Will you be publishing a follow up blog post about how you’re increasing API user fees once you’ve monopolized your particular market? Or how about how you’ll be increasing margins for investors in 5 years as you prepare for your IPO?
Why won’t you suffer the fate of every single other tech company that raises a shit load of money which is completely and irrevocably selling out any pretense of being beneficial for customers and employees (primarily) in the extreme long term?
My new heuristic is that I avoid every single company that raises venture funding. Hopefully others adopt this heuristic because by raising tons of money, so you are explicitly creating an adversarial relationship between the customers/users and your investors so everyone but your founding team and investors in the long term is worse off.
Edit: I’ve been a HN power user since 2012 - don’t ask me why I’m here.
This is the cold truth. The entire process of raising money in the modern software world has nothing to do with creating a better product and business specifically. It's simply the de facto step-by-step playbook process one follows if one is an entrepreneur with the eventual become very rich. There is nothing novel, innovative, or remotely surprising about this process. It is well defined, well established, and simply how business is done. Every single person looking to build a company for the purposes of becoming rich should adhere religiously to this playbook. It's a cold, hard, transactional fact of life. Whether or not the product is good and fair and honest is largely an independent variable to this basic playbook process.
Sometimes funding is necessary to grow income enough to sustain the business or hire more engineers or whatever you want to do.
If it costs $40 to acquire a new customer, and you expect a customer to stick around for long enough to spend $90 then it's totally worth doing that, but you need $40 now to make 90$ over some period of time.
There is an entirely possible and alternative funding model that perpetually allocates a responsible amount of incremental funds for the purposes of novel R&D. It's trivial to imagine how a responsible incremental funding approach could create a better, more transparent, more estimable, more reportable, more mappable, more rigorously trackable innovation process.
Raising massive lump sums of money is about VALUATION. You have been led to believe this is the only way to go about building a software business like this.
It's all a major silkscreen for the colder simpler goal of generating a lot of eventual wealth for a specific cast of people.
Again, no shame or emotion here. It's just how business is done in this world.
> There is an entirely possible and alternative funding model that perpetually allocates a responsible amount of incremental funds for the purposes of novel R&D.
This works for some but not all business ventures.
There's a reason corporations were invented in the Age of Sail. If you build 5% of a ship, you can't sail to the New World and bring back 5% of the resources. You just sink in the harbor.
(The moral implications of relating modern VC-invested corporations to rapacious European conquests of the already-inhabited-thank-you-very-much New World is not lost on me.)
I believe there are healthy ways to start up a business that has startup costs too large to bootstrap. I agree with you that VCs are often not it.
Or maybe 20 customers who believe that having a shared ship might form a join stock company to take care of their respective 5%... and when the venture proves itself, they might convert it to a publicly traded company and let it scale up with demand.
And by the time you've done that 97.3% of all shipping from the new world is being handled by a small handful of companies with gigantic cargo ships.
But congratulations, you've successfully created a small "local" business with a decent number of customers who are reasonably loyal. You should be happy with what you have and possibly invest in future generations who want to colonize the moon or something (assuming you want to expand your wealth)
Real world example: was DropBox a better or worse product when they were a simple syncing app before they started “innovating”.
The only consumer company that I can think of that went from “initial value proposition” to “not sucking after it went public” is BackBlaze. None of their new offerings has taken away from their initial “unlimited cheap backup” offering.
I'm curious have you ever tried to raise money for a tech business before?
There's a big reason VC and angels were and largely continue to be only game in town. No one understands or would risk loaning millions of dollars on a high risk business aiming for marginal incremental growth.
That alternative only works in the absence of competitors who raise capital to pursue more rapid growth. It is an arms race to an extent, but if you don't play the game then you may get locked out.
Particularly when that rapid growth involves price dumping. I've bootstrapped businesses before. It's really difficult to compete with free offerings when you have to pay the bills. Your competitors can burn a pile of cash to flush out the competition. They don't even need a better product... people love getting stuff for free. Invariably, those services either go bust or don't remain free since it's often unsustainable. But, it means in the short-term you often need to raise money if you're competing with a VC-backed business.
> There is an entirely possible and alternative funding model that perpetually allocates a responsible amount of incremental funds for the purposes of novel R&D.
You are completely missing the point of venture capital here.
Of course, bootstrapping exists, but I can't point to any similar companies to Fly which have achieved standout success in an area like this with a model like that.
