How I raised 500k€ created a game studio hired 20 people and CRASHED it(twitter.com)
twitter.com
How I raised 500k€ created a game studio hired 20 people and CRASHED it
https://twitter.com/tibo_maker/status/1402586814049886213
9 comments
One of the issues with 'raising money' is that the investors typically want to see you spend it, to generate a return.
VC were famous for this. Spending money, growing to the 'magic' 50 employees, etc. became full time jobs. That's part of the reason a lot of startups are basically 1 year contract gigs - its very hard to tell backers you're stretching the money for a longer runway.
VC were famous for this. Spending money, growing to the 'magic' 50 employees, etc. became full time jobs. That's part of the reason a lot of startups are basically 1 year contract gigs - its very hard to tell backers you're stretching the money for a longer runway.
I can understand VCs wanting to get return on their investment asap but I can't being blind to the fact you can actually be hurting prospects of the business you are trying to profit from.
From a founder perspective I guess it would be important to skip investors that are not compatible with your vision. I understand it easier to say when you are not actually looking for money to keep your business alive...
From a founder perspective I guess it would be important to skip investors that are not compatible with your vision. I understand it easier to say when you are not actually looking for money to keep your business alive...
It's not just getting a return on investment. They also want to pressure you into a position that will require you to come back to them for money.
Each new round of fundraising is a chance for them to significantly increase their ownership in the company. They must get you to spend money just a bit faster than you are making it, or else you won't need then anymore after the early rounds.
Each new round of fundraising is a chance for them to significantly increase their ownership in the company. They must get you to spend money just a bit faster than you are making it, or else you won't need then anymore after the early rounds.
Every lesson has to be learned by every subsequent player the hard way, right?
500K, run-rate, MRR — it’s a simple equation.
500K, run-rate, MRR — it’s a simple equation.
Yup. It is a simple equation and that's why it is so surprising so many people fall for this.
500k EUR for 20 developers is basically nothing. This means burning through your cash reserves before those developers even become productive.
And think you are one of these developers. All the other guys are completely new, nobody knows what we are doing because the owner has no time to explain because he is constantly hiring and talking to investors to get next funding.
With 500k EUR I would not dare to hire more than 2-3 people. This would give them enough time to hopefully get acquainted with the problem and start producing something. And you as owner of the company to think about your actual business rather than be overloaded by hiring and setting for next funding round.
500k EUR for 20 developers is basically nothing. This means burning through your cash reserves before those developers even become productive.
And think you are one of these developers. All the other guys are completely new, nobody knows what we are doing because the owner has no time to explain because he is constantly hiring and talking to investors to get next funding.
With 500k EUR I would not dare to hire more than 2-3 people. This would give them enough time to hopefully get acquainted with the problem and start producing something. And you as owner of the company to think about your actual business rather than be overloaded by hiring and setting for next funding round.
Why not make a blog post instead of an emoji-laden Twitter thread?
Just guessing here, but it might have to do with Twitter having 330 million users who might see his thread.
We have ruined the internet. :(
It doesn't work like that, unless you really have infinite pockets and already have a lot of experience.
The more money you spend the less value you tend to extract from each dollar. Your 20th employee is not likely to be as motivated as you, your cofounder and your first employee.
The more money you spend and especially the faster you do, the less time you have to actually be prudent with it.
The project will not get done twice as fast if you put two times more people on it.
Allocating all your money puts a countdown till your death as a business, which is exactly opposite from what you should be doing -- ie playing a long game to stay in business for as long as possible.
If you don't have infinite pockets and especially if it first business, it is better to start slowly and ensure that every dollar is spent with as much benefit as possible. Having those dollars work to prolong your business also means you get more time for learning and learning is as much important as getting product done.