astute observation that
| warranted your time to formulate a response - more than
| once. But, I'm afraid it went over my head. Perhaps you
| can frame it in another light?
| whilenot-dev wrote:
| B2C isn't the only business model, businesses and
| governments pay for a ton of stuff.
| 9rx wrote:
| _> businesses and governments pay for a ton of stuff._
|
| Yes, that was addressed in the second half of the
| comment. But ultimately business must serve consumers -
| unless angel money is paying for. If you sell to a
| business, who sells to a business, who sells to a
| business, who sells to a business collecting angel checks
| you are still dependent on angel money.
|
| Government too is effectively the angel model. The money
| will be there even if the consumer isn't being served
| anything they want to pay for.
| tptacek wrote:
| Nobody disagrees with that. The clear subtext to that comment
| is "if you plan to raise money". You can bootstrap a
| successful firm without raising a dollar.
| b_fiive wrote:
| I don't know much about the fund itself, but
| https://www.indie.vc/ seems like their whole thesis is this
| middle path.
| justinzollars wrote:
| We are currently fundraising - and we consider this a valid path
| if VCs don't bite. We have customers and no matter what - we are
| building something valuable. Nice post!
| beambot wrote:
| https://paulgraham.com/growth.html
|
| "A startup is a company designed to grow fast. Being newly
| founded does not in itself make a company a startup. Nor is it
| necessary for a startup to work on technology, or take venture
| funding, or have some sort of "exit." The only essential thing is
| growth. Everything else we associate with startups follows from
| growth."
| mediaman wrote:
| Yes, this is what every venture capitalist says. You aren't
| doing a startup unless you want extreme growth, which requires
| our services and cuts us in. Building in a capital efficient
| way that generates substantial wealth for founders, but without
| giving VCs a cut of the pie, is, of course, "not a real
| startup," and often also slandered as a "lifestyle business"
| for low-ambition people.
|
| PG is great in many ways but he's not the person I'd turn to
| for an unbiased opinion on what counts as a "startup."
|
| The founders I'm particularly impressed with are the ones who
| have such a nuanced understanding of capital efficiency that
| they _do not require_ VC, and only take money much later in the
| cycle when they can basically dictate terms and want hundreds
| of millions for liquidity or whatever (see, e.g., Joe
| Mansueto).
| milesrout wrote:
| It is the definition of the word. Nowhere does pg say you
| can't start a non-startup business.
|
| >The founders I'm particularly impressed with are the ones
| who have such a nuanced understanding of capital efficiency
| that they do not require VC, and only take money much later
| in the cycle
|
| That isn't "understanding capital efficiency" it is called
| having enough capital already.
| mediaman wrote:
| Your comment seems to suggest that you don't see any
| difference between "capital efficiency" and "having
| capital."
|
| The terms mean very different things. Capital efficiency is
| measured by metrics such as the cash conversion cycle. It's
| possible to design a business model in such a way that you
| have negative cash conversion cycles, which cause you to
| actually generate cash as a function of growth (even when
| unprofitable by GAAP!), which is the opposite of most VC
| funded businesses whose burn rate is roughly a function of
| their growth rate.
| Eridrus wrote:
| It's obviously better to raise the optimal amount and no more.
| But things are not always so clean, and the best time to raise is
| when your company is killing it, not when you're running out of
| cash and trying to make it to profitability.
|
| I think one option this approach ignores is the ability to raise,
| but not spend profligately and not give up board seats.
|
| E.g. if you raise $10m, but still have $8m in the bank, a $10+8m
| exit is still possible. You do lose whatever percentage on top of
| liquidation preferences you sold, but the $10m in insurance can
| be helpful.
|
| Another thing to keep in mind is that once you have competitors,
| the pace at which your invest and ship is not entirely up to you.
| If your competitors raise more and manage to ship more or out-
| market you, your product is going to get squeezed out of the
| market.
|
| Slack is sort of the prime example in my mind here of a pretty
| unimpressive product dominating the space through fundraising.
| None of their erstwhile competitors had good outcomes because
| Slack just sucked all the oxygen out of that space and the only
| company who could really compete with that turned out to be
| Microsoft.
| tptacek wrote:
| If you raised $18MM total in two rounds and then sell for
| $18MM, you're going to walk away with a signing bonus for the
| new company and little else, right? You can't generally sell in
| order to distribute the proceeds of an investment round to the
| company operators.
| Eridrus wrote:
| I am mostly imagining the "happy middle" scenario where you
| raise $1m and sell for $10m in cash, but modified to assume
| you raised $10m and spent $2m of it, and then got the $10m in
| cash from the acquirer, and still have $8m in the bank
| account, you would give back $10m to your investors per the
| liquidation preferences and then split the remaining $8m.
