TMBA 326: To VC or Not to VC, That is the Question

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Today’s show is the first of a two part series in which Dan and Ian are speaking with someone who’s been a great influence on them: David Heinemeier Hannson.

David is the co-founder of Basecamp and creator of Ruby on Rails. In this episode, we’re going to be talking about a subject that some see as a blueprint for getting mega rich and others consider a dirty word: Venture Capital.

Wade Foster also offers his thoughts and experiences of taking seed funding for Zapier, the company he co-foundered.

Transcript

Listen to this week’s show and learn:

  • The differences between success in the VC world and building a successful lifestyle business. (6:03)
  • How David and his partner decided to sell a minority stake in Basecamp. (16:38)
  • Why keeping yourself engaged in your business can end up being extremely profitable. (24:45)
  • How Wade’s life has changed since taking a million dollars in venture capital for Zapier. (25:51)
  • Why investing more money doesn’t always guarantee faster growth. (28:48)

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Thanks for listening to our show! We’ll be back next Thursday morning 8AM EST.

Cheers,

Dan & Ian

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Published on 03.03.16
  • Evaldas Miliauskas

    Dan/Ian you’re not the only ones that had goosebumps when interviewing DHH, I had the same thing when anticipating this episode lol
    To tell you the truth, he never was in my radar and I learned about him only quite recently by following Dan’s tweets, but what really caught my attention is this one quote on his blog: “Expectations, not outcomes, govern the happiness of your perceived reality.” I think it sums up really well his ideas behind the life & business relationship
    In terms of episode itself, I liked the part around the incentives of why someone would want to promote success stories. When everyone is cheering for it and you see startup accelerators popping up all over the place it’s hard even to resist the temptation of questioning the chances of making big. Thought going over at the back of my mind most of the ones that make it big usually already have a working biz model, revenue and are profitable one way or another. The VC is actually just giving them a lift to the next level. The idea of making from zero to hero is possible, but the chances are slim and slim is out of town (another favorite quote heh).
    Having now listened to quite a chunk of episodes I can truly say you raised the bar for 2016. Congrats on that!

  • lion

    Would you say there’s a ‘white space’ between private equity and venture capital funding with businesses that don’t expect a valuation in the billions – a la shark tank and your investment in Green Belly?

  • http://salesability.co Damian Thompson

    LOVED this episode. Big DHH fanboi & was lucky to speak with him a few years ago. You guys did well, & you know I ALWAYS love a good VC bashing!

  • lion

    Speaking of the startups themselves, from what I gather many go in to it with a relatively ambivalent attitude towards success. Gary Vaynerchuck talks about this from a VC perspective (he has a fund). Many see it as a learning experience; a game in other words. Which may say something about the bubble..
    Also I’m not sure many of the big names are profitable at this point

    I don’t know much about what it’s like behind the curtain. I’m curious what it is that’s stopping these companies from becoming successful $~10 million dollar business. It’s not like the VC’s pull their money out if the company doesn’t hit a billion dollar valuation

  • http://www.tropicalmba.com/ Dan Andrews

    :D thanks DT!

  • http://www.tropicalmba.com/ Dan Andrews

    thanks Evaldas appreciate the feedback! I enjoy thinking about this idea of incentives as well, seems similar in some ways to Taleb’s “skin in the game” sorta like “neck on the line” perhaps

  • http://www.tropicalmba.com/ Dan Andrews

    very curious to see as well, perhaps by being prodded into over-investment and go big or go home biz models the founders can’t draw sufficient salaries or decent lifestyles out of the business since many of these decisions (say to hire a big sales team) were made earlyish on and can be hard to reverse… perhaps we’ve got it wrong and plenty of them are just fine, just operating with a big loan and other people with a say/hands in the pot

  • http://www.tropicalmba.com/ Dan Andrews

    for the record we did not invest in Green Belly, yeah absolutely I’ve seen people having success with strategic partnerships.

  • David Evans

    This was exactly what I needed to hear at a critical time in my startup. I’ve been learning more and more about VCs as I’ve been on this journey to start a business and the more I learn the more I’m finding it isn’t right for me. I’m uneasy about having an investor with their own goals and agenda having such a large stake in my business, especially at such an early stage.

    What are the chances I find a VC that shares the vision and goals I have if mine are not to build fast and get acquired? Trust the gut! #yeabuddy

    Thanks guys!

  • http://www.tropicalmba.com/ Dan Andrews

    you got it David glad you are digging it (and good luck with the business!)

  • lion

    investors can apparently also block you from making a sale and through fiduciaries, essentially force you to work on it even if you want to get into something else

  • http://gobigmike.com Mike Manning

    Nice one! DHH shared some gems. He seems super down-to-earth for a high-flying internet unicorn…

    You referenced Ricardo Semler’s “Maverick,” which is definitely an interesting (mind-blowing, especially in context?) read. But very hard to find, as you mentioned. His TedX talk is a good glimpse into that though, 20+ years later (he no longer looks like he did on the book cover): https://www.ted.com/talks/ricardo_semler_radical_wisdom_for_a_company_a_school_a_life?language=en

  • http://www.tropicalmba.com/ Dan Andrews

    thanks for that link Mike!!! DHH is super down to earth and has interesting opinions about almost anything! :D

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