> Raising massive lump sums of money is about VALUATION.
Valuation is merely a side effect in pursuit of market dominance or hopefully establishing a niche monopoly.
That’s what's so great about five year projections! Somehow it’s always worth it until reality comes knocking after the money’s been raised. Then it’s a mad scramble for ROI that debases everything that built the business.
You raise money to pay for costs of running the business. If you couldn't raise money, then only people who are already extremely rich would be able to start a business of any size, let alone one that requires deploying physical hardware in multiple regions. Good luck getting even four regions for less than $1M. The world would be far worse off if all tech businesses had to be bootstrapped.
That being said, there's certainly many businesses that raised too much money based on bullshit, had the founders take money off the top, and then have to drastically change to become sustainable, especially in the ZIRP era. But I don't see that happening here.
You can offset burn rate with more skills. Putting a few machines in multiple regions is fairly cheap. If you’re ok doing the ops yourself, you can get buy on a shoe string budget. I know. A startup I was part of did this ten years ago and the tooling to do this has only gotten easier and better.
To be clear, I’m not saying that venture is intrinsically evil, but also companies are explicitly trading off higher burn rates and higher raise rounds to reduce the need to build all of this in house. That’s not a bad idea because it’s usually better for the business to scale as quickly as the sales channel can fill it rather than be stuck on difficult engineering roadblocks.
To add to it, without external funding _any_ innovation would be stifled by existing players. If you can't even get low millions in funding, existing corporations with tens of billions of free money will eat you alive.
Organically growing a business; bootstrapping sounds fine, until you try to do something that potentially has any global impact.
It's funny to hear this in this context. Fly is treated as one of the few potential successors to Heroku, and Heroku raised very little money while remaining the number one choice for most devs here (based on sentiments). And then an existing corporation with tens of billions of free money came along, bought Heroku ... and ran it into the ground. So I don't buy that you need to fundraise or else be outpaced, at least not by big corporation.
To be fair, they do call out in the article that they're hosting on their own hardware. Afaik Heroku has always been hosted on AWS which is a lot less capital-intensive than buying hardware.
Also, Heroku was acquired in 2010. I know that the prevailing sentiment around here is that the acquisition was a mistake, but Heroku has been owned by Salesforce for 13 of it's 16 years of life...
> If you couldn't raise money, then only people who are already extremely rich would be able to start a business of any size, let alone one that requires deploying physical hardware in multiple regions
You’re describing the current state of the world
We’re there already. The entire system is built to exploit everybody who does not have significant capital to fight back against it
I am so curious why you repeatedly spit in the collective face of the millions of small business owners in the US and around the world.
If what you say were true, the world would exist as a series of 3-5 megacorps, and small businesses would not exist. Since they do exist, how do you square that with your claim that only the "extremely rich would be able to start a business of any size" is currently true?
I would also add to your point that starting a business is easier than it has ever been. While far from perfect, the internet has been an amazing equalizer.
On the one hand, it makes it easy for you to reach customers.
On the other hand, it makes it easy for your competitors to reach customers.
I'd argue that, on the whole, the internet has made starting "just an idea and a garage" businesses harder, because they now face immediate, maximally-funded competition. Whereas pre-Internet they would have been geographically/physically protected for awhile.
True, net win for customers, efficiency, etc. (maybe). But you couldn't start a Starbucks these days.
Starting a business requires little more than filing incorporation documents with your state.
Growing a business to dominate a market and get crazy rich may require outside funding, but growing a business to support and maintain your individual lifestyle does not.
> spit in the collective face of the millions of small business owners in the US and around the world.
Their income is similar to that of most working professionals and their assets are similar to the savings of most working professionals. They entrepreneured themselves into having a job, they're not the investor/capitalist multimillionaires we picture when we think of rich people.
>the world would exist as a series of 3-5 megacorps, and small businesses would not exist
The economy exists as the 500 megacorps that make up the s&p 500. Small businesses just fill in the gaps and are for the most part beholden to the megacorps for their business, their supplies and/or their financing.
It's just not though. Surely you know (or know of) people who've built successful businesses with the help of funding, and couldn't have done so without it.
Just because someone takes funding, doesn't make them any less or a part of some "built" system. Even my favourite bakery could never have got started without funding - with debt not equity. It doesn't make him any less brilliant. He would've had to be extremely rich so start the business otherwise
Not all funding is creating equal or share the same expectations. Borrowing money from a bank to open a bakery or taking an investment from friends and family to cover the initial startup costs is very different from raising venture capital money. The growth and return on investment expectations are wildly different.
