Hi all - Paul Graham has just let loose another extremely long and
detailed missive, this month covering 9 essential pieces of advice for
anyone in the money-raising cycle.
If you don't already subscribe to his feed, then take a few hours, and
read this latest post, as well as his back-catalogue of articles
focussed on Silicon Valley/startups/investors/etc - wondferul insight.
For those of us who already read his posts regularly, what are your
thoughts/comments/feedback regard his advice this time around -
especially reflecting on the current state of Australian investors/
startups...? What advice would you add or amend from his points, to
make it more relevant for startups on this side of the pond?
My first reaction was to be heartened by his point of view, but then
after a re-read, a little less heartened, as we in Australia have the
added pressure of a diminished investor pool, and from an investor
point of view, and diminished range of startups. While the per-capita
ratio of investors to startups in Silicon Beach to Silicon Valley
might be the same, how do others/have others coped with the more
limited numbers in Australia?
Looking forward to fanning the flames of a conversation on this topic
- I know it's one I'll be heading down very shortly.
With thanks,
AB
PS - I'll de-lurk and introduce myself this week - juuust about to get
the v1.0 out in the next 24 hours!
Paul Graham either genuinely believes his own press these days, or he's doing very smart PR. Lately everything he's written has a clear subtext of "the YC way is the way you should do it" which really must help drum up business for YC. Of course the cynic in me suggests that he sounds a lot like those guys who make money flogging their "can't lose" investment strategies, instead of using said strategies to make buckets of cash. But hey, maybe he's just outsourcing his startups by having naive kids do all the grunt work?
So lets assume for the sake of argument that you can't self fund and/ or bootstrap to profitability.
All his criticisms of the investment process I'd suggest are valid here and amplified by the local environment, due to a smaller pool of both investors and startups (as you've identified) and a relative inexperience in the tech industry compared to US angels. My (second hand) experience is that angel investors here are not a lot different to what he describes, I can't comment on AU VCs though.
I'd consider adding something about govt grants. Some of the in-kind stuff (free/subsidised assitance for IP advice, marketing, etc) is probably worth taking. I don't believe in leaving money on the table, but I would not pin a lot of fund-raising hope solely on grant money - my (again indirect) experience there has shown that is a good route to the "long NO". Bureaucracies love their paperwork and selection panels.
Plus it's usually a competitive process, with a fixed pool of money, and the whole "oh my god, they gave them *that* much and this is *all* they could come up with?" post-mortem of your competitors isn't worth the grief ;-)
(Incidentally, it strikes me that maybe the whole govt funding thing could be fixed by simply outsourcing the management process to an actual VC, any wins go back into the fund to be reinvested. This is where a YC model might actually be workable here, if they keep the shiny-arsed chair-polishers away from the process. Imagine if instead of PG getting a cut of Omnisio's $15m acquisition, that money came back to an AU fund which reinvested in the next round of startups? If anyone's actually doing this here, then they need to make a hell of a lot more noise about it!)
> Hi all - Paul Graham has just let loose another extremely long and > detailed missive, this month covering 9 essential pieces of advice for > anyone in the money-raising cycle.
> If you don't already subscribe to his feed, then take a few hours, and > read this latest post, as well as his back-catalogue of articles > focussed on Silicon Valley/startups/investors/etc - wondferul insight.
> For those of us who already read his posts regularly, what are your > thoughts/comments/feedback regard his advice this time around - > especially reflecting on the current state of Australian investors/ > startups...? What advice would you add or amend from his points, to > make it more relevant for startups on this side of the pond?
> My first reaction was to be heartened by his point of view, but then > after a re-read, a little less heartened, as we in Australia have the > added pressure of a diminished investor pool, and from an investor > point of view, and diminished range of startups. While the per-capita > ratio of investors to startups in Silicon Beach to Silicon Valley > might be the same, how do others/have others coped with the more > limited numbers in Australia?
> Looking forward to fanning the flames of a conversation on this topic > - I know it's one I'll be heading down very shortly.
> With thanks,
> AB
> PS - I'll de-lurk and introduce myself this week - juuust about to get > the v1.0 out in the next 24 hours!
