(1) "I was told to hire a lot of people. Put fuel on the fire they said. Bring industry experts who can move the needle. All this BS you hear all day. All failed. I hired VPs and bloated my payroll. Ultimately I ended up with a bunch of highly paid employees who don’t know how to do anything but to “build and lead amazing teams.” Imagine you hire someone to scale an area and their solution is to divide that area into 5 sub areas and hire someone for each of them to figure it out, etc. that’s their solution."
(2) "I ended up focusing my efforts on hiring and ramping up those VPs and dealing with their dumb ideas instead of focusing on my 3 core tenants: build, sell, and deliver."
A bunch of bourgeoisie over-educated idiots, usually with MBAs, who don't know how to do anything except take credit for work that other people do.
The story ends as you'd expect, we all got laid off and the founder was shitty.
The made sense.
They smelled good.
They made great leadership stories.
...but none of it actually mattered to the customer.
I've worked at a lot of startups. The worst of them were led by people who list things like "organization design" and "build and lead amazing teams" on their LinkedIn.
At the most dysfunctional company, the ex-FAANG CTO would take key job descriptions and add the requirement that they must have FAANG experience. This created a glass ceiling where the early employees, non of whom had FAANG backgrounds, were unable to be promoted. Instead, we got a lot of ex-FAANG VPs and Directors who didn't know how to function at a startup. They were told to lead teams of people who knew the business inside and out (because they built it!) yet they could barely function outside of a big company themselves. Every meeting would be a competition of stories about "At Microsoft we did this..." or "At Facebook we did that..." because playing the FAANG card was the only thing the CTO liked to hear.
The only non-FAANG person who thrived at that company was the single worst leader I've ever reported to. He is a LinkedIn influencer with his own newsletter where he talks about, among other things, his expertise in "Organizational Design". Yet the organization he designed was completely dysfunctional because he ignored how the business worked and instead hired arbitrary numbers of people according to some book he read. Half of the people at that company were 90% idle, while the other half were working 80 hour weeks because the "organizational design" person had strictly assigned responsibilities to arbitrary teams in a way that didn't account for how the business actually worked.
The next line from this post is exactly how he responded to every problem:
> Imagine you hire someone to scale an area and their solution is to divide that area into 5 sub areas and hire someone for each of them to figure it out, etc. that’s their solution.
He was never accountable for anything because he always had someone under him to blame.
CS degree.
"I have a proven track record of building and leading amazing engineering teams."
"Okay. What's the difference between a character and a string?"
*crickets*
We all have our specialities, but jesus ¢@&#ing christ: if you're interviewing for an engineering role, of any sort, you should be able to answer basic questions.
Boy was I wrong. My first question was "Name the most common data structures you use day to day". He stayed silent for a bit and then said "What, do you want me to just list them?" I said yes. After some more silence he said he couldn't recall any. The fact that he said "list" was particularly ironic.
I kind of gave up on expecting used-to-be software developers to have retained a single bit of knowledge from their time as a dev after they've moved on to "leadership" or "management". I believe it's important for technical leadership to understand technical problems and their solutions in broad strokes, but it seems I'm mostly in the minority in the real world. That interview (and trying to hire for that role) really showed me how little engineering leaders remember about software.
Because it is terminated with A ZERO."
Either that or they're completely incompetent. Likewise it takes a special kind of stupid to think they could wing it.
This is a low IQ question.
A brief case study: Russia's invasion of Ukraine. The argument has been made (and I agree) that much of their early failures stem from not understanding/implementing Unified Command. They didn't have a Joint Task Force Commander who was responsible for the entire Area of Operations. They didn't have an Air Component Commander subordinate to the JTF to ensure all air operations achieved synergy with, and were in support of, the ground scheme of maneuver.