Which is sort of natural, isn't it? The natural world is set up to exploit everything that does not have a defense against it. You adapt or you get eaten or out-competed. The fact that "the non-rich" have not yet realized that they can, in fact, band together to force more powerful forces to behave better, doesn't mean they can't still do it.
Our biggest advantage is working together as a community, and our biggest flaw is not helping each other when we easily could.
No, it's not. It's emotionally manipulative propaganda that is thinly-veiled political ranting, and so is your comment, and neither belong on HN. Stick to interesting, intellectually stimulating discussion, please.
The simple answer is: we sell something people want to pay for (VM time, network services, etc). We'll obviously want to improve our margins over time, but there's a market price for this stuff and we don't have pricing power.
I don't think you can build an interesting public cloud without raising money, unfortunately. At least, not without jumping back in time 25 years and starting then.
Yeah no I have to agree with you on this one. Every company is going to raise prices at one point or another - it might be inflation, it might be profit-chasing, padding for an IPO - whatever.
Just because a startup might raise prices in the future shouldn't stop you from using their products - with a caveat, that is, how easy it is to shift to another operator. I haven't used fly.io personally, so I don't know about that - could you elaborate on shifting to another provider just in case?
I am skeptical that Hetzner or OVH or similar could get off the ground starting in 2023.
There are a couple of things working against a boostrapped public cloud:
First, you gotta buy expensive kit. And then hope you can make your money back over the next 18 months.
Funding this is hard. You could try to borrow money, but that (a) increases your underlying cost and (b) dictates how you sell. You can't borrow money against developer usage / traction because banks don't know how to value that. So you have to do top down sales and land some big, committed customers before you can use debt.
The sales model constrains the product. There is no big, committed customer on the planet that will buy global infrastructure from a company who hasn't built it out yet. So you won't be building a global cloud, you'll end up in one region.
And, no big committed customer is going to buy something novel. They do not care that "fly launch" makes it easy for a dev to launch a new project. They care that they got the best possible pricing when they were shopping for their hardware. They might care that they can run k8s on it.
This is all fine, though. I'm not opposed to it. But I think it leaves you with something that's not as good as AWS, even though it's cheaper.
While I tend to agree with your overall thesis, and I get particularly baffled when some SaaS company, whose nearly sole expense is payroll, feels the need to raise hundreds of millions of dollars, fly.io is a cloud infrastructure company.
They literally run physical servers all over the world (at least, that's my understanding from their website). I've got to imagine then that this business has huge capital costs, and it's nearly impossible to grow a very capital intensive business without outside capital.
I don't disagree with your main point. Everyone has seen "enshittification" eventually take over all tech startups as they switch the focus from satisfying users to satisfying investors. But I just don't see how you build a business that requires running servers all over the world without a lot of capital.
> They literally run physical servers all over the world ... I've got to imagine then that this business has huge capital costs, and it's nearly impossible to grow a very capital intensive business without outside capital.
I genuinely struggle to understand how Fly.io managed (manages) to have this much physical server presence to date, having raised only ~$16M prior to this round. Hire a dozen engineers and that money starts to go fast. The regions page [1] shows 34 cities largely across 4 continents, but technically across 6 if you count the 1 region each in Africa and Australia.
Maybe they have managed to get inside other existing cloud's data centers and it's not literally their own physical hardware, or behind-the-scenes they are leasing collocated servers, etc.
I would love some insight here if one of the founders in the thread sees this.
The short answer is that none of our regions are so big that we have to own our own top-of-rack switching yet (though some are getting close), so we can take a random spot in (say) an Equinix rack, rather than having to engineer a network (we run our own BGP for Anycast, but our uplinks are just DAC connections to our upstream providers switches.
For what it's worth: we've been on our own hardware ever since we launched, long before the 14MM Intel/Dell round. It's really the only way we can see to make the margins make sense. A big part of the premise of AWS and GCP is that they're allocating hyperscaler-grade resources to the task of making sure they claim most of the margins in hosting things on their own platform, not middlemen --- though that may be more true for some services (like EC2) than others (like S3).