|
| You are in a worse boat than if you had only raised the $1m
| and then sold for $10m, but the founders probably still walk
| away with ~5-7m pre-tax (depending on how much equity the
| $10m cost you over 1-2 rounds), and you're in a better
| position than if you had run through the $1m and hadn't quite
| gotten to a thing worth $10m.
| datavirtue wrote:
| First time on substack, apparently first time writing also.
| Enough undefined acronyms to get an 8th grader smacked.
| boxed wrote:
| > For most B2B SaaS businesses, you shouldn't need more than
| $1M in capital to get to PMF, find a GTM motion that works (not
| that it needs to scale), and reach an ARR figure where the
| revenue multiple for valuation starts to look pretty tasty--
| enough to offer significant upside even after investors are
| paid out.
|
| That sentence (yes, ONE sentence) is some of the worst I've
| seen.
| ninetyninenine wrote:
| You don't speak tech bro.
| Ylpertnodi wrote:
| >That sentence (yes, ONE sentence) is some of the worst I've
| seen.
|
| "[S]ome", as in 'plural'? Perhaps 'one of', may be better?
| clusterfook wrote:
| _Abbreviations_ :-) being defined or not depends on the
| audience, so it is not a law that you need to define them. PMF
| (product-market fit) and GTM (go to market) I would define
| though.
| jamesjyu wrote:
| This is what we did for Sudowrite. Took a small seed and got to
| profitability within 2 years by hiring within our means and laser
| focusing on our users. Happy to answer questions!
| bdcravens wrote:
| The company I work for is a small company that has enabled above-
| market results for everyone employed. Almost 20 years ago the
| founder saw a specific niche, and went after it aggressively,
| having software built out of his own savings. We've never taken a
| dime of outside funding (aside from PPP loan in 2020, allowing to
| us to lose no employees despite our income being decimated). He's
| very aggressive about keeping expenses low, but he takes care of
| his employees, knowing they are the most valuable part of his
| company. (Self-serving for me to say I know, but it really is his
| value system)
| ilrwbwrkhv wrote:
| No VC company has done what valve has done. More companies
| should be like valve. YC is also no longer a good deal for a
| company which has even a little bit traction.
| apparent wrote:
| > so if you're aiming for a $10M outcome, they won't be
| interested
|
| VCs won't be interested if you're aiming for a $100M outcome
| because what you aim for is generally loftier than what you hit.
| If you're aiming for $100M you might sell for $25M or $50M, which
| is generally uninteresting to VCs.
| haloblue wrote:
| Currently in a seed funded by a very simple cap table, pre-series
| whatever SaaS company. This post resonated with me as we will
| have to raise money later this year and I'm dreading having to
| take institutional capital. There is another way.
| jiveturkey wrote:
| > For most B2B SaaS businesses, you shouldn't need more than $1M
| in capital to get to PMF
|
| I'm not sure that's true today. Author is a one-time founder that
| had some success. He exudes selection bias. Note: i'm not poo-
| pooing him that "oh he's only founded one company". Don't read
| into it that much. I'm just expressing that he has the standard
| hubris that any one-time successful founder would have. After
| that single success he's already enlightening us with his wisdom.
|
| Of course there are such businesses, but "most" of those aren't
| startups. I don't think PMF is a term that even applies to such
| SMBs. PMF implies scale and repeatability of the sales process --
| becoming a unicorn is baseline now.
| garrickvanburen wrote:
| I'm always conflicted about this because it's like saying the sky
| is blue.
|
| Stepping outside of the VC startup bubble, we see small self-
| funded businesses are the norm. It's the neighborhood businesses
| all around us.
|
| 82% of all US business have <10 employees
| https://forstarters.substack.com/p/for-starters-10-the-three...
|
| 99.976% of new businesses don't raise venture capital.
| https://forstarters.substack.com/p/for-starters-32-start-wit...
| system2 wrote:
| HN wants to hear what they already know, what to hear, or agree
| on.
| bbor wrote:
| I'm guessing you know this, but for those new to the terms:
| what this post describes as the "VC route" and the "bootstrap
| route" are usually referred to as "growth businesses" and
| "lifestyle businesses" (i.e. pays for the lifestyle of the
| founders).
|
| As a big believer in the need for syndicated worker's coops, I
| think this basic distinction is a pretty great radicalization
| tool against the current system ;)
___________________________________________________________________
(page generated 2025-04-07 23:00 UTC)