Most field-grade officers who have planned and/or executed a major multi-service or multi-national training exercise are familiar with Command Relationship org charts and understand WHY they are important (if that stuff isn't clear, responsibilities get fuzzy when edge cases arise, and then in the resulting confusion/friction....people die). It's also just as important to understand how much of that "big DoD" cruft you can peel away when you are doing small, localized training with a developing nation with....austere practices, shall we say.
So I could see adding "Organizational Design" to my LinkedIn....unknowingly putting myself in the same bucket as "hot-air no-nothing ex-FAANG managers". And then no one cares what digital signal processing stuff I could do for them as an IC... :(
This story is remarkable in one sense: the founder removes all of his own agency from the story. The vast majority of initial financing rounds leave the founders in control of companies these days…
Finally, a VC backed company is always likely to die. If you want to run a nice, small SaaS, don’t take VC. Whether financing comes from a bank loan, an angel, private equity or VC, one job of entrepreneurs is to align incentives with capital sources.
IMO, it is foolish to hinge the decision of taking VC money or not based on potential lifespan alone.
VC money could kill your startup quickly, but you could potentially make a lot of stable money in that short period of time, and end up better off than collecting smaller profit from your small SaaS that lives for a longer period of time.
And yea most of the time you are reinvesting profits but you should hopefully be paying yourself too along the way. Not to mention you are also paying a lot of other people as well and creating value for them.
Ultimately VC money isn’t destroyed, it’s just reabsorbed into a wider economy.
Is the claim that innovation only happens in the USA? That the only good companies are US companies? What are the specific benefits, other than merely indulging the startup fantasies of a relatively small number of founders, that come from this "high risk, high reward" environment?
The advantage is not in American recklessness, it’s in American shamelessness. The only risk made is in the money, someone’s “honor” doesn’t play into it, for the most part.
> Nowhere else on the planet are you able to do that with such magnitude, not in Japan, not in Europe, not in China
Europe had that too, rich nobles sponsored scientists and artists.
We are back in aristocratic society
In Australia, we have similar issues.
We also face geographic and population restrictions.
I’m often advising clients to stop listening to advice from Unicorn CMOs from SV. America had 100s of millions of people.
Australia had ~25m.
You arnt going to sell a million widgets by engaging an Instagram influencer. You arnt the Kardashians.
Don’t get me wrong, I love listening to and reading about SV culture and the companies.
It’s a fascinating world, to me anyway :-)
They raised at an inflated valuation and seemingly received a favorable multiple (100-10x “7-figure” revenue). The fact that they rode out the company to 0 means they had board control and were never fired. So they are ultimately responsible for every decision they made. Including over-hiring and not firing their clueless VPs.
I say this as a founder of a yc-backed company that was acquired. I know the pressures of short-sided VCs. I also know that the job of a founder is to pick which advice you follow.
The results are predictable. Note how there is no acceptance of personal responsibility.
I also note that there isn't a shred of evidence for this whole story, and $100M to $0 does not seem like a believable trajectory (nor does $0 to $100M, but the other is much less believable).
A key requirement of any company is managing your equity holders.
A year later, we had our first round of vc fund. I had a slight bump in salary, but owned stocks so all is good. My role was, make-things-work-at-all-cost. I'd be on calls with customers and their engineers to make things work. I'd generate specialized reports by merging data locally, I'd get a calls on my personal phone from customers. We did the things that don't scale.
Year 2, we are 30 employees getting ready for another round of funding, the ceo and cto spent all their time in vc meetings. I worked in all my waking hours, it was unsustainable. I told them I needed a break, the way they responded showed me that I was just another replaceable employee.
I packed my stuff and left, they tried to screw with my stocks, but i fought back and got it all. They got their second funding. They never replaced me. Instead of hiring 2 or 3 people to do my job in a scalable manner, they stopped offering the service all together. Instead they went with buzzwords in AI.
Fast forward 3 years. The company was acquired, the stocks are worth 0 dollars, and most employees got fired. Though the linkedin post sounds like a success story.
2) > I hope this part is clear because it’s the crux of the misalignment between founders and VCs.
