Comments on: Why Startups Shouldn’t Raise Money Just Because They Can

By: OLENA

OLENA — Sun, 02 Dec 2018 11:38:59 +0000

Very informative article. Every startup owners should know this facts

By: Sunny Paris

Sunny Paris — Thu, 26 Nov 2015 09:23:16 +0000

HI Alex, as a founder (youdontneedacrm.com and Weborama.com) I do not agree.
I would say the exact opposite: take as much money as you can when you don’t need it.
By reading your post it seems that the main point is don’t do shit with the money you raise. You can’t say to someone don’t take money because you’re going to be wrong with it. Tell him how to be good with it. First of all it is not that easy to get money. May be int the west coast it is but for example in Paris it is not. I’ve raised money for my first company and at the end manage to listed it in the French stock market but most of the time when I tried to raise money it failed.
Second thing people want to give you money when you don’t need it, when you will be in trouble (and you will) you won’t be able to raise money. And in the same way that company like Uber, Facebook and Google should be considered as non existent (they are the exception), company like 37signals should be considered the same. As talented is your team you can’t have a DHH as CTO every time. DHH, as Google, is the exception. He arrived a the right moment with an incredible vision on what should be web development, and was strong enough to build an incredible framework and engage a community around the project.
So my advice should be : “take as much money as you can without loosing the control of your company and run your company as if it was your last financing round”. Because I agree with you that in 90% you will not meet your target and you don’t want to be in a situation of raise or die.

I’ll add one exception, if you have already realized one project and have enough money on your side, you can run your company and depend on investors money to survive. There is a huge probability that you will loose at the end, but if you win you will win big.

By: Donald E. Foss

Donald E. Foss — Fri, 20 Nov 2015 13:28:58 +0000

While I agree with most of it, especially expensive money, there’s one thing missing from your living/lifestyle costs-debt recovery. The first thing I intend to do is pay offer ALL debt I have it have incurred, set up a foundation and trusts for my kids, invest the bulk of the rest into moderate low cost accounts, and live off 80% of the yearly return, primarily paying capital gains tax, not regular income, until I’ve sufficiently recovered to want to do it again.

I told my early investors that I had no plans to build a billion dollar business-I don’t want any horns on my head, but that I planned a solid 3-5X return in 3-4 years. You’d be amazed at the credibility you earn.

If you intend to be a repeat entrepreneur, always set aside money in an index fund to have your own money next time. You can still have expensive money as long as it pays you.

By: Dave Willson

Dave Willson — Thu, 19 Nov 2015 20:51:41 +0000

Thanks for the well timed article. This is actually a topic of conversation I was having at the gym today with my brother. A capital partner could really complicate things. I think your approach has been a good one!

By: Mark Kaufmann

Mark Kaufmann — Thu, 19 Nov 2015 17:50:55 +0000

Great point about Techcrunch and the tech media in general. They are so focused on writing about fundraising rounds to the point that if you haven’t raised a bunch of money, you can’t possibly be worth writing about. I don’t understand the fixation given there are so many examples of funded companies that have disappeared and companies like yours that have built a successful company without raising money. I guess it probably has to do with taking the path of least resistance. If others have decided to invest in this company, it must be worth writing about.

A great post! Really enjoyed it.

By: Jiraud

Jiraud — Thu, 19 Nov 2015 17:07:21 +0000

Cool! I want a Tesla, too!

By: Charles Forster

Charles Forster — Thu, 19 Nov 2015 16:41:11 +0000

Great article!

I think your lifestyle breakdown needs to highlight the taxes bit more. You’re really looking at closer to $300k. Still doable, just a different target.

By: Brenan Klain

Brenan Klain — Thu, 19 Nov 2015 16:24:32 +0000

Loved this article. Especially loved what you said about vision. I feel like it’s so easy to neglect thoughtful vision. What’s really important? What will really deliver long-term fulfilling value? I think that excessive money and power fail to deliver true happiness for most people; however, we’re conditioned to really go for those unicorns. I try to remind myself of this every day and recenter my thoughts on what really is important to me. First and foremost, that is my wife and three children. But, I do also want to build a fulfilling business that I’m passionate about and that enables other people to have more fulfilling lives. That business does not need to be a unicorn success in order to deliver all the value I could ever want. But, it does take a constant reminder with all the information that suggests otherwise.

One experience that was transformative for my wife and I was this interview with Simon Sinek: http://www.byutv.org/watch/41f10e4b-c66e-49b7-8a53-0d486bc1e286/fresh-take-start-with-why-with-simon-sinek . Watching this with your spouse or someone that knows you super well and then having an open and honest discussion is immensely valuable for finding your personal vision for your purpose in life and how to feel fulfilled. It was amazing for my wife and I. Highly recommended.

Alex, my dear digital friend, thank you for these awesome articles. You certainly know how to keep it krispy.

By: ctbtj

ctbtj — Thu, 19 Nov 2015 16:24:29 +0000

Love the lifestyle cost analysis, and the super thoughtful post overall. Having a child taught me how valuable having control of your time is, it gives you time to really connect with your kids in an unhurried way. At this point, for us, extra dollars don’t alter our lifestyle, but extra time is incredibly precious. 5-10 years before having kids, I might have tried to build a bigger company if people had been offering me money (they weren’t), but in retrospect I’m lucky that I ended up with a more modest business.

By: David

David — Thu, 19 Nov 2015 15:56:02 +0000

Really good write up. Particularly liked the lifestyle / cost analysis. Few people actually back-solve for that equation, they just plough ahead for an imaginary target and find themselves dissatisfied even if they do reach that. All about personal expectation management, even if you goals are super high (which is totally fine also).

By: Andreas Huttenrauch

Andreas Huttenrauch — Thu, 19 Nov 2015 15:55:25 +0000

30% tax on $210k income? Where do you live? I’m moving there 🙂