I think it's a good question, but the linked article says unambiguously near the bottom that they run their own hardware:
> Why We Raised A Bunch Of Money
> Here's what we think it takes to build this kind of platform:
> A hardware fleet. Fly.io has always run on its own hardware. There are fun, technical, “control your own destiny” reasons to rack hardware instead of layering on top of commodity clouds. But it's really just economics. If you want to get people to build apps on your platform, you need a shot at being around 10 years from now. Hardware is what makes the margins work.
you can finance new hardware and rack in a managed colo for extremely cheap. like really cheap.
i was in this business until a couple of years ago.
we'd quote prices for potential customers currently in public cloud and they literally wouldn't believe us. it actually became an impediment in the sales cycle and part of the reason we sold. people are dumb, but i'd be even dumber if i expected them to change for my benefit.
> That's the promise of pay-per-minute (or even second) cloud computing, right?
Maybe I misunderstood your point, but that's the promise for cloud computing customers. Fly.io is a cloud computing provider, and those are all hugely capital intensive businesses.
> There are customers who are comfortable engaging with tiny Fly.io, and others who are comfortable engaging with the Fly.io that raised an additional $70MM led by EQT ventures
There's the other kind of customer who sees that "$70MM led by EQT ventures" is a liability and will inevitably screw over their customers at a later date.
It just all seems irrelevant to fly.io. I can host stuff on there for money, which is all I want from a service provider. Electricity and storage and network and compute and infrastructure engineers cost money, and I'm happy to give them money. How does web3 get these things paid for?
It’s not irrelevant to the parent and grandparent comment, which (having experienced the recent buyouts at Reddit and others) are rightly wary of a similar outcome, and regard the mere fact of being funded by VCs as a ticking time bomb. So what is the alternative?
Don’t build your app on someone else’s platform. Whether it’s Twitter and Periscope, or Apple vs mamy developers (https://www.washingtonpost.com/technology/2019/09/05/how-app...) … build on a permissionless platform that isn’t owned by any gatekeepers. Like the Web. Or Ethereum. Or Polygon.
Utility tokens and micropayments via trustlines are exactly done for that purpose.
I’m not sure I follow. It seems like a strawman question of some kind.
Well, fly.io is not the Web, but also it’s not the point
The closest I can get to what your questions is to say, it’s under the control of a for-profit company financing itself with shareholders who want to see profits? That’s true of many companies, the sentiment in the GP comments applies to the general pattern of becoming enshittified after a large investment / sale, not specifically fly.io
But it exposes things on the Web. And if you don't like them you can move somewhere else?
And more generally: people do things for money. Companies wanting a profit is not a bad thing. That urge can go wrong, but that risk is mitigated, in fly.io's case better than most, by the lack of lock-in technology choices.
For example, if you want to, for some insane reason, build an application that uses Microsoft's CosmosDB, then your data is stuck in Azure forever. Fly.io doesn't have that problem, as they use things you can run elsewhere.
So: what is the problem, as pertaining to the topic of this comment page: fly.io?
Why is it that any time VC financing comes up in any fashion we end up with some unrelated pseudo-meme walloftext nonsense bouncing back and forth between a treatise on the structural inefficiencies of capitalism and tech fundraising from 30 years ago? All with some tenuous barely coherent tie back to blockchain, or NFTs, or web3, or whatever The Next Bitcoin™ du jour is.
Because open source software is the only alternative we know to the problem that was described, that has consistently liberated people everywhere it was introduced. And utility tokens are a great way that was invented several years ago to monetize open source and turn it into a free market instead of only a gift economy.
Blockchain is the most widespread and proven way thus far to eliminate the middleman, and it’s there right now, you can deploy a token in a few minutes if you wanted. Many people here seem to keep repeating the mantra that “Web3 has no good applications” but here is one that literally solves the societal problem you are complaining about and has done so with IPFS, Ethereum, Polygon and many other permissionless networks.
It’s a wall of text because there are literally so many detailed examples, that I chose to engage in a few. I like to back up what I’m saying so people don’t think I’m just talking out of my ass. Now the ball is in your court to explain why you disagree anyway.
I don't even know that I do disagree with you. I just don't think Venture Capital is some sort of existential threat, or by definition a problem (some specific applications of it, sure), so I don't think the blockchain solves any real problem out of the box. It's an interesting thing from a technical standpoint, and some interesting things have been built on top of it, and I made some money on BTC back before it was 5 figures.
But you're not going to convince anyone to swap out VC funding for utility tokens by talking about Napster and FogBugz.