I'm going to have re-read it when I have time, but I found it a good article when I read it the other day.
The rely on consulting/don't rely too much on consulting for bootstrapping struck a cord for me. And certainly, my (second) hand experience of hearing about people raising money - his view seems very much in line with what I understand.
I think an important difference between the valley culture and the Australian culture with startups - is that in the valley, people are building to sell. In Australia, people are talking about building a company. There is a big difference. It probably is also why the word startup is so glorified and prominent in the valley - as I raised in a different thread, the lifecyle of a comapany is startup, growth, maturity, decline/exit - and for valley companies fueled by VC agendas, they are lookin for a large return through an exit ASAP. Companies in the valley, are kicking arse in the startup incubation sense...but still lacking in the rest of the business cycle.
On 8/12/08, Warren Seen <warren.s...@gmail.com> wrote:
> Paul Graham either genuinely believes his own press these days, or > he's doing very smart PR. Lately everything he's written has a clear > subtext of "the YC way is the way you should do it" which really must > help drum up business for YC. Of course the cynic in me suggests that > he sounds a lot like those guys who make money flogging their "can't > lose" investment strategies, instead of using said strategies to make > buckets of cash. But hey, maybe he's just outsourcing his startups by > having naive kids do all the grunt work?
> So lets assume for the sake of argument that you can't self fund and/ > or bootstrap to profitability.
> All his criticisms of the investment process I'd suggest are valid > here and amplified by the local environment, due to a smaller pool of > both investors and startups (as you've identified) and a relative > inexperience in the tech industry compared to US angels. My (second > hand) experience is that angel investors here are not a lot different > to what he describes, I can't comment on AU VCs though.
> I'd consider adding something about govt grants. Some of the in-kind > stuff (free/subsidised assitance for IP advice, marketing, etc) is > probably worth taking. I don't believe in leaving money on the table, > but I would not pin a lot of fund-raising hope solely on grant money > - my (again indirect) experience there has shown that is a good route > to the "long NO". Bureaucracies love their paperwork and selection > panels.
> Plus it's usually a competitive process, with a fixed pool of money, > and the whole "oh my god, they gave them *that* much and this is > *all* they could come up with?" post-mortem of your competitors isn't > worth the grief ;-)
> (Incidentally, it strikes me that maybe the whole govt funding thing > could be fixed by simply outsourcing the management process to an > actual VC, any wins go back into the fund to be reinvested. This is > where a YC model might actually be workable here, if they keep the > shiny-arsed chair-polishers away from the process. Imagine if instead > of PG getting a cut of Omnisio's $15m acquisition, that money came > back to an AU fund which reinvested in the next round of startups? If > anyone's actually doing this here, then they need to make a hell of a > lot more noise about it!)
> Cheers,
> Warren
> On 10/08/2008, at 10:28 PM, AB wrote:
> > Hi all - Paul Graham has just let loose another extremely long and > > detailed missive, this month covering 9 essential pieces of advice for > > anyone in the money-raising cycle.
> > If you don't already subscribe to his feed, then take a few hours, and > > read this latest post, as well as his back-catalogue of articles > > focussed on Silicon Valley/startups/investors/etc - wondferul insight.
> > For those of us who already read his posts regularly, what are your > > thoughts/comments/feedback regard his advice this time around - > > especially reflecting on the current state of Australian investors/ > > startups...? What advice would you add or amend from his points, to > > make it more relevant for startups on this side of the pond?
> > My first reaction was to be heartened by his point of view, but then > > after a re-read, a little less heartened, as we in Australia have the > > added pressure of a diminished investor pool, and from an investor > > point of view, and diminished range of startups. While the per-capita > > ratio of investors to startups in Silicon Beach to Silicon Valley > > might be the same, how do others/have others coped with the more > > limited numbers in Australia?
> > Looking forward to fanning the flames of a conversation on this topic > > - I know it's one I'll be heading down very shortly.
> > With thanks,
> > AB
> > PS - I'll de-lurk and introduce myself this week - juuust about to get > > the v1.0 out in the next 24 hours!
