Comment by rsweeney21 | Hacker News Reader

Comment by rsweeney21 | Hacker News Reader

I've started a few modestly successful companies over the past decade. Most of them were bootstrapped, but for one of them I went the VC route. I raised $16M over 4 years, starting with Angel, then VC, then "top-tier" VC.

Taking VC funding made the experience of owning and operating a business worse in almost every way.

There are many reasons why I wouldn't recommend raising VC money, but I'll focus on just two right now. First, once you take VC funding, it's no longer your company. Think about that - this business that you created from nothing, sacrificed so much for, know inside and out, and poured years of your life into - now you share control with someone who you've spent maybe 8 hours with. And you're going to have to do that again and again over the years.

The second reason is the disparity in the invested interest between the VCs and you. You have EVERYTHING riding on this startup. The VC has almost nothing riding on your company. It's not their money, they get a great salary either way, and they are expected to have most of their investments fail.

There seemed to be more worldly prestige running a VC backed company, but that's probably because we bought press coverage. :-) In terms of my own personal happiness, I've never been happier than when I was running my own bootstrapped company...and I also made a ton of money.

How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company.

I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually.

* How does one even learn that is an issue?

* It seems like something where getting started is driven entirely by having contacts in the industry.

* There has to be a ton of prohibitively expensive red tape to cut through. Would you just pay a lawyer to figure all that out? Lawyers are expensive!

* It doesn't seem like something that really makes the world better although I'm sure you could tell yourself that it does if it was your business. Is having your business do something you consider positive important?

* Where do you get the knowledge you need to get started in an industry. Say you're really only good at programming and want to start a ...fashion business. How do you even start? It can be hard to use Google when valuable information is buried under an ocean of click bait articles.

>I heard about startups that do something like make medical insurance billing easier. That raises a lot of questions, actually. * How does one even learn that is an issue?

Try figuring out how much a medical procedure or visit or lab will cost before you have it done, and you will find out very quickly.

> How do you know what type of company to start and how much of your own money did you invest when bootstrapping a company.

I get random ideas all the time and usually deciding to do a project will lead to something. I started with an idea where I wanted to do web analytics initially. Turns out that people liked my app more for the cool graphs that could be easily exported into slideshows and pdfs. The idea changed a lot from talking to people and I found something I never thought people would pay for.

Become a technical co-founder for someone with a deep knowledge of some valuable business, who has a great idea for a startup but lacks the technical skill to make it work. There are lots of them.

Be careful: signal/noise ratio is extremely low here. There are lots of people, particularly in SV, with vague ideas and a general desire to be a "non-technical cofounder", but far less that have the deep, valuable domain knowledge being discussed here.

Well, yeah. Vet your partners. They need to have a realistic and achievable idea that makes sense to you. "Business plan" becomes their responsibility, and it needs to be better than "collect underpants, ???, profit!", or "Facebook for cats" or whatever.

I remember having lots of very similar questions when I first started. I'm a software engineer, so I moved to silicon valley years ago to find a CEO I could CTO for. Fortunately, I stopped looking and had the confidence that I'd be able to figure out all the business stuff. I bet on myself as the CEO.

One of the reasons why there are so many software startup opportunities is because industries are so siloed. My current startup is in Oilfield Logistics - it's literally software to aid moving sand from a mine to an oil well. I had no idea this problem existed until I talked to a friend that runs a large trucking company, and then dug into it. Key takeaway - talk to a lot of people, in lots of different locations, in lots of different industries.

As for how to get the money to bootstrap - you have to get creative, and that's what makes bootstrapping so much fun. Having a VC write you a check is so...unoriginal. If you can find a customer whose pain is more acute than the rest, you can often get them to pay in advance or have them pay to build it, but offer them a "discount" so you can retain all the IP. Now a customer is funding your startup. Or find the smallest MVP that customers will pay for and only build that. The MVP might be a spreadsheet or Zapier + Airtable. You would be surprised what customers are willing to pay for. They don't care if it's easily deployable, can be easily scaled up, or has a beautiful UI, as long as it solves their problem.

You typically have to be in the industry already and experiencing the problem first hand. If you’re technical the best opportunity is usually to partner with someone in the industry 50/50 cofounders. In the later stages you will become an expert because if you’re technical usually fast at learning.

If you have ideas for products or services to improve technical workflow that could also be a space to innovate too.

> * How does one even learn that is an issue?

> * It seems like something where getting started is driven entirely by having contacts in the industry.

Get a job in an industry and learn the domain. It's that simple, in theory at least. The "advantaged" have friends and family who educate you on these industries, but it's hard to really get domain expertise without doing the work.

You aren't "only good at programming." If that is the case you underestimate yourself, are lazy, etc. That's not meant to be mean, but you can achieve more.

The challenge is that domain expertise can be a significant investment when:

* You could be doing more fun things

* It might be location specific

* Might impact your earnings

* May result in your settling down to a different life than you expected.

> Say you're really only good at programming and want to start a ...fashion business. How do you even start?

Get a side hustle. For that exact scenario see https://twitter.com/donasarkar and http://donasarkarbooks.com/fashion-design/.

If you are not well versed in company structures, than maybe you really loose control. But that depends of you.

In a LLC/LIMITED company you as shareholder/member of the company, decide of your structure. So if you do decide that you give up some shares/interest to the investors, then that can be the reason why you would loose the control.

But even if you give up all the shares, by means of controlling the initial articles of organization and operating agreement, you can still remain in full control as manager/director of the company.

In case of Limited Partnerships that issue is even better regulated from beginning, as Limited Partnership consists of one or more General Partners who are managers of the business and one or more Limited Partners who are usually investors, but cannot manage the business and often cannot even replace the General Partners.

The issue is simple.

What you decide is what you get in the end.

VCs typically do not invest in LLCs and will force you to form a C Corp as part of the raise.

  - VCs won't invest in LLCs or LLPs. They invest in C-Corps. The possible arrangements you described don't apply to VC backed companies.
  - You only get to set the terms when you don't need their money. This won't apply to you unless you've bootstrapped to significant revenue or you already have a previous successful exit under your belt.

Reply on news.ycombinator.com