This is the crux of the misalignment between small business owners and VCs. The large majority of the startup founders I've met all have dreams of building a rocket ship, not of building a happy small business. If you're in the latter camp, as I have been several times, you usually know better than to take VC money.
I'd imagine by doing actually useful job there
This is someone in their teenage to twenties, who makes 10 reddit accounts a month, farms karma on them, then sells them to spammers in a couple months for a couple hundred dollars each.
If you're a marketer who wants to create networks of shill accounts (happens more than you think) then you need enough accounts that meet these requirements.
Beyond gaining some sort of reputation for not doing what your investors want, is there anything else?
And if you put it to work to any degree, you start growing and accruing costs.
You are then in a race against time for the next raise and you are off to the races.
The actual deals are very complex and the details are hard to understand but it isn't as simple as "here is $10m go make me rich".
Then VCs won't invest in you, put a bunch of cash into a competitor, bleed you dry and either let you die or force you to reincorporate in a way they can have ownership.
VCs are a cancer. They want to spread and grow, at any cost.
You think you need to bring the tenured exec in with all of the industry contacts, but they are often a terrible cultural fit or experienced in the last iteration of your industry. They also want to hire under them rather than work the tools themselves and do this bait and switch after you’ve hired them.
You are then stuck with high salaries for ineffective people or an expensive and disruptive exit.
VCs also seem to push these people onto you as they think that is what constitutes a real company and/or they want a nice gig for their friends.
Some times your money printer won't scale, but other people will try to convince you that it's full of golden eggs?
If you're cash-positive you should see VC as supplicants begging for scraps?
It makes sense. If he got there quick, his product was working, and it had a chance at gold. Ultimately, lots of ways for startup to fail and failing-to-scale is one of them.
Well, he knows there's PMF at a small market now. He can try again without the large raise if he wants to run a lifestyle business.
But that makes this whole thing pretty circular—they only would have $100MM valuation because they sold a story of growth to investors. Assuming that the round at $100M valuation was during the boom times of 2019-2021, that could have been with as little as $3-5M annual revenue (20-25x multiplier).
Assuming slow or no growth, a company with $3M in revenue would be worth <$15M.
FANNG hires?
That’s not an exhaustive list of course.
The problem is those VC firms are much harder to get started with.
After all the whole schtick of the VCs complained about in OP is to fund tons companies and make so much money off the unicorns that it doesn't matter how many fail.
Honestly though there is one upside to VC money: it also caps your losses. Most forms of debt for a small company rely on you being a creditor meaning you can be in the hole if your company fails.
Overall getting money is hard and nuanced which makes sense given there is nearly infinite demand for it.
I've heard these "grow until you burst" stories some times, but no one ever told a good way of getting free from the VC without retaliation
Who could have predicted this?
because you paid yourself $300k for 5 years despite having such low performance
The reddit poster goes on to comment:
>15 minutes phone call to decide to file for bankruptcy and for them to take their money back (and then some) and shut down my company
What? In no world would that happen. Even a mostly failed company has quite a bit more value than $0.
No mention of the name of the company or even the vertical. 100% BS.
In the same way $100M could just have been $99M or even $80M, and then $0 they started with could just as well have been $20K in savings he invested.
Does it matter if the company in the post didn't even exist, as long as the story is similar to what actually happened to many others?
It's probably more reasonable to say "Not all the blame is on the VC". I've seen VCs, rich guys in their fifties with a lot of swagger, put unreasonable pressure on young padawan entrepreneurs to take more capital to grow faster than necessary. Then they over extended and it started failing apart. The entrepreneurs are ultimately responsible for taking the cash, but the power dynamic is such that the VCs surely deserve some blame for pressuring inexperienced entrepreneurs into biting off more than they could swallow.
You don't think that should have any blame at all?
It's not the VCs' fault that OP failed at scaling his business. If you are getting VC funding you will need to be able to scale up.
