Bogus Startups burning VC money!

Research Now / Eng Arschloch
Jun 27, 2018 7 Comments

I got a call from a recruiter to interview for a role at a startup company. Upon arriving in the office I saw that the office is extremely swanky. Free breakfast tacos. Fridges full of soda. Beer taps. Everyone with latest Apple hardware. I could compare this office to something from a more established company.

During the interview I learnt that they have chosen a very specific community like DBAs and IT Admins and Network Guys and they build free online tool for this specific community. They have around 150K such users world wide.

So I asked how does your company make money. And they gave me a “we run ads senator” type of answer. Well you don’t make any money from ads if you have 150K users in total.

They also boasted about recently getting 50M funding from VC.

I am wondering is it really this easy.... doesn’t anyone see that this type of business model only worked in the past. How come VC pour money into such companies now.

Or maybe I am wrong .... maybe it is possible to have a swanky office with ad supported free online tools for as little as 150K users.

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TOP 7 Comments
  • Zillow Group GilFoyle1
    As my fictitious soviet uncle would say: “only one kid needs to survive Siberian winter for family name to go on”

    VC’s have a portfolio. They understand 95%+ of those start ups will fail. They might invest 5 million in 20 start ups (100 million dollar fund) and 19 fail. But the 1 that survives will have a very high probability of making them more than the 100 million initial fund size.

    It’s a game of numbers
    Jun 27, 2018 1
    • Amazon / Design Hot==dog
      OMG your first line. Gold dust. I think Siberian got autocorrected to Serbian though 😂
      Jun 27, 2018
  • Google mfj
    previous startup moved 3 times in 5 years. remodeled the office every time they moved at the cost of mid 6 figures every time. somehow they didn’t have the budget to give anyone raises. i wonder why
    Jun 27, 2018 0
  • I have very little context on the company and am not defending the VC’s backing it, but...

    Ads that provide extreme targeting and can result in multi-million dollars sales cost a lot more than end consumer ads.

    Maybe better questions to ask would’ve been what’s their current revenue, what rate is it growing at, what is their projected runway with the new funding, how big is the engineering team, is the $50M just for this product or are they also trying out a new vertical or horizontal
    Jun 27, 2018 0
  • Indeed bagsbunny
    Who knows just ask for lots of base salary that model seems to work for spiceworks
    Jun 27, 2018 0
  • Research Now / Eng Arschloch
    OP
    Nothing wrong if you have a decent business model ....
    Jun 27, 2018 0
  • Oracle / Eng 大哥别杀我
    What's wrong with breakfast tacos and beer? Startups need to match up with what big companies offer to attract talent. Latest apple hardware is like the minimal basics...Ex alphabet fb people at my current startup won't join if we don't have free lunch or dinner for them. It's hard to take away these benefits they had.
    Jun 27, 2018 0

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