I’m new to Substack—this is my first post.
Hey, I’m Matt. I founded Vizzly as a first-time entrepreneur and exited in under three years, selling the company to WPP, the world’s largest advertising organization. A few months after starting the company, we were accepted into Y-Combinator, and I spent about four months engrossed in San Francisco’s tech hustle culture learning from people much smarter than I. I’m not anti-SF (far from it; I have some incredible memories there), but I didn’t buy into the all-or-nothing mindset of startups.
It’s worth noting that after Demo Day, we set out to raise more than we ended up with—essentially, a failed Seed round. At the time, I saw this as a negative, assuming fundraising was a form of validation (turns out it’s not, by the way).
A year later, I came to realize that this was the best thing to happen to both the company and myself. For starters, it forced us to become very revenue-centric.
Additionally, it opened the door to smaller acquisitions. Because our preference stack (more on this later) was tiny, even a relatively small deal would produce a life-changing outcome for the founding team.
Writing this, I could go in a million directions—and I probably will in future posts, diving into different aspects. For now, I’ll focus on the ‘missing middle path.’
On my LinkedIn feed, it feels like there are two dominant narratives in B2B SaaS: the VC path—go big or go home, maybe take a secondary at Series A or B, but push hard no matter what—or the Bootstrapper route—build sust
12 Comments
atemerev
"In fact, if you pitched this pathway to a VC, I’m sure they’d ghost you quicker than their last Hinge date." — oh they will, fr
ilrwbwrkhv
Also the other thing that I realised after working with a bunch of VCs is that they are all incredibly dumb. Few VCs are founders themselves and you will have better luck with them but the majority of VCs have simply no idea about product and technology and they are simply pattern matching. What that means is that they will cargo cult everything and if your startup doesn't fit the mold they will not respond to you favorably and the sad part is that the actual 10x, 100x returns that their VC firm needs comes from those type of investments but they simply cannot see them.
bitlad
Yes, this is so true. I hope all our competitors follow this advice.
mg
Hopefully, over time, we will get better and better in creating the world of software from small interoperable pieces that can be maintained by small teams or even solo entrepreneurs.
Etheryte
Well yes, that's called a regular company. Not sure if I'm missing something here?
summarity
Here's a model that exists in Germany, which I like:
You can present a business plan to the state's investment bank and apply for several financial aides, including:
* 1.5 years of universal basic income for you plus up to 2 other people. It's a tiny amount of money, but the point is to free you up to invest your actual time an money into the business. You do not have to pay this back.
* up to 20k EUR in "consulting fees", for which the bank will contribute up to 50%. Again, you don't have to pay it back, but obviously you need money for them to match.
* discounted loans, amount depends on business plan outlook
I've worked with an accelerator that helps founders write the required pitches and plans for this program. And while the majority don't make it (because they mostly realize their idea won't actually hold up to business planning scrutiny), some do. And those don't become hyperscaling unicorns, they become normal companies, growing organically as stable, solvent employers in the region.
Every once in a while a VC would stick its head in and encourage the startup to take on VC funding, and for an even smaller percentage (one in my time doing this), this worked. But for me, the organic growers are the best success story.
muzani
I usually compare them as sharks vs bottom feeders. Either you become the predator that eats all the big fish. Or you go somewhere the big fish won't go.
There's the 'crab' model, but this isn't for startups. They're old, companies like Yahoo who have a moat and can't leave it. They're at evolutionary peak or rather a local maxima. They're too difficult to change and a major change would make them too vulnerable.
submeta
Trying to be a unicorn killed many otherwise good products. For instance Evernote. Or Wunderlist. Or Soundcloud.
jillesvangurp
I live in a country (Germany) that is famous for having a lot of "mittelstand". These are basically family owned businesses. Some large German companies fall under this. Aldi and LIDL for example, which are super market chains that at this point have a global presence. And some large companies (Bosch, Siemens, VW, etc.) are actually a multitude of smaller companies. Much of the German economy is smaller and bigger specialized companies doing their thing. Only some of them are public companies.
What these companies have in common is that they start small and then grow organically. The main issue from a VC point of view is not that these aren't good companies but that it can take decades for them to turn into big companies. But from the point of view of the people founding these businesses, it's a good, honest way to succeed in life.
There's nothing wrong with the principle of starting a company to make money from whatever it is you do at whatever scale you are doing it. But it should drive your decision making as to whether or not you give chunks of your company away to an investor. It might stop being your company if you do.
Also, if you go down this path. Stop calling yourself a startup. It scares away customers. They don't want to hear that you are a flaky wannabe that is still figuring it out. They want to hear about your other customers and how awesome whatever it is you are selling is. They want to be re-assured that it is safe for them to enter into a multi year customer relationship with you. Projecting that you are new to all this company stuff and might not be around in six months is exactly the wrong message for them. They don't want to hear about what you are going to do, they want to hear about what you have done already. The stuff that gets VCs horny will scare away customers. If you are pitching customers and VCs at the same time, make sure you have two very different pitches. And if you are going to pitch VCs, it actually helps if you have customers. The more business you have the stronger your negotiation position.
senko
I do like the idea in general and feel there's a lot of room for improvement between the (VC / bootstrapping) extremes.
However, the middle path from the article presumes the existence of VCs willing to join you on that path. The article waves this away with:
> angel investors are generally more open to a 2-3x ROI
For a $1M round you'd need to find 10-20 such angels (assuming $50k-$100k average check size) willing to accept small upside, for which you'll have convince them there's commensurately smaller risk. This will probably mean you have some revenue and some sense of where PMF might lay or some kind of brand/pedigree.
Do not underestimate the value of YC brand and being able to present on Demo Day gives you. A random Jane from Ohio building her tech company would have a lot harder time finding those 10-20 angels, to put it mildly. I'd be more careful when extrapolating path-dependent success into a general strategy.
That said, my gut feeling is there's room for the next Paul Graham to fill that space – somehow.
Oras
Someone investing $1M for 10% might better off buy gold or a property.
It sounds good for me as a founder, but from investor point of view, this is pointless. Why taking a huge risk for 10%?
Obertr
I'll send this to my competition thanks!