Building to flip is just intellectual property speculation. Like any property speculation, you're subject to market forces, you could catch a rising market, get out before the bubble pops, or you could have the rug yanked out from under you. For those who have done it, and were successful, more power to them.
If it's a "bet the farm" kinda deal, sure, try to get some VC money, bet someone else's farm on it. What do you do if you can't flip it though? How are you going to deliver a fast, profitable exit for your investors? IPO? Not bloody likely.
I think it's pretty clear the the Valley today worships the fast flip, and the fast buck that comes with it. But the companies that came before these startups - that actually built the foundation of that ecosystem, they weren't focused on getting out 5 minutes after they got started.
Realistically, our local industry needs these as much as it needs a few big "winners" to hang its hat on.
> I'm going to have re-read it when I have time, but I found it a > good article when I read it the other day.
> The rely on consulting/don't rely too much on consulting for > bootstrapping struck a cord for me. And certainly, my (second) hand > experience of hearing about people raising money - his view seems > very much in line with what I understand.
> I think an important difference between the valley culture and the > Australian culture with startups - is that in the valley, people > are building to sell. In Australia, people are talking about > building a company. There is a big difference. It probably is also > why the word startup is so glorified and prominent in the valley - > as I raised in a different thread, the lifecyle of a comapany is > startup, growth, maturity, decline/exit - and for valley companies > fueled by VC agendas, they are lookin for a large return through an > exit ASAP. Companies in the valley, are kicking arse in the startup > incubation sense...but still lacking in the rest of the business > cycle.
> On 8/12/08, Warren Seen <warren.s...@gmail.com> wrote:
> Oooooh. No replies yet?
> OK, I'll bite.
> Paul Graham either genuinely believes his own press these days, or > he's doing very smart PR. Lately everything he's written has a clear > subtext of "the YC way is the way you should do it" which really must > help drum up business for YC. Of course the cynic in me suggests that > he sounds a lot like those guys who make money flogging their "can't > lose" investment strategies, instead of using said strategies to make > buckets of cash. But hey, maybe he's just outsourcing his startups by > having naive kids do all the grunt work?
> So lets assume for the sake of argument that you can't self fund and/ > or bootstrap to profitability.
> All his criticisms of the investment process I'd suggest are valid > here and amplified by the local environment, due to a smaller pool of > both investors and startups (as you've identified) and a relative > inexperience in the tech industry compared to US angels. My (second > hand) experience is that angel investors here are not a lot different > to what he describes, I can't comment on AU VCs though.
> I'd consider adding something about govt grants. Some of the in-kind > stuff (free/subsidised assitance for IP advice, marketing, etc) is > probably worth taking. I don't believe in leaving money on the table, > but I would not pin a lot of fund-raising hope solely on grant money > - my (again indirect) experience there has shown that is a good route > to the "long NO". Bureaucracies love their paperwork and selection > panels.
> Plus it's usually a competitive process, with a fixed pool of money, > and the whole "oh my god, they gave them *that* much and this is > *all* they could come up with?" post-mortem of your competitors isn't > worth the grief ;-)
> (Incidentally, it strikes me that maybe the whole govt funding thing > could be fixed by simply outsourcing the management process to an > actual VC, any wins go back into the fund to be reinvested. This is > where a YC model might actually be workable here, if they keep the > shiny-arsed chair-polishers away from the process. Imagine if instead > of PG getting a cut of Omnisio's $15m acquisition, that money came > back to an AU fund which reinvested in the next round of startups? If > anyone's actually doing this here, then they need to make a hell of a > lot more noise about it!)
> Cheers,
> Warren
> On 10/08/2008, at 10:28 PM, AB wrote:
> > Hi all - Paul Graham has just let loose another extremely long and > > detailed missive, this month covering 9 essential pieces of > advice for > > anyone in the money-raising cycle.
> > If you don't already subscribe to his feed, then take a few > hours, and > > read this latest post, as well as his back-catalogue of articles > > focussed on Silicon Valley/startups/investors/etc - wondferul > insight.
