[tptacek]

In addition to the point 'jasode makes, I think there's an additional unrealistic subtext to the argument you're making, which is the idea that companies with stable but unspectacular growth are somehow less risky than shoot-the-moon startups.

But this just isn't true. In addition to the fact that companies fail a lot more often than operators recognize, there's the fact that a company winding down after years of solid but unspectacular returns is also a failed investment. Companies don't have to lose product/market fit to "go out of business". All they have to do is fail to compete with the operators other options. Eventually, somebody else will outbid the company for key talent.

Slow-burn companies can keep going for decades before this happens. It's not bad to be a slow-burn company! I've spent most of my career in them! But to take money from LPs, you have to have a story about how you can pay them a return.

[logicallee]

Yep: for companies at their first financing stage, "companies with stable but unspectacular growth are somehow less risky than shoot-the-moon startups".

When small community banks disappeared (as nikanj points out), who would have financed these "sensible old-school companies with 10% per year growth and 15% profit/revenue ratios", that didn't make them riskier.

Meanwhile your subtext is that you just don't want to raise money. You spent a lot of words pinning it on how it's bad for VC's but all I asked you is what term sheet you'd write for yourself if you closed an hour later. None: you don't want investment. That's fine!

[tptacek]

Companies with 10% growth Y/O/Y fail all the time. A portfolio of 10 of those companies will consist primarily of failures. Most of the companies in that portfolio will cease to exist without returning money back to investors. By your own definition, none of them will grow explosively, and so the winners can't pay back the losers. Pick a success rate and an investment multiple for the winners and do the math.

Banks do fund businesses like this, all the time. The difference is that they fund with debt instruments, not equity. You're obligated to pay them back and can't deliberately manage your business to avoid the obligation (chances are, you'll have to co-sign the obligation personally).

If all you're arguing for is broader availability of lines of credit, by all means, keep asking for that. But that's never been what startup investors provided.

[logicallee]

I defined what I was arguing for: more checks written to startups that are already printing money and raising their first round.

In 2018 more than 1,800 startups are fantastic equity investments at a time when they're printing money, and VC's are idiots for writing 1,800 first funding round checks to startups total, nationwide. I couldn't believe how low that number is. You said, "well yeah they're printing money but it's the wrong kind of money". You would have called Airbnb the wrong kind of startup and you would have stood there and told me VC's are totally right not to invest in them. 9 years later here we are, $31B+ valuation.

It couldn't raise its seed round and it's obviously because VC's are idiots who are paid to lose money. It sold cereal on national TV instead. That's a fact.

[tptacek]

No, Airbnb was self-evidently not the wrong kind of money. It was unclear whether Airbnb could succeed, but if it did, it was obvious how it would make truckloads of money. It’s practically the archetype of a shoot-the-moon business model.

[logicallee]

why isn't the fact that they're printing money on that model proof that they can succeed in that model?

[tptacek]

I think we're talking past each other. I brought my company up as an example of "the wrong kind of money" because we're a services company, and no matter how much money we're printing today, we're unlikely to liquidate for 10x forward revenue. Airbnb, on the other hand, has a business model that can do that.