I think you could just say: "Instead of relying on the concentrated capital of VC firms, we should rely more on individuals investing smaller amounts in companies they want to use. The individuals collective stake in the company can help protect them from the company going against their interests."
That's just the main point right? Everything becomes essentially Kickstarter/Patreon subscriptions, and maybe you pay a little more fees to exchange your money to tokens?
Its surely an appropriate argument to make I guess, just falls a little flat to me personally. Like I just want to use a service and not get ripped off, I don't want to enter into and have stake in some distinct governance structure for every service I want use.
Well yes, and now you can do it using open protocols, without relying on centralized platforms for the money part.
Utility tokens need a decentralized network so there is no single point of failure. Just like the Web itself (1.0) disrupted gatekeepers at newspapers, TV and Radio stations, etc. that you used to have to pay (“payola”) to get the word out. VOIP lowered the cost of long distance phonecalls to pretty much zero by eliminating middlemen, too. The infrastructure providers shouldn’t ALSO control your app layer, that’s the point!
Curious people are allowed some latitude when historical performance predicts future outcomes [1]. This is "not the first rodeo" as it were. Agree being antagonistic is not welcome, but it should not be unwelcome to ask hard questions about how something won't end up the same.
I like the Fly.io folks! But asking questions should never be off the table; how else would you be curious?
(it is unfortunate that something with so much value and enjoyment like HN is a product of an investment firm, but a component of life is compromise; enjoy it like you would a public good while it lasts)
> why are you on a site whose community is literally created and run by a startup accelerator?
Why do missionaries go where no one believes their religion already? The idea that you must already be a believer in some community to participate in the community makes little sense and certainly isn't a good way to make progress.
> I guess my only other question is why seek attention like this?
Would you also characterize your own reply as mere attention seeking?
Because they have a political agenda to push and have decided that Hacker News is a good place to push it (even though that's a blatant violation of the HN guidelines).
I think this is just due to the maturation of the community; it has grown and diversified, so enthusiast hackers represent a smaller proportion of it. The same dynamic is at play in the tech community at large.
I joined in '09 and I think I've changed pretty substantially, so the idea that this or any website would lock-in to a particular viewpoint isn't realistic IMO.
And you're being awfully reasonable now, once we've gotten past the bombastic opening claim. I think part of what makes HN great is that at least sometimes we can skip that opening wild claim.
But that's a fundamentally different view than "All VC funding is bad"; there are tons of risks involved and many actors aren't good in every industry, why specifically does venture capital draw your ire?
Further, it seems like these highly integrated “app platforms as a service” have been the primary type of dev tool that VCs are drawn too given the complete vendor lock in they provide/demand. It worked for squarespace, wix, Shopify, et al. Vercel has a softer sell on this, and firebase was one of the first to offer a fully managed database in this space.
My hot take is that these platforms are relying on an influx of new developers who need a friction free way to build and deploy applications to learn and showcase while selling to companies that don’t have time or budget to create a full dev team and CI/CD environment, creating both sides of supply and demand. Pricing is engineered in a way such that it gets very expensive the moment before companies notice how much cost it incurs but the cost to switch aways is much higher.
I agree with the heuristic of avoiding VC-backed products, it fosters incentives that often leave otherwise loyal customers holding the bag for a product who price does not match the service provided. It is for this reason I consider high vendor-lock-in products rather insidious.
I can understand how you might think investors mis-align the business with customers, but this isn't necessarily true.
First, businesses aren't in the business of leaving money on the table. That is fine for a non-profit, but ultimately they need to weigh money making with customer satisfaction and growth. It's crazy to think a business should not optimize here.
Second, you're conflating venture-funded consumer businesses with B2B businesses. Consumer businesses with venture funding are typically going to fuel growth/momentum by doing things which don't scale. But eventually push comes to shove. B2B business models are usually more transparent about what is a promotion and what is not. Consumer businesses don't always know how the business model is going to play out to even offer that transparency.
Third, if your business model is advertising and data is your moat, then when you give away your data via API to promote distribution, yes you run into an issue later on when you need to advertise or you have underinvested somewhere (in Reddit's case it was mobile). For Reddit or Twitter, these mobile apps were profiting off their users/data while taking on none of the costs (infrastructure, moderation, etc.), and limiting their means of monetizing themselves. You don't need an investor to tell you that isn't in your long term interest.
Here is an alternative, unpopular (for the narrative like in the above post) hot take.
Nothing is forever. Five years is a long time. People need motivation. Enjoy and make use of things while they last. Nobody owes you anything.
