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Parties using VC Money

I'd say that a significant portion (but not a majority) of VC startups are founded with being financially successful as a secondary motive.

For example, there are "entrepreneurs" out there who think of an idea, sell it to the VCs, take the money, spend it, sell the idea to the VCs again, take the money, spend it and on and on, until the startup dies years later.  For them, the startup provides a good salary and plenty of freedom, not a route to being millionaires.

At the beginning of the cycle, they have plenty of money to spend on hiring their friends, throwing pizza parties, buying a pool table, buying fancy computers and having a good old time.  Periodically, they hustle together a demo for the VCs.  Later on, they have to spend more time getting the VCs to reinvest.  Then, usually several years later, the startup gets ugly and runs into the ground.  But, since the point wasn't to be sustainable, only to get VC money, these people aren't all that disappointed.

Maybe, in a few cases, these companies are even accidentally successful.

In another example, many startups see getting VC funding as the end of the road rather than a step along it.  Although very similar to the "entrepreneurs" above, these startups really have great hopes from the VCs.  They feel that getting VC money means that they can relax and take things a little slower.

But, even if the company doesn't follow this example, I'd say that nearly every VC startup that gets its first round of funding usually starts with a party and some sort of free giveaway.  The party is a little strange; hey, I like to feel good but does this really the correct message to send?  The giveaways can be the standard free sodas, anywhere and anytime you like; that makes some sort of sense.  Catering, massages and weekly free lunches are common and make less sense.  Executives get free laptops.

And, we all know how this ends.  A few months later, somebody really needs a laptop or $1,000 to buy BoundsChecker or whatever and the company drags its feet.  Do you really need this item?  Yes, ok, you get it.  And, when the team ships, they only get more work, not a little celebration dinner at a nice restaurant.

In the end, either the company survives and settles into a reasonable set of giveaways.  Or, if the company is failing, the weekly lunch turns into a monthly lunch and then is cancelled altogether.  The free sodas turn into free juice boxes (which nobody wants to drink, so you only have to buy a few, get it?).

So, when the company gets VC money, the company rewards you for doing nothing without a second thought.  Then, when you do something, everybody hems and haws about how to find the time and make it not too expensive.

And, so, when the company gets VC money, it buys you fancy chairs and massages.  Then, when you need Boundschecker or finally realize that a second computer, even a pitifully slow one, to use while your primary machine crashes, the company says, "Maybe later."

Those VCs are so smart.

Anonymous
Thursday, June 12, 2003

1999 called, and they want their insights back!

Fred2000
Thursday, June 12, 2003

debt is debt. Whether it's VC money or credit cards, people will treat it the same way.

www.MarkTAW.com
Thursday, June 12, 2003

God yeah Fred2000, that's *so* four years ago. It can't possibly be relevant now...

Basil Brush
Thursday, June 12, 2003

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