[shayan]

Not all VC's are like that... I posted a question about a week ago about Disqus a YC company... and asked how big was the market for YC to be interested in the company and invest in it

this was pg's response: "... I have no idea how big the market is in dollars. It's not worth thinking too much about anyway. Startups evolve. It's enough to start with something you know people need."

http://news.ycombinator.com/item?id=77608

[tx]

PG's advice is good for YC but I blame myself for taking it seriously. Now, after nearly a year of work and tons of personal savings spent, we're seeing quite negative reaction from the first wave of investors we've approached: everyone wants to see 2 year projections of revenues and they want those numbers to be huge. That's discouraging.

We never thought about "revenues after 2 year run" because I preferred PG's approach of focusing on "building something people need". His take on having a business plan with "shiny revenue projections for next 2 years" is that a business plan does not matter much, since the business will change, and in the end writing it won't be that hard for a couple of smart hackers. Well... not really, especially if you're faced with questions like "how exactly you are going to get users"? And my honest reply (I haven't brave enough to give it out yet) has always been "well... you give me the money and I will hire someone with a good answer". Don't get me wrong: everybody agrees that we're solving a very real problem and there is money to be made, but the lack of clear understanding of where we're going to be in 2 years is our big problem right now.

My approach, influenced in part by PG's essays, is to focus on making people happy and "evolve" organically. This does not fly with investors at all. It's depressing: Facebook is losing money, nobody knows for how long, it is older than 2 years old and commonly considered "successful". Meanwhile, investors want us to make money, and tons of it just to get an A-round.

[marcus]

That may be true for YC which does seed funding but the model for VCs that invest large sums of money is based on the home runs and if you can't show the hope for a home run, they'll probably not be interested.

[shayan]

of course, if you are not looking for seed funding (or angel funding) and looking to raise a serious series A then you will have problems... but I think if your market is in fact not too big, then you must avoid raising too much money, since there are only two scenarios where you'll actually be able to raise that much money for a project like this:

1- you raise money from an idiot, i.e. someone that really doesn't know what they are doing. You are always better off not doing that no matter how much they give you

2- you can prove the idea will work, and you can gain the trust of the investor in you and your team. In this case you might be able to convince a good VC to invest in the company but you will then have to give up the majority of your shares in the company

If the market is in fact not that big, why would you have to raise so much money! do you think its reasonable! And if no VC out there can tell how big this market really is or how good the potentials of this business (which is already making money, a rare case!) then maybe there is something theyoungceo can't see, and maybe its really not as big as s/he thinks it is

Anyways, I have a feeling this post is a bit about possibly finding some potential investors rather than getting advice. Which is fair, but not sure if these advices are really what the theyoungceo is looking for.

Also why is the name of the company not mentioned? (specially that the company is already out there and doing business!)

[theyoungceo]

The market doesn't need to be a quagillion dollars to need sales and ops guys; I still dont' quite understand the point of "sizing a market" -- I have already proven that there are plenty of people who want the product badly out there, and always thought that would be enough. No matter what you invest at what percent, this one has a lot of proven traction already and is more likely to be a winner than most deals (I think). I think what I'm getting at is the question of: what do you do if the VC model just isn't quite right? It seems everyone assumes there is no business growing with them.

Also: -theyoungceo isn't naive enough to believe that investors are scouring news.yc for deals, although he'd love to be proven wrong. -i didn't mention the company name because i know everyone knows everyone in SV and it might be unprofessional to be discussing this here from an investor's perspective (IMHO)

[trevelyan]

There are a lot of organizations looking for investment opportunities. If scalability matters I'd find a more established company in your field and try to get them on board.