> > For those of us who already read his posts regularly, what are your > > thoughts/comments/feedback regard his advice this time around - > > especially reflecting on the current state of Australian investors/ > > startups...? What advice would you add or amend from his points, to > > make it more relevant for startups on this side of the pond?
> > My first reaction was to be heartened by his point of view, but then > > after a re-read, a little less heartened, as we in Australia have > the > > added pressure of a diminished investor pool, and from an investor > > point of view, and diminished range of startups. While the per- > capita > > ratio of investors to startups in Silicon Beach to Silicon Valley > > might be the same, how do others/have others coped with the more > > limited numbers in Australia?
> > Looking forward to fanning the flames of a conversation on this > topic > > - I know it's one I'll be heading down very shortly.
> > With thanks,
> > AB
> > PS - I'll de-lurk and introduce myself this week - juuust about > to get > > the v1.0 out in the next 24 hours!
A fast flip culture brings money into the ecosystem, veteran employees and entrepreneurs, and hype that things are booming. But it is also dependent on a market where acquisitions are prominent - in Australia's economy, although we are over-banked (in the investment bank presence sense), do we really have enough Fairfax's to encourage that ecosystem?
The fast flip is also at odds with the Australia culture, and is evidenced by the startups that have come out of Australia. People live in Australia for the lifestyle - and so build companies that enchance that lifestyle, not the endless tail chasing of more money in the pursuit of happiness. Freshview go surfing every day...and are profitable, but don't aim for aggresive growth (that I am aware of at least). The Tjoos co-founders who I have got to know very well from the Official Friday Silicon Beach drinks are profitable, but also very focussed on a specific goal...so focussed on that goal, that they can go on a holiday for a week and not worry about the business.
Not sure where to conclude on that above analysis...although a friend from the valley pointed me to this link which is an interesting read http://techdirt.com/articles/20080731/0216021848.shtml that might add to the discussion
On 8/12/08, Warren Seen <warren.s...@gmail.com> wrote:
> Building to flip is just intellectual property speculation. Like any > property speculation, you're subject to market forces, you could catch a > rising market, get out before the bubble pops, or you could have the rug > yanked out from under you. For those who have done it, and were successful, > more power to them.
> If it's a "bet the farm" kinda deal, sure, try to get some VC money, bet > someone else's farm on it. What do you do if you can't flip it though? How > are you going to deliver a fast, profitable exit for your investors? IPO? > Not bloody likely.
> I think it's pretty clear the the Valley today worships the fast flip, and > the fast buck that comes with it. But the companies that came before these > startups - that actually built the foundation of that ecosystem, they > weren't focused on getting out 5 minutes after they got started.
> Realistically, our local industry needs these as much as it needs a few big > "winners" to hang its hat on.
> On 12/08/2008, at 9:43 AM, Elias Bizannes wrote:
> I'm going to have re-read it when I have time, but I found it a good > article when I read it the other day.
> The rely on consulting/don't rely too much on consulting for bootstrapping > struck a cord for me. And certainly, my (second) hand experience of hearing > about people raising money - his view seems very much in line with what I > understand.
> I think an important difference between the valley culture and the > Australian culture with startups - is that in the valley, people are > building to sell. In Australia, people are talking about building a company. > There is a big difference. It probably is also why the word startup is so > glorified and prominent in the valley - as I raised in a different thread, > the lifecyle of a comapany is startup, growth, maturity, decline/exit - and > for valley companies fueled by VC agendas, they are lookin for a large > return through an exit ASAP. Companies in the valley, are kicking arse in > the startup incubation sense...but still lacking in the rest of the business > cycle.
> On 8/12/08, Warren Seen <warren.s...@gmail.com> wrote:
>> Oooooh. No replies yet?
>> OK, I'll bite.
>> Paul Graham either genuinely believes his own press these days, or >> he's doing very smart PR. Lately everything he's written has a clear >> subtext of "the YC way is the way you should do it" which really must >> help drum up business for YC. Of course the cynic in me suggests that >> he sounds a lot like those guys who make money flogging their "can't >> lose" investment strategies, instead of using said strategies to make >> buckets of cash. But hey, maybe he's just outsourcing his startups by >> having naive kids do all the grunt work?