But you have options.
You can have a business genius build a company that delivers great product forever without grinding employees into the dust, burning up founders and still outmaneuvering competitors.
You can have no product or a company going under because founders have stretched them thin, burned out and went broke ruining their lives pursuing a good idea that morphed into a sunken cost.
Or you can crazy pricing models justified by the desire to live like a VC LP while shipping a 3rd party API-dependent cute app. But without VC!
Or you can have a VC-subsidized business that ships a product at ridiculously low prices, locks you in for some 3-5 years and then goes ballistic and becomes unusable. But it’s been five years of a very good run, FIVE YEARS. And then the next will come to take their place.
Reading how five years is a short timeline for a low-cost-high-value product is wild. Now that’s some entitlement.
Yeah, I follow the same view, I've stopped paying attention to companies that raise venture capital or are publicly traded (aka, they don't truly own the direction of their own business). Whatever good is there is _always_ subverted by the persistent need for "growth" and "increasing engagement" and hitting metrics that are pleasing to investors. It'll start out pretty minor, but the trajectory is persistently altered at nearly every single point of decision. The sway is there, no matter what, and sometimes major decisions are driven solely by "it's what our stakeholders want/need", and the thought of the end-user of the software is practically an afterthought or side-effect.
I think It's actually quite a beneficial pattern for the likes of the consumer and the founders.
Say Fly will eventually get acquired or IPO, their founders will justify it that they could use that money to work on Fly's mission statement or if they've had their fill of servers go on to build further startups in Fusion, AI, or Space Technologies or even give to charity (take your pick).
When they do get acquired/IPO the natural bureaucracy of large organisations and shift in incentives will set in (we've been here before with Heroku/Salesforce and SendGrid/Twilio...) and they'll become slow, more risk-averse, and ultimately less innovative catering for enterprise and other large businesses (where the easy corporate money is at) instead of scrappy startups and curious hackers.
This is where Fly 2.0 comes in 5 years down the line reaching No. 1 on Hacker New, where utilising the latest technology they'll create a completely new and innovative solution that will solve the current problem even better than now and they'll start by catering for startups and hackers until they themselves get acquired/IPO.
This doesn't mean it's necessarily a bad thing - founders get a chance to cash out, consumers get cycles of new innovation.
Except when you get something like YouTube or the American telcos that have a monopoly/oligopoly and suck all potential for competition out of the space.
other things being equal, organic growth via paying customers is the time-honored way of avoiding the pathologies you mention.
in this model speculative capital is only required in the very early stages. a company either reaches a symbiotic relation with its clients or not. the burden is primarily on intrinsic aspects of what the startup venture delivers and how much this resonates in its sector.
the VC model is basically turbo-charging this process. though it is risk capital and not lending, it creates an implicit, arbitrarily sized liability that need not have much to do with the underlying value proposition. it removes the organic cashlow constraint via a faustian bargain.
the "beauty" of it is that you can't have both models in the same economy. the set of ideas that are ripe for exploration at an given era are what they are. if some people pursue them while being on steroids this means there is no room for people to explore them in a less toxic way
You really ought to do some standup comedy, Thomas (do you?); I regularly LOL at some of your comments — even the subtle put-downs, like the parent — and yet you're invariably courteous and non-snarky.
> Why won’t you suffer the fate of every single other tech company that raises a shit load of money which is completely and irrevocably selling out any pretense of being beneficial for customers and employees (primarily) in the extreme long term?
To be fair, the fate of most of them is actually to fail. Hence this amplified effect of why VCs need such a standout massive return to make the fund model work.
That said, while it seems like it to us normal folk, in the grand scheme of VC, $25M is not really "a bunch of money". In 2021, a16z led or co-lead $3.2B [1] in funding rounds. I can't find a publicly available stat for how many rounds that entailed, but napkin math says 100–300. Of course the distribution is not linear, but if we take the 200 investments midpoint, that's a $16M check on average.
The additional $70M here follow-on is the real story. It looks like they are not giving it a label, though Crunchbase lists the $25M from a16z a year ago as Series B, so I'm inclined to call this new round the Series C.
> My new heuristic is that I avoid every single company that raises venture funding.
IMO tech, startups at least, are not long-minded like this in general. Companies regularly come and go in 6–24 months. Good luck convincing the current and next waves of CTOs of not using venture-backed tech [that saves them tons of time for great prices right now]. And then portcos also often make deals with other portcos... the cycle feeds itslef in more ways than one.
