I don't think it's irrational on the investors' part. People with larger amounts to invest want to see a potential for larger returns. Larger returns require faster growth which requires more money up front.
I guess "lifestyle business" is a dirty word to investors, but it needn't be to the rest of us. I think we might see a lot more of them in the coming years, now that it has gotten so cheap to build and operate a Web app.
Anyway, kudos on your success. Bootstraps can be quite rewarding, as you see.
But nobody is going to get rid of the friction in that market until much, much larger markets have significantly reduced friction. Whoever is de-frictioning needs to make enough money for it to be worth it. And small-to-medium investors willing to tolerate high risk combined with stable, successful businesspeople opening new small businesses has got to be a small total market.
At least, compared with startups, VCs and large tech businesses.
Still, somebody will eventually make some money by making that market work.
If that's what it is -- ok. But as I understand it, the thing that stops lifestyle businesses from scaling up is that the owner prefers having a business that works around their schedule, suits their lifestyle, and prefers to be hands-on in operation rather than delegating. To the point that it makes little sense to scale, because the person is the business, and vice versa.
So if what stops lifestyle businesses from being good investment vehicles is the founder's unwillingness to scale, then I completely understand why larger investors would shy away from them. But if an owner of one -- I mean, it could be a bakery or a doggy daycare or anything -- builds out a framework for growth, wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate?
Maybe stretching it here, but why would an investor choose someone who makes great at-home pizza and wants to open 50 restaurants next year, over someone who's run a pizza place for awhile and wants to open two or three more, when the investment needed for the latter is half or a quarter that of the former on a per-restaurant basis?
Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground.
> wouldn't it be logical to pick one that was trying to grow at a slow, responsible rate?
Wouldn't it be more logical to find one which had the potential to explode, and which they could own more of with a large investment? These guys don't want small bites of a small-to-medium business, they want big bites of a potentially massive one. And they're willing to take big losses on the losers in order to get the big winners.
> Is it that VCs won't stoop for pennies? Because - I've always thought it was kinda stupid when people said they wouldn't stoop for pennies. That's money. Why would you leave it lying on the ground.
Because there's a cost in picking them up, and the value of a penny is too low for many people to bother doing it. I certainly wouldn't stoop for a few pennies on the sidewalk - they just aren't worth the effort. It's the same with VCs, I'd guess.
In your pizza example, it is possible that the investors have their Fast Food Business formula with their suppliers and management consultants they bring to the table. Someone who made great at-home, with a great personality would add exactly the right "personal touch" and taste to match.
This doesn't mean that stooping for pennies is bad or that VC are necessarily justified in scorning it. I think it avoiding it can be perfectly sensible from their perspective (which should leave others to take advantage of the opportunities they scorn).
Hence you're not likely to get a URL here.
1. Jurisdictional questions are one reason; in truth, Bitcoin gaming itself probably doesn't violate any US laws to begin with, since Bitcoin isn't legal tender. But our business plan never called for opening in the US, and taking a cue from Linden's preemptive ban on gambling with their funny money, we decided it wasn't worth the risk. We go out of our way to avoid trouble. 2. P2P proxies are too slow to give a good gameplay experience anyway, and disconnects annoy other players in multiplayer games. 3. Providing a fair game for everybody is more important in this case than standing tall on the principles of crypto-anarchy, so we like to know something about our players, especially to prevent duplicate accounts, poker collusion, chip dumping, etc. We know Bitcoin users like their privacy, and respectfully try to strike a balance while maintaining our own security and view of what's happening on the floor.
I should add that this is a 24/7 business manned by 3 people, including me, and two lawyers who signed on for equity, and that I'm also the only coder. It's small, personal, just about right; I figured with 10-20 concurrent players we'd make a profit, which turned out to be accurate, but keeping it cozy, friendly and civilized is a part of the goal and the culture I've tried to imbue in it. Sometimes that rubs against anonymity a little bit.
To bring this full circle, the closest analogy I can give is to the all night coffeehouse I used to work at when I was a kid. It's a small business with a crowd of nice regulars. That's exactly what I pitched to investors, and they didn't get it. Aren't internet companies supposed to be huge and viral? But I mean, who's to say you can't run a very successful small business that doesn't ever go huge, or require seven figures to launch? Anyway, I'm resigned to growing it at the pace it's growing, and I probably wouldn't give away equity now for anything. Not that anyone's banging down my door, lol.
How do you block tor? If by blacklisting public nodes, someone can set up their own bridge relays if they really want to take the effort.
Turns out I had it all backwards. Several investors, declining, confirmed to me that the amount I was asking for was frighteningly low. I showed breakdowns of what would go to hiring and equipment, what would go to advertising, and what was the emergency fund - ($100k) - and how we really wouldn't need more because it would start paying for itself quickly. That wasn't satisfying to them.
What I also didn't know was that turning a profit was the last thing on their minds. It took me awhile to piece that together. I have to thank HN for opening my eyes to it.
The problem with speculative investors is that they aren't producing anything of value. They aren't building the software, they aren't in the trenches trying to acquire users or running customer service.
So I launched with a couple of friends who threw in some very, very small investments of a few grand, rented the equipment I would have wanted to buy, and ran it myself. And I haven't been able to grow it nearly as fast as I would have wanted to. But y'know what? It's making a profit. I just paid a 12.4% dividend on investments for the first quarter. Average time on the site is 45 minutes. We convert 1.5% of users at an average of $75 each. And I hold 81.5% of the company.
So... are investors looking for massively overhyped, vaporous, disruptive monster-IPOs wrong? No, but it's kind of like going to the track and only betting on the longest-shot horses you can find. The whole game would cease to function if a majority of cooler heads weren't making wiser investments with better chances of pretty-good payouts, in companies that actually turn a profit. Of course, the whole game might cease to function pretty soon; things right now look an awful lot like 1998. But people with good ideas and a shoestring budget will keep finding ways to turn a profit that keeps the lights on; and for that I'm glad I didn't find an investor, and did it my way.