Sorry about the recent lack of posts. Things always get quiet towards the end of the year, and I have been traveling and coding and coding and traveling non-stop the last few weeks. Hopefully Geoff and I will get things going again as baseball season nears.
A few days ago, my friend Zach and I had a discussion over email about raising funding for internet startups. The conversation was spurred by this article from the Economist, discussing a possible pending tech bubble. Zach argued that the bubble was clear to him when someone, somewhere decided that the reported $6 billion bid on Groupon by Google was not enough money and called the deal off. My counter point or more accurately put continuation of the conversation is below, slightly edited.
[T]o me the ‘bubble’ aspect is that a lot of pointless things (as the economist points out) are getting funded. Like, pointless things. gimmicky neat tech demos are getting funded. And to me that is the main point of irrationality.
[It] sounds like irrationality is closing in on two fronts though. one on the “spray and pray” front where angels will fund idiotic ideas, and another on the high end where companies are being overvalued. the former seems more pervasive, and the latter seems bubble-y.
Part of this has to do with comfort. Stupid-to-less-than-stupid-to-reasonable-but-unproven ideas should all be bootstrapped. Instead, we have these idiots who are so afraid of eating ramen that they spend all their time and effort on figuring out how to raise money instead of how to build a true business. The raising money is the goal, because then you can make 80k a year doing your own stupid thing and it’s living the dream.
I interviewed with that Sunfire place again last night. the woman I spoke with asked me if i wanted to raise money. I said preferably no, but i could see reasons to. And i said the only reason I would was if I was not at enough users to pay for itself but enough users that I saw a future in the business. And she made a reality-based statement that depressed me – it’d be really hard to raise money if I don’t have the numbers I was hoping for – its easy if you get huge amounts of growth, of course. But I was like – wait, if i have enough users, why would I ever raise money?
And part of that is the thing too. If you don’t have ANY proof, you’re in a better spot than if you have numbers that aren’t stellar. And in a way, that is the investor needing comfort too – either the comfort of the irrational kool-aid or the comfort of stellar numbers. Less than awesome numbers on a launched product that might require (gasp) work was looked at by the woman I was talking to, accurately, as a liability.
So, this is why I don’t want to raise money. mostly because investors are risk-averse assholes. And also because I like ramen.
Despite being one of the risk-averse assholes I called out in that email, Zach liked the response, and the more I think about it, the more I like it as well. I understand the need to raise money even if your startup proves itself spectacularly – growth can always use more capital, etc, etc. But there is a lot of weirdness in the money-raising world, and until I find some people who see things a bit more in line with how I see things, I don’t see myself actively pursuing funding.