It's like trying to change the color of the ocean with one single cup of red dye. At the end of the day, this is just a rounding error.
But also, Big Tech will end up acquiring many of the standouts a la Firebase or Heroku. Resisting the model won't upend or stop it.
>selling out any pretense of being beneficial for customers and employees (primarily) in the extreme long term?
I mean... raising prices ≠ "selling out any pretense..."
You're upset that a growing business lowers prices to grow faster? Ok, but maybe relax a little. You're upset that advertising-based businesses eventually shut down the ad-free clients that use the API? Ok, but maybe relax a little.
A business grows with low prices and loses some customers not willing to pay when they put up prices that reflect longer term sustainability. That happens, why does it have to be a moral outrage?
Yeah, if you're using a VC-backed startup expect the cheap services to get pulled back on when they hit IPO time.
I chose those because they are ubiquitous and downright hard to avoid. What do you want to bet OP made that post on a Chrome browser? Or an Android/iPhone/Macbook? Is there even a way to purchase a computer of any sort that doesn't involve supporting a venture backed company? The list of venture backed companies is so long, it would be exhaustive if not impossible to avoid using them without going off grid.
How many venture backed companies do you think are involved just in me pressing the "reply" button to send this post?
How can you monopolize this market? There is no moat here at all. There are already trillion dollar companies competing here. They are selling a commodity.
I would partially disagree. I think your statements are true, but only for companies that raise investments on the promise of scaling to greater profitability, but ultimately fail to deliver. If the founders delude themselves or are overly optimistic, the only recourse they have to investors is to gouge the customer.
Raising the 'right' amount should be the goal. Not 'as much as possible'
This kind of comment is blatantly violating the HN guidelines in both letter and spirit - it's a generic political tangent meant to spark a flamewar that has no informational content or value whatsoever.
I don't think they they'll need to increase, fly.io is already rather expensive as far as cloud offerings go today: shared 8 vCPU / 16GB VPS is $85/mo at fly, Hetzner is $16/mo for the same.
How isn’t? You’re paying for a VM with access to a slice of resources. Yes fly.io offers some clever deployment and routing, but it’s still your code running on a VM.
You could ask the same question about why Hetzner is so much cheaper than the big cloud providers. If there weren’t any tradeoffs, presumably every company running containers or VMs on a big cloud would move to Hetzner and save 80%. Why isn’t that happening?
Whatever the answer is, it’s probably the same answer for why many companies would likely be willing to pay more for fly.io than Hetzner as well.
It's worse. For a 16 vCPU + 32GB RAM + 20TB traffic (fly.io has max 8 vCPU) I would pay around $750 on fly.io instead of €30 on Hetzner. People are willing to pay a lot for I guess an easy deploy story ?
Developer time is pretty costy and if you can save a lot of dev time a noticeable higher running cost can be well worth it for some companies (like smaller companies, startups which have still a fluent changing business model etc.).
Through also it's not a fair compression because for the kind of services where being close to the edge and redundant over many places matters Hetzner isn't even an option. AWS maybe, but AWS is also pain in my experience.
Good luck avoiding every single venture-funded company. Can you give an example of such a "monopoly"? Vercel? They have plenty of competitors, all they are doing is charging a premium for convenience. There will always be alternatives to any given tool if you don't like the costs. Seems your problem is with capitalism and not this particular startup.
Sure, but if you are a startup and your bill went from $10,000/m (say this is comparable to AWS) to $100,000/m because the fly investors said so, you would probably move? Or go bust? Either way it is not good game theoretically for the vendor to do that.
And if they did they also wont get the enterprise customers who are considering conservative alternatives.
Consider this perspective: Users of Fly.io are essentially getting a loan from venture capitalists. However, just like any loan, it has to be repaid eventually. Thus, it's prudent not to take on an excessively large commitment.
A lot of companies are bootstrapped or "seed-strapped".
My company raised a $1.2m seed after doing a startup accelerator in 2015, used it to get to profitability, and we've been growing 40% YoY for a very long time without any additional outside capital.
It's also a huge selling point to prospective employees while interviewing candidates: "Unlike many other startups, we haven't raised lots of money, we're profitable, we've never done lay offs. That's all possible because we have product market fit and we have a sustainable business model. Our customers (rather than VCs) fund our growth."
