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Jason is Bad at Math
As part of my obligatory competitive analysis for a project I'm working on, I must endure the fingernail-pullingly-demagogical Jason Fried.

This week's SVN Tautology is that venture-funded companies are stupid / bad / immoral / not customer focused because they sometimes fail, and that the NEW, better thing to do is to build companies using an innovative technique (apparently invented by Jason Fried) called "self funding". As far as I can tell, Jason is saying that because a lot of venture-funded companies fail, the only correct way to run a company is to be immediately profitable and then build only on your own profits.


If I a nickel for every company that wasn't built on credit, I would have zero nickels. All businesses run debt, even if it's just a little bit to buy a delivery truck, write the first version of the software, etc. Even in self-funding companies you have to use your existing cash cows to fund your next ideas, because your next ideas aren't making money yet because they don't exist yet. There's nothing different about borrowing against your own past successes, borrowing from a bank, a VC, or Visa... you just have to be willing to pay the corresponding finance charges.


Maybe Jason wants to make the point that VC-backed companies are less successful than self-funded companies. First of all, that's not true. But even if you define success as "the duration of the existance of the company", then I guess I would just have to say well duh. Some business models are riskier than others, and a smart business man bent on near-term success can choose the low risk route to keep the business going. But keeping your doors open for 5 years isn't any more likely to get you big revenue than persuing your idea more directly on credit--- but it will make you 4 years older when you finally realize that your idea had a low revenue ceiling. VCs and their portfolio companies bet big to win big; more likely to fail, maybe, but also more likely to pay off bigger, and sooner. For VCs, a small, long-lived, profitable company with low revenues is a failure. If you're making 10% annually on the company that you're working on full-time to keep in business, well, you should have bought a mutual fund.

Customer Focus

On the other half you’ll find [me] representing people building companies with a different set of investors: paying customers. -- Jason Fried
This is a great example of how Jason writes--- he says something that sounds pithy and quippy, but that is logically nonsensical or misleading. In this case, he is implying that being self-funded somehow makes you more customer-focused. It's true that some businesses treat their customers like shit, and that's just got nothing to do with how they are funded--- if anything it's the companies who can afford to invest up front in good customer service and good products that are more likely to be good to their customers than the penny-pinchers. Step the fuck off, Jason.
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