by BobbyH on 6/15/20, 4:08 PM with 113 comments
by manfredo on 6/15/20, 4:44 PM
Right now we're seeing a trend of larger companies taking an ever larger piece of the market share, and the total number of firms decreasing. While encouraging founders to form smaller companies with shorter time to profitability undoubtedly results in more companies surviving 3, 5, and 7 years after founding, that's not what we're optimizing for. An investment strategy with high rates of failure, but producing larger companies with those few successes is still yields the potential for larger overall returns.
1. What does it mean by 10% vs. 44% of companies surviving? Presumably it means that 10% of traditionally funded companies exist X years after founding versus 44% of Indie.vc founded companies. But this is a strange metric to give without specifying how many years we're talking about.
by a13n on 6/15/20, 5:22 PM
It seems like it's just a really, really, really expensive loan. They make it sound nice with their anti-VC, pro-founder marketing angle. But at the end of the day, they are charging you 3x what you're borrowing.
by digitaltrees on 6/15/20, 6:46 PM
I say this as a founder that prioritized profitability and outlasted many VC backed competitors and was sick of VCs telling me to increase burn and growth and ignoring my warning of the long term perspectives and risks. We decided not to take VC and are smaller but killing it.
I am glad to see this perspective but it only lasts during a financial crisis then it’s right back to fetishized hyper growth.
As far as I am concerned go ahead and keep your hyper growth VC dollars, I’ll buy your bankrupt portfolio company in a few years with our profit.
As YC says, get to ramen profitability as early as possible and be a cockroach that will survive.
by gigatexal on 6/15/20, 5:28 PM
by EGreg on 6/15/20, 7:08 PM
Our company, Qbix, is a poster child for the preaching of the Basecamp folks. We raised $107,000 from friends and family and then generated revenues, then another $135,000 and generated more revenues. We are up to almost $1MM in revenues now. Also we have attracted 8 million users and growing.
But many VCs have turned us down because they look for hockey stick growth and zero friction, and don’t like “the agency model” companies which make money. Actually, they’re just applying pattern-matching to reject the vast majority of startups unless they are hockey stick growing.
by wiremine on 6/15/20, 5:21 PM
Clearly there was more silly money being throw around in the late 90s and into 2000, but by 2002 the mantra in was "ROI, ROI, ROI!"
[1] https://en.wikipedia.org/wiki/Dot-com_bubble#/media/File:US_...
by awinter-py on 6/15/20, 4:55 PM
by gnicholas on 6/15/20, 8:55 PM
Seems like you're doing something wrong if you raise seed and A rounds[1] and have given away enough board seats that they can push you out 4 months later.
Also, why would anyone take out a million dollar personal loan to fund a startup? I have heard of founders spending their own money to get things off the ground, but usually it's $50k or so, and it's never a bank loan.
I'd agree that this guy is rightly wary of going back to VCs, but his experience seems like an edge case (which is perhaps why it's featured in this article).
1: https://www.crunchbase.com/organization/retracehealth#sectio...
by loceng on 6/15/20, 7:18 PM
These current models don't only want the icing (their returns on initial investment) but they want to eat their cake too; they're currently doing this because they can get away with it because their current competition, traditional VCs, is far worse - but once a new competitor comes in that only wants the icing but not the cake from the transaction, they'll lose out on potentially a lot of this deal flow.
by _gmnw on 6/15/20, 4:24 PM
by gnicholas on 6/15/20, 9:11 PM
Is this measuring revenue, users, profits, or something else? If it's revenue or users, I would guess that most VC-backed startups grow faster than this. If they're looking at profits, then probably the VCs do worse.
> Plus, the fund’s mortality rate is 10% — compared to about 44% with traditional VC-backed companies.
Are they looking at the same time period? If Indie.vc's portfolio is younger, then they would obviously have fewer deaths than traditional VCs.
Basically, it looks like the author wanted to put down impressive-looking numbers without the context that would make clear if the underlying facts are actually impressive or not.
by georgeecollins on 6/15/20, 4:39 PM
The Indie.vc model is contrarian and probably doing well. It will continue to do well as it becomes imitated. And then the cycle will repeat. So keep your eye on unpopular unicorns!
by tommilukkarinen on 6/15/20, 5:21 PM
It also sounds like it could work, if there's enough demand = enough obvious good apples, which are willing for the deal because of not enough supply in financing instruments.
I can understand that investing in unicorns can also work. As many unicorns fail after their initial hype, investing in these normal companies sounds less like gambling on hype than investing in unicorns.
by halite on 6/15/20, 4:27 PM
by burtonator on 6/15/20, 4:25 PM
by jiofih on 6/15/20, 7:55 PM
by remotists on 6/16/20, 12:01 AM
by Peteris on 6/15/20, 4:22 PM
by foobar_ on 6/15/20, 5:14 PM
Do banks have something against software businesses ? Are there software companies that have bootstrapped themselves with loans (not friend/family loans) as opposed to VC ?
by troughway on 6/15/20, 4:33 PM
If so, how is it different from what VCs are doing now?
