zlacker

>>waxpan+(OP)
Excellent, balanced post.

We’re at the end of a grand experiment of “you can take VC money and deliver a tech with new values, one that people want.”

The only people still claiming you can just haven’t run out of their last funding round… yet.

We have 20 years of evidence on what tech businesses can be built on the Internet that make money. It’s narrow and mostly can’t solve the problems that remain.

The escape hatch is always subscription revenue.

It’s true you can build a unique business on unique values for a unique community.

But it’s a long slog in the MicroSaaS world where anyone can & many will straight up copy you - forever.

X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not.

This might seem a negative outlook, but it could be quite positive if founders know & accept it.

The secret is out now that, mostly, founders make the same amount of money in the same amount of time whether they go the VC or bootstrapped route (when it’s a winning business).

There will always be opportunities for finance-backed cartel-busting mega runs.

But if you are a founder that cares about anything - anything - the route that gets you there is founder control, patience, and a customer base that pays.

>>sirspa+9s1
Why can't you take VC money and run the business the way you want? They can't force you to do anything. Sure they can pressure you, but if you have ownership and they have a minority stake, you can do what you want. Ello could have stopped at any time. Why did they raise 5 million only 6 months after their first round and another 5 million 6 months after that? What were they spending their money on? I don't see how this would have worked if they hadn't taken money

> X.com is probably the only & last experiment on whether switching to subscription rev is achievable at scale. Looks pretty clear so far that it’s not.

I don't know. X showed that you can fire ~80% of your employees and the product could still exist. Not only exist but push product at a faster pace. In the last year you got editable comments, subscriptions, revenue sharing, blue checkmark for sale, alternative check marks for govts and org, culling of old accounts, API restrictions, forcing people to put parody identify themselves, longer videos, just to name a few off the top of my head. I noticed more large changes in the last year than the last 5. You don't need a lot of people to run a SaaS company and you can cut a lot of bullshit. And all tech companies are coming around to that conclusion.

Maybe if Ello had raised only a few million and kept around a dozen employees or so, it could have succeeded.

>>bko+SQ1
>> Why can't you take VC money and run the business the way you want?

Because taking VC money let's you defer the revenue question. And by deferring it, you then have to bait-and-switch the users.

Let me be clear. It's OK to get startup money. Businesses need capital to get going. But revenue should be the original business plan.

In other words, who is paying for this site, and how? Ello ruled out advertising and data sale - that's fine, but that leaves subscriptions, donations, premium features, whatever.

For a "regular" business, each wants to become sustainable, its important to become profitable ASAP. The team is focused on revenue, keeping costs down and so on. Once it can pay expenses and salaries it can run forever.

The obvious revenue here is subscriptions. Income rises with expenses. But of course if you charge you'll grow slowly. So you start free, which means customers will rebel later.

(Anyone see parallels to Open Source companies here?)

VC money allows you to kick this can down the road. Small angel investment? Sure, no problem. You still have majority control. But if you are using that money to pay salaries, then it'll quickly run out. If you don't have enough revenue, you could just close up, but you dont, you go get a series A. Then B. Then C and so on.

The implication is you are selling equity. One day that investor equity exceeds 25%. A round or two later it's over 50%. You've lost control. (And I'm assuming all the founders are in agreement all the time - in reality one wants to cash out, and joins the investors camp well before the 50% is reached.)

So, you can grow slowly, and sustainably. Or you can take money, grow fast, and "hope".

But make no mistake, when you sell -equity- you are selling control. You are selling your right to dictate "principles". That is -what- you are selling-.

Since you are selling to people who are in it for the financial return, the end result is like night following day; inescapable.

If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.

>>bruce5+iU1
>If you want to build a business on principles, not profit, you HAVE to answer the revenue question first.

From Wikipedia:

"Business is the practice of making one's living or making money by producing or buying and selling products (such as goods and services)."