Re:Founder Dilution - How Much Is "Normal?"
by drusenko on Saturday February 21, 2009 @03:55PM
(#490067)
Agreed. I wrote some of my thoughts down recently here: http://david.weebly.com/1/post/2009/02/does-capital-efficien...
Essentially, while running a grossly underfunded company is definitely bad, that's not to be confused with a "raise insane amounts of money and spend it indiscriminately" attitude.
Doing the most with the least amount of money is still the best way to maintain maximum ownership, but it should definitely be balanced against the risks of not being properly capitalized, where "properly" is certainly open to interpretation.
Re:Founder Dilution - How Much Is "Normal?"
by jacquesm on Saturday February 21, 2009 @06:52PM
(#490200)
I read your post, and a similarity struck me between your situation and the one I was in with a competitor funded to the tune of 30M US by two very large companies. We were approached with the intent to acquire, but the management team there was - to put it mildly - a little strange, so we declined. After 3 years they had burned through the whole wad and the plug was pulled.
It was the weirdest experience, to out-compete a company that has such enormous backing with a team of very few but very dedicated people in two small offices (one in Toronto, another near Amsterdam).
If you're halfway smart - and you'd better be if you plan to play the game well - then you should stretch your own means as far as you can. If you're dirt broke and you want to start a new company it better be something that is profitable within 30 days.
If that is not in your future then consider doing two things, one with a short ttm to fund the other. That way you can develop your 'big idea' to the point where you've proven its merits by having your first batch of users on board or whatever metric you use to measure your success.
The worst way to start a new company is to just have an idea and to start looking for funding. By the time it is a running business you'll have nothing left.
No point in blaming the VC's for that, an idea is just that, an idea. I have a notebook here that contains a bunch of ideas. Each and every one of those is potentially a company worth some money if you put in a couple of years of sweat and brain power. Without that they're just ideas and I personally value them at exactly $0.
edit:
Another really good reason to go the 'spend your own $ first' route is that you show with your own money that you really believe in your idea, that will go a long way towards convincing people that you are serious.