(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."
That's how it works in a nutshell. Lots of talkers out there. The people I know who do the real work are the ones at the bottom, and you don't know them because they keep their heads down and focus on writing code. The people that self-promote the most are the ones least capable.
The OP should hire someone to handle VC requests (better say to send most of those requests to /dev/null with a nice chocolate & flowers wrap) and keep customers happy with his productive five employees. Growth would come naturally over time.
> 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.”
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.
"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.
This makes for frustrating reading, coming from an industry where "Organizational Design" can have extremely serious consequences: the military.
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... :(
I’m a VC backed founder. The VCs will give you lots of advice, but generally are removed enough from the business that it’s obviously up to you to make final strategic decisions.
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.
All I'm thinking is, you Americans are really fucking lucky. Yeah OK, VCs are greedy and difficult to work with, but at least they give you a chance and literally give you startup capital in the millions to build your own thing. That is mind blowing to me and definitely what sets America apart from everywhere else.
The built-in culture of risk taking in US can't be underestimated. Yes, we joke about Florida man and lament about the excess funding for startups. But with great risk comes great reward, and chances for inexperienced founders to prove themselves. Nowhere else on the planet are you able to do that with such magnitude, not in Japan, not in Europe, not in China (now that they're broke and in a Great Depression, and Xi is killing off entrepreneurs).
i mean, it exists in europe and asia too (i'm not familiar with latam/africa so less willing to make this kind of statement there). and if you pass some kind of socioeconomic bar you can be based anywhere but "effectively part of the US startup scene" if you hustle into the right circles. step 1 is incorporate thru stripe atlas imo.
The guy is complaining about making millions being his own boss and working on his own idea funded by someone else's money and is blaming the people who gave him the money to do so. Much less, now that he lost it all, he is not in debt for the rest of his life or in prison. True first world problems.
Elements of this story indicate a founder who simply lost control of their company, which is their job as a founder. I don’t think the VC is the villain here.
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.
Exactly that's the big takeaway: he didn't learn what he should have learned: that it was his horse to lead. A CEO that slavishly follows the VCs has abdicated.
I can condense this to 'I thought CEO was a nice title but I failed at taking it seriously and allowed others to lead my company whilst I held the title'.
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).
I’m willing to accept the 0 to 100M to 0 plot line. But I agree, if this was a truly productive post the poster would have also admitted some level of personal culpability. They are the founder after all and the VC is just another stakeholder. The founder hired those VPs, not the VCs.
A key requirement of any company is managing your equity holders.
$100M to 0 sounds plausible for a founder with common stock in a VC led company with little success. You can raise a lot of money without much revenue or track record, but it will come with all kinds of liquidation preferences leaving common stock at 0 if things don't go like a rocket ship.
This sounds like the start up I left a couple years ago. I was employee number 3. I took a deep pay cut to join them. I shared a cubicle with the ceo and cto, the two cofounders. Tight nit group.
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.
1) How can you be in an "executive job at a FAANG" and not know this is how the VC model works?
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.
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.
What I got out of the post is – "My business was on a path to success because of my own efforts, and failed only because of those pesky VCs and their money". With an attitude like that no wonder they lost what they had.
Honest question: if you sell <50% of your company to VCs or anyone else and your articles of incorporation state that you can do whatever you want if you own >50%, then why do what the VCs tell you to do?
Beyond gaining some sort of reputation for not doing what your investors want, is there anything else?
Why don’t you pick up the soccer ball and run around with it in your hands? There’s no fundamental reason you can’t have minority investors whose opinions you completely ignore, but that’s not the game that VCs or the people who accept VC money are playing.
If you assume you can outsmart a VC who has worked with hundreds of startups with an idea you just had you are exactly the schmuck they want to work with.
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".
> your articles of incorporation state that you can do whatever you want if you own >50%
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.
There’s a lot of information missing. All of his problems were caused by VC? Why did he raise VC if he had 7 figure revenue? 5 years explained in 6 paragraphs. I agree that hiring bigco people for a startup is a mistake, but otherwise you can’t learn anything here.
