Obligatory blurry flight photo.
Around two months ago, I got a text message from my friend Dave, who had recently started a venture capital fund called Backend Capital:
Hey DK, have a crazy idea I want to share. When’s good to hop on a quick call tomorrow?
In the call, he outlined his idea of creating a program called the Hacker Fellowship: He wanted to bring together 12-18 people in NYC for 10 weeks where they can focus on just building whatever they'd like, and he'd take care of everything else. He wanted me to be a part of it, and Backend Capital would invest $25,000 (half of which would go toward the program costs) in exchange for 2.5% equity of the company I'd build.
To be honest, a lot of that didn't sound very appealing. I had already created a lifestyle that enabled me to work on my projects with minimal friction. I had found a community I enjoyed living in and rather liked being in Austin, and I wasn't sure that I'd like the intensity of being in NYC.
As for the $12,500 I'd get, I'm not strapped for capital and my goal is to create a sustainable lifestyle business that gives me the freedom to work on whatever I'd like, not be a venture-backed startup where I'm beholden to investors. I think with few exceptions, bootstrapping makes a lot more sense than raising money because the incentives between investors and founders can be quite misaligned.
Investors are interested in finding home runs that will generate 10x or 100x returns, so they're incentivized to encourage all of their portfolio companies to pursue insane growth; as a result, ideas that might solidly sustain the founders plus possibly a reasonably-sized team become catastrophic failures because the goal became taking over the world rather than building a sustainable business. At the end of that, founders are the ones with nothing to show for the years they spent tirelessly toiling away, sacrificing their personal lives and well-being; investors have many companies in their portfolio, so one company failing isn't a big deal — it's expected. They're playing a numbers game.
In addition, having investors who are looking for big returns often creates pressure to build products that are harmful to society (addiction = engagement = growth!), and that's the last thing I'm interested in doing.
Of course, investors can be quite helpful given their experience and network, and many companies have succeeded with the VC-backed model. But if your goal is to build a business that brings you more freedom and independence in your life, I don't think going the venture-backed route makes a lot of sense.
Despite my disinterest in raising outside investment, I said yes for one reason: I think it'd be super fun living with lots of other people who are also working on their own projects/companies. I'm pretty excited to get to know the other fellows and have IRL companions in the journey of creating something from scratch.
Of course, I wouldn't have felt right about accepting the offer without being transparent with Dave about my thoughts and intentions. Even after telling him how I felt about being venture-backed and that I'll probably still want to just continue building a lifestyle business at the end of the program, he said he still wanted me to join because he thought the cohort would benefit from having me in it even if I don't necessarily go on to create a successful startup, so I figured I have nothing to lose. Even though I'm second-guessing everything after realizing how freaking cold it is here (oh god, my fragile SoCal body wasn't built for this), I'll be spending the next 10 weeks in NYC!
<aside> 👋 You're reading Road to Ramen, where I think aloud and share everything I learn in exploring the question: Can I make a living building things I love?
by DK the Human (@dk_the_human)
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