>> So lets assume for the sake of argument that you can't self fund and/ >> or bootstrap to profitability.
>> All his criticisms of the investment process I'd suggest are valid >> here and amplified by the local environment, due to a smaller pool of >> both investors and startups (as you've identified) and a relative >> inexperience in the tech industry compared to US angels. My (second >> hand) experience is that angel investors here are not a lot different >> to what he describes, I can't comment on AU VCs though.
>> I'd consider adding something about govt grants. Some of the in-kind >> stuff (free/subsidised assitance for IP advice, marketing, etc) is >> probably worth taking. I don't believe in leaving money on the table, >> but I would not pin a lot of fund-raising hope solely on grant money >> - my (again indirect) experience there has shown that is a good route >> to the "long NO". Bureaucracies love their paperwork and selection >> panels.
>> Plus it's usually a competitive process, with a fixed pool of money, >> and the whole "oh my god, they gave them *that* much and this is >> *all* they could come up with?" post-mortem of your competitors isn't >> worth the grief ;-)
>> (Incidentally, it strikes me that maybe the whole govt funding thing >> could be fixed by simply outsourcing the management process to an >> actual VC, any wins go back into the fund to be reinvested. This is >> where a YC model might actually be workable here, if they keep the >> shiny-arsed chair-polishers away from the process. Imagine if instead >> of PG getting a cut of Omnisio's $15m acquisition, that money came >> back to an AU fund which reinvested in the next round of startups? If >> anyone's actually doing this here, then they need to make a hell of a >> lot more noise about it!)
>> Cheers,
>> Warren
>> On 10/08/2008, at 10:28 PM, AB wrote:
>> > Hi all - Paul Graham has just let loose another extremely long and >> > detailed missive, this month covering 9 essential pieces of advice for >> > anyone in the money-raising cycle.
>> > If you don't already subscribe to his feed, then take a few hours, and >> > read this latest post, as well as his back-catalogue of articles >> > focussed on Silicon Valley/startups/investors/etc - wondferul insight.
>> > For those of us who already read his posts regularly, what are your >> > thoughts/comments/feedback regard his advice this time around - >> > especially reflecting on the current state of Australian investors/ >> > startups...? What advice would you add or amend from his points, to >> > make it more relevant for startups on this side of the pond?
>> > My first reaction was to be heartened by his point of view, but then >> > after a re-read, a little less heartened, as we in Australia have the >> > added pressure of a diminished investor pool, and from an investor >> > point of view, and diminished range of startups. While the per-capita >> > ratio of investors to startups in Silicon Beach to Silicon Valley >> > might be the same, how do others/have others coped with the more >> > limited numbers in Australia?
>> > Looking forward to fanning the flames of a conversation on this topic >> > - I know it's one I'll be heading down very shortly.
>> > With thanks,
>> > AB
>> > PS - I'll de-lurk and introduce myself this week - juuust about to get >> > the v1.0 out in the next 24 hours!
> On 8/12/08, Warren Seen <warren.s...@gmail.com> wrote:
> Paul Graham either genuinely believes his own press these days, or
> he's doing very smart PR. Lately everything he's written has a clear
> subtext of "the YC way is the way you should do it"...
Sure, some of his latest essays have that flavor (YC is his child, so
how can that be otherwise?), but I can't agree that "A Fundraising
Survival Guide" is a YC PR. Take it out of paulgraham.com / YC context
and it'll be fine on it's own. Clearly one may obtain angel
investments and/or VC money completely bypassing YC. The essay has a
few generic points too, like do not concentrate on money alone and do
not expect any expressed intention becoming a set in stone deal.
What sounds too stretched to me is PG's recent promotion of fast
flipping. That is when he becomes too YC oriented and forgets the rest
of a picture.
Whether fast flipping resembles property speculations or not depends
on how much value is added. Property speculation hardly adds much
value, building a startup does. Idea has no value, but a demo version
of the idea definitely may have some. Speculations happen more often
when people sell too fast. But then is getting VC money a speculation
too?