It was making 7 figures and now it's worth $0? If the investments from VC didn't lead to anything, wouldn't the company still make 7 figures anyway and shouldn't it be possible to continue as it is?
yeah def not the whole story being told. this wouldve at least been a nice acquihire for somebody if it were a valuable business. if this founder ran a 7 figure business into the ground with no cash shortage pressure he cant blame VCs for that.
A little frustrated by the ambiguity of the $100M in the post. Is that capital raised, ARR, GMV? Makes a big difference in terms of understanding what kind of business they built.
I'd guess it's valuation. He raised once at $1M (F&F probably). Then raised. Then some time post-raise low 7-figs in revenue => $3-4M, and $10M in the bank. Raised $20M at $100M perhaps? Seems reasonable, 25x-30x revenue.
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.
> 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.
At the point right before taking VC money, what's the safer alternative sources for cash? This is a serious question. The alternative I've seen work is another company in the same field make the investment with an option to further invest or acquire the company later on. Their expectations for growth were a lot more "down to earth".
I would have preferred to see this written as a blog post, there's nothing that requires anonymity imo if presented the right way, and it would make it more credible. As is it's believable and certainly reinforces stereotypes I have but it's not super helpful, as in it's just an outline of stuff people already think.
[+] [-] raincom|2 years ago|reply
(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."
[+] [-] game_the0ry|2 years ago|reply
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.
[+] [-] booleandilemma|2 years ago|reply
[+] [-] dig1|2 years ago|reply
[+] [-] matrix_overload|2 years ago|reply
[+] [-] Aurornis|2 years ago|reply
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.
[+] [-] ethbr0|2 years ago|reply
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.
[+] [-] CapricornNoble|2 years ago|reply
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... :(
[+] [-] seizethecheese|2 years ago|reply
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.
[+] [-] mustafa_pasi|2 years ago|reply
[+] [-] jamesaurichs|2 years ago|reply
[+] [-] swyx|2 years ago|reply
[+] [-] firecall|2 years ago|reply
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 :-)
[+] [-] Apofis|2 years ago|reply
[+] [-] dgudkov|2 years ago|reply
[+] [-] atleastoptimal|2 years ago|reply
[deleted]
[+] [-] kcsavvy|2 years ago|reply
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.
[+] [-] jacquesm|2 years ago|reply
[+] [-] jacquesm|2 years ago|reply
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).
[+] [-] master_crab|2 years ago|reply
A key requirement of any company is managing your equity holders.
[+] [-] t0mas88|2 years ago|reply
[+] [-] firefoxd|2 years ago|reply
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.
[+] [-] mdorazio|2 years ago|reply
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.
[+] [-] Waterluvian|2 years ago|reply
[+] [-] ilyt|2 years ago|reply
I'd imagine by doing actually useful job there
[+] [-] codersfocus|2 years ago|reply
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.
[+] [-] catboybotnet|2 years ago|reply
[+] [-] paxys|2 years ago|reply
[+] [-] djoldman|2 years ago|reply
Beyond gaining some sort of reputation for not doing what your investors want, is there anything else?
[+] [-] t0mas88|2 years ago|reply
[+] [-] benjaminwootton|2 years ago|reply
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.
[+] [-] lijok|2 years ago|reply
[+] [-] SpicyLemonZest|2 years ago|reply
[+] [-] streblo|2 years ago|reply
[+] [-] Guvante|2 years ago|reply
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".
[+] [-] ohgodplsno|2 years ago|reply
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.
[+] [-] monero-xmr|2 years ago|reply
[+] [-] laurent123456|2 years ago|reply
[+] [-] swyx|2 years ago|reply
[+] [-] ipaddr|2 years ago|reply
[+] [-] blobbers|2 years ago|reply
[+] [-] apodolny|2 years ago|reply
[+] [-] renewiltord|2 years ago|reply
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.
[+] [-] mdorazio|2 years ago|reply
[+] [-] axpy906|2 years ago|reply
FANNG hires?
[+] [-] morkalork|2 years ago|reply
[+] [-] version_five|2 years ago|reply
[+] [-] ouraf|2 years ago|reply
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
[+] [-] ooterness|2 years ago|reply
Who could have predicted this?
[+] [-] thih9|2 years ago|reply