[AchieveLife]

"Maybe I'm being naïve here, but isn't it kind of crazy to raise 3.5M in funds for a business that has no plan but to be acquired by someone else?"

That's a sane question. IMO it's the current financial environment that encourages such "leap without looking" strategies.

Fear of missing out is huge right now.

I know of a startup that received a multi-million valuation and many more million in funding. They don't even have a prototype!

[RussianCow]

This is very real. A friend of mine started a company with over a million in seed funding with what basically amounts to just an idea. Years later, the company isn't doing that well in terms of sales/revenue, but they still manage to raise money because they have a couple obvious acquisition targets. It seems crazy to me to throw millions of dollars at a company with the hopes that one of maybe three or four megacorps in the industry will acquire them, but investors buy into that, and that's all that matters.

[jassmith87]

Seed and Series A is investment in the people always. They assume if the product doesn't work the team will pivot until they find something that does. It sounds to me like your friend failed to pivot when needed.

[timClicks]

FOMO has always been present.

What's changed is that debt is almost free. That allows VCs to take (very!) speculative bets for relatively low risk. They know that if each of their portfolio companies has a 10% chance to reach 30x returns, investing in 10 companies should pay off.

[bobloblaw45]

I know this might sound stupid but if you can get that much for something that wow's people, can you get like 100k for a "meh" idea?

Like if you wanted to open a dry cleaners.

[nostrademons]

Well, yes, but not in the way you mean. If you want $100K for a dry cleaners you get a bank loan, the same way people have been doing it for a century.

Equity capital is solely interested in business models that either wow people or fail outright. The reason has to do with risk: most such business ideas have various things that can go wrong, and those risks are generally manageable but not really quantifiable. Basically a VC wants to see "These are the assumptions in our model, and if we build this it will revolutionize X industry, which is currently worth $50B but could be worth a lot more with our product, and that will give you a 50% annualized return on your fund." And they're giving you money to prove out whether those assumptions are actually true, with the expectations that for a good number of startups they won't be and their whole investment will be wasted.

[vechagup]

Yes you can. It's called a small business loan. See https://www.sba.gov/funding-programs/loans and https://www.bankofamerica.com/smallbusiness/business-financi....

You'd finance your dry cleaners with debt rather than equity because (unless you are starting a chain) you are not shooting for the massive, near-zero marginal cost scaling that the venture capital model focuses on. Instead, the bank looks for a modest, predictable return through interest payments.

[Analemma_]

No, because the mania for throwing money at tech startups is specifically because of tech's unique promise of both worldwide scale and zero marginal costs after the initial Big Spend on capex, and hence potentially gigantic returns for investors.

Now, how well the current crop of startups is delivering on that promise is an exercise left to the reader, but it's there in theory. A dry cleaner has marginal costs and no economy of scale, and so can't attract unicorn valuations.

[nikanj]

As parodied some 5 years ago: https://medium.com/signal-v-noise/press-release-basecamp-val...

Once you make money, it's much harder to come up with outlandish numbers. A dry cleaners has a well-established range for revenue and profit, so it's hard to justify why it would be worth $100 billion.

[melvinroest]

Well, not everyone does that. I applied to YC with my side project [1] and got rejected. I didn't expect to get in, but if I would have, then I would be full-time on it.

Now I can't, which is a shame. So in that sense, I wish someone would fund me. I have a lot of "doodling the internet" type of ideas. I use digital note taking extensively myself, so I know what's missing.

[1] doodledocs.com

[mikekchar]

I'll give you a hint. You should pivot to a collaborative design app. There are a couple around, but very few that have that "doodle feeling". You should be able to pick up a pen, sketch something quickly and then have someone else be able to modify/review it.

I'll give you another hint. Add shape recognition and move from capturing and storing pen strokes and generating bitmaps to capturing pen strokes and generating shapes. Add rudimentary grouping and ungrouping functionality, ability to move, stretch, rotate, etc. Allow pasting clip art and letting it grow/shrink/rotate when grouped with other objects, but just with a rough scaling, etc -- it doesn't have to look pretty. It's just for sketching things out.

Practically every software/design team needs an application like this and there will be money to pay for it.

P.S. I was on a team that built this as a windows application about 20 years ago, but we were ahead of our time. A SaaS webapp would be the bomb here.

[hazz99]

What differentiates you from drawing apps?

[daxorid]

Indeed. The flip-side to this is that speculative investment on unprofitable moonshots seems to be where ALL the equity-finance money is.

My company reliably earns low-7-figures on high-7-figures revenue, with respectable but not amazing growth, but the only capital "market" open to us is bank loans and merchant financing.

Nobody cares about boring profitability.

[scarface74]

Why is that a bad thing? If you are profitable, why would you want to give up equity and control?

[x0x0]

Serious question -- why would you want something besides a bank loan? Because a loan at a couple of percent is way cheaper than VC, who will typically want at least 20% of your company?