When we have a balance between selling quick and growing big then we
have a good model and a good ecosystem. Take either extreme and have
either a receipt for a next bubble or a stand still of a blue chip
economy (well, I am stretching things a bit too :)
Fast flipping is not only about quick money. Some people are good at
generating ideas and springing them into the air, others are good at
keeping products airborne. Small companies are different from big ones
and I can imagine why some entrepreneurs prefer selling newly created
companies rather than heading them to big enterprises themselves.
May be the balance is one of the keys to success? If Australia is at
odds with fast flipping then people who are good at making startups
have nothing to do but keep building a business further. If they are
not good at that they become bad CEOs of bigger companies and pave a
way to troubles instead of doing what they are best at? May be it
would be better for them to be able to sell early and move on to
create something new? And those who are good at steering big ships
would win too, rather than struggling with ropes in a small dingy?
Sounds too naive?
I think you misunderstand the analogy I'm making... the danger with a "built to flip, someone else can figure out the biz model" startup is that you're dependent on outside market forces. If things change and Google loses their appetite for buying startups, then what? I don't know, maybe this is a good thing (fail fast?) but it seems to me that it makes more sense, especially here, to build something sustainable in the long term.
Sure, everything in business is a risk to some degree, and therefore is speculative by definition.
Personally, if I had the means I'd do a new project every few months, going wherever my interests take me at the time, so I understand your point about the ecosystem needing people who make bad long term CEOs to cycle through into new things where their talents aren't being wasted.
I just think that building to flip doesn't acknowledge the reality of business outside of the Valley bubble. Sure M&As happen in other industries, but I can't think of any other industry where "get bought by huge player in 6 months" is a valid business plan?
> Whether fast flipping resembles property speculations or not depends > on how much value is added. Property speculation hardly adds much > value, building a startup does. Idea has no value, but a demo version > of the idea definitely may have some. Speculations happen more often > when people sell too fast. But then is getting VC money a speculation > too?
It's funny how often people include the exit strategy in the business
plan when pitching ideas to us. It's worrying to here people talking
about the exit before they've even built the product. You can only
exit if you have a viable, successful, long term business. That's not
always true, but it's generally true. If the business is successful
then more often than not the exit presents itself. Investment bankers
will start sniffing around for a possible IPO, competitors will start
enquiring about a trade sale.
I'd always suggest to people not to pitch for funding until a
prototype is ready and sales orders are in place. Better still if you
can get earnings under your belt it changes the dynamics in
fundraising negotiations completely. Investors understand earnings
more than anything. The bootstrapping phase is absolutely crucial.
Achievements in the bootstrapping phase will be magnified down the
line. Each customer won at the bootstrapping phase is worth 10 or 100
or 1000 down the line.
On Aug 13, 1:31 am, Warren Seen <warren.s...@gmail.com> wrote:
> I think you misunderstand the analogy I'm making... the danger with a
> "built to flip, someone else can figure out the biz model" startup is
> that you're dependent on outside market forces. If things change and
> Google loses their appetite for buying startups, then what? I don't
> know, maybe this is a good thing (fail fast?) but it seems to me that
> it makes more sense, especially here, to build something sustainable
> in the long term.
> Sure, everything in business is a risk to some degree, and therefore
> is speculative by definition.
> Personally, if I had the means I'd do a new project every few months,
> going wherever my interests take me at the time, so I understand your
> point about the ecosystem needing people who make bad long term CEOs
> to cycle through into new things where their talents aren't being
> wasted.
> I just think that building to flip doesn't acknowledge the reality of
> business outside of the Valley bubble. Sure M&As happen in other
> industries, but I can't think of any other industry where "get bought
> by huge player in 6 months" is a valid business plan?
> On 12/08/2008, at 11:56 PM, dimka wrote:
> > Whether fast flipping resembles property speculations or not depends
> > on how much value is added. Property speculation hardly adds much
> > value, building a startup does. Idea has no value, but a demo version
> > of the idea definitely may have some. Speculations happen more often
> > when people sell too fast. But then is getting VC money a speculation
> > too?
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