2w ago

My friend leads a startup

This is an alt account. I doubt I will use it to post again.

A friend of mine leads a startup. They are beginning to draw attention and are soon to go for investment funding. They make something to be used in sports, medicine, and space.

My friend is frustrated with the ecosystem's current obsessions. 'AI B2B SaaS', making 10x returns in 3-5 years. None of it is sustainable. None of it solves real problems in a way that will keep them solved for decades to come. In a way that is truly new, and better than the old ways in consideration of social and ecological impact.

In your opinion, how might my friend best navigate their choices to positively influence the world? What actions would you take, in their shoes?

18 comments

Don’t seek investment.
- Thanks for your comment.
  It likely will not be practical to raise no investment, since there will be non-negotiable expenses to be covered in the near term.
  There are alternatives to venture capital that are being prioritised, grants and favorable angel investment among others.
  I do agree, VC investment must remain at the bottom of the list.
- This.

If they become a worker owned cooperative, they may be able to find a credit union that will give them a loan to grow (there are some that specialize in helping cooperatives). Likely not as much as VC money, but far more sustainable, and for the workers who work there, far more equitable and ethical.
If they take the VC money, it is fairly inevitable that they will want to sell their share of the business and bail at some point. The least they could do if they take the VC money is actively encourage and facilitate their workers to form a union with the IWW, so at least they have a head start in bargaining with their VC overlords after he cashes out. But that scenario is far less ideal than a worker coop.
- Thanks for your response.
  This was an interesting suggestion. A worker owned coop seems like an equitable way to operate a service.
  Being that the venture will likely only ever involve a small team who are already owners, the benefit appears small in this case.
  I'll see that my friend will keep it in mind for the future.

Do not try to get money from venture capitalists. Try to find three or four customers that you really work with to solve their problems. Grow slowly and steadily.

Investment funding seems to be tightly connected to making unsustainable decisions that lead to someone trying to do "10x in 3-5 years"
This mightve come across as blunt, but I really think following a strategy that increases agency and independence is the one proper way of doing things the right way in the long run.
☀️
- Thanks for the considered response.
  My friend shares the same view. The problem to be overcome is covering non-negotiable expenses for the duration of the project until there can be revenue. There are several solutions, grants and favorable angel investment, with VC funding at the bottom of the list.

Find a different strategy for investment. Maybe crowdfunding? I know that seems infeasible but hear me out.
If he is against the current environment, one of the main things he can offer that other places can't is customer service. This was hammered into me in my twenties when I worked in a small rural grocery store that was somewhat competing for business with the Walmart about a 20 minute drive away. Being close to where people lived, keeping a stock of what those people wanted and needed, offering services they used, and giving them quality customer service from people they got to get to know on an interpersonal level is what could sway people to not make that 20 minute drive for something cheaper. For the most part, it worked.
So many companies are chasing AI because they want to dump you into a customer service loop with an AI that never helps you. So many companies are chasing SaaS because they want endless income streams to be able to go public and sell the company. So many companies are choosing B2B because we've hollowed out the consumer class and the only groups who have a lot of money left to spend are big businesses.
Focus on customer service and having real customer service agents, word of mouth will make people know that this company has humans you can talk to. Work with local governments to get grants to give some of this product away to local medical facilities or locally owned gyms for the sports use. State government grants are actually an excellent way to get funding and get your product in the hands of people who need it. Also, selling to state governments is also similar to a B2B model, except you're working with the government to try to get things into the hands of people who need it.
Anyway, just some thoughts, shooting from the hip so to speak on the idea. Hope it makes sense, good luck to your friend.
- Thanks for your thoughtful response and kind wishes.
  I've passed it on.

Whoa, I'm in their shoes right now!
Ok, the shoes are uncomfortable af and have holes, but mine are clean! I've lived with this tech company for 4 or 5 years now, and I never ever stained myself with VS bullshit. I might go bankrupt this month, I had harsh betrayals and market fluctuations beating the shit from me. I've got store with sales that are just too slow. I've delayed salaries for almost a month (except mine, I haven't made any money for myself this year lol). I still refused to go for all those investor traps and I'm proud of that. Worst case - I'll just go bankrupt and start over!
With investments, you'll never get out clean, without betraying yourself. There will always be compromises. And you won't get very much richer in the end, it's a game where those "bad guys" will inevitably burn you unless you'll become one of them. The rich will get richer and you've participated in burning the world? Not cool.
I've been there. I had in my hands technologies that save the world. I had nuclear waste treatment technology tested in Fukushima. I had sub-10 nm lithography in 2014 (and we showed it to Intel in hopes they'll just hire us back then). Investors never want to save the world, they want coke and whores and to burn us all. Decision makers will keep messing things up. Only grassroots are sustainable.
(please do come to my store buy some weird stuff before it's gone and I'm losing everything and starting another company again: https://store.zymologia.fi/)
Gosh, this post and especially all the comments singing with unison to my dream cheered me up, I've got to go do something good now!
- Thanks for your response.
  I immensely respect your drive. Many young founders I meet don't have it in them to go bankrupt and then do it all again.
  My friend aims to never touch VC funding, same as you. They have plans to push for many other funding avenues; but it is still kept as a last resort for the survival for the project. The view is that, at least, the technology will be made available and they can use the profit to fund their next venture independently of any outside investors.
  I wish you the best of luck in your current venture and the next.
  
  Thanks!
  Just another a bit of advice: remember to reeeeeally carefully inspect grants; in many cases (almost always - but not always, I had some luck there in the end) they require supporting paperwork and other stuff that would effectively require you to spend resources comparable to grant funds themselves just to handle grant issuing party relations. Or they steal the IP in the end. Grants are dangerous poison, for once you have a team writing reports in payroll and rely on grants, it's very hard to drop this, and people would rebel, and firing someone because you are not applying for grants in near future is very hard and often too unethical to do.

“B2B” has existed as a term at least since the 90s, and as a concept for thousands of years.
And SaaS or any *aaS in IT is just virtualization. And that’s been a concept in IT for like 20 years now.
But I’m with you in the AI thing. Throw crypto in there too.
- Thanks for your response.
  I'm aware. I find it unfortunate that so many small teams I meet focus on including these buzzwords in their business model just so they have a perceived higher chance at VC funding. But, what then?
  Particularly AI where it is not needed or useful, seems like one is setting their team up to fail.

Many countries have business grants, especially for sustainable or otherwise advanced businesses.
Some of them are low interest loans for developing a startup that might otherwise not find investments.
Others are more like research grants for developing a process or technology, a small sum of money to do research for a limited time and to produce some tangible results.

Seek investment and do what they want, but use the profits to build a sustainable branch as well.

I don't know if this is helpful in the specific situation, but check it out: https://rutgerbregman.com/sma

18 comments