Personally, I really like the "seed strapped" model... raise 1-2 million in order to find PMF and begin an early sales/marketing function with the goal of reaching profitability before the $1-2 million is burned through. It also creates a short window to fail fast... lots of companies raised way too much money and will end up failing very slowly.
"Failing very slowly" is what should be avoided.
Raising huge amounts of VC is a signal the company couldn't sustain their growth with their current revenue and operating model. It's also a signal that the company is likely using inorganic / unscalable tactics to grow, which might work now but won't work forever. That means the company will likely pivot their model at some point (from an employee perspective, that means higher risk of lay offs, and from a customer perspective, that means higher risk of price hikes in the future, etc)
This is an entirely valid model, and many startups would be better served by following it. Still, the whole point of (larger) VC funding rounds is facilitate rapid growth, far more than 40% year over year. There's no contradiction between embracing bootstrapping/seedstrapping where it works, and VC funding for the cases with hyper-growth potential.
I’m not against this, by that point there will be another hosting provider with even cooler features for small companies to make their next startup in.
Fly.io are doing great I think and that they might one day charge more I’m not that upset by it at all. If fly.io can make money at a higher price that means they are adding more value.
I hasten to add you appear to be hanging out on a forum focused on VC funded startups.
I don't understand why someone comes to a startup incubator and VC forum when they hate venture funded startups. You know what YC does, right?
There are so many forums you could go to, but you specifically select this one when you fundamentally dislike the premise? Why? It's just baffling behavior.
It may be a VC forum, but it functions as a broad technical forum. How many posts here are explicitly about startup economics?
It's important to remind people in the broader technical community that financial success should not the only goal, nor should it be required to maximize profit at the expense of customers.
Not OP, but I think the answer is that a lot of people who quit Reddit a couple weeks ago have spread out to other news/discussion forums to find something to replace it. They're still in the exploration phase trying to find communities that resemble subreddits they used. The content on this forum sort of resembles a few tech related subreddits, even if the discussions and intent are quite different.
I suppose the community makes the purpose of the community. And this sort of thing makes me worse, so I should seek something else, or modify my interaction with this community.
It's an open forum and presumably those running it prefer this outcome.
If that is the case, then you shouldn't be using Apple, Google, Intel, Nvidia, Stripe, Shopify, Meta, Git, etc etc.
Companies raise money now to generate cash flows in the future from a wildly risky innovation. Assuming the thesis is correct, the company will then to pay it back to investors (VCs and their investors including Endowment Funds), but also employee and taxes.
As companies grow, they pay more taxes, and this will let government spend in things like education, infrastructure, social security.
It's either this or socialism.
"Capitalism: The worst economic system, except for all the others"
> As companies grow, they pay more taxes, and this will let government spend in things like education, infrastructure, social security.
As companies grow so does their ability to dodge taxes. That's why they're headquartered in Ireland, Bermuda or whatever the latest low corporate tax state is. Proportionally they're likely paying less than a corner store. I certainly pay more in income tax.
>My new heuristic is that I avoid every single company that raises venture funding
you're basically going to be prevented from using anything that isn't an established enterprise(which are also beholden to shareholders) or consumer apps. You can't bootstrap anything that requires significant R&D or infrastructure unless the founder is already rich
This post seems to be referencing the Reddit API situation. The solution is to not make your company reliant on a single API , pretty sure with Fly you can deploy Docker containers so you could always switch easily if they tried to price gouge. If something is a critical component of your business you should always plan to be able to switch providers in a hurry for any number of reasons
Complaining about companies raising venture capital on hacker news! What!? No way!?
This is going to sound wild, but believe it or not it takes quite a bit of capital to reserve capacity in data centers ALL OVER THE WORLD in order to, like, deliver on your core value prop of enabling deploying normal apps AT THE EDGE. This used to just be called making a capital investment (because it takes a lot of upfront capital), but then it became en vogue to whine about venture capital.
You may want your hosting provider to be capital poor and running a razor thin balance sheet on the brink of insolvency (aka bootstrapped) but I don't. Or you might want to lease your own space in a colo and rack your own servers and hire your own remote hands and your own sysadmins and dev ops with 24/7 coverage so if you have a hardware failure you can deal with it asap but I don't. Not having to do all that shit takes...capital.
Where would you have them fetch said necessary capital if not from venture capital firms?
Honestly, do you even know what you're bitching about? A theoretical monopolistic reality that a. does not exist and b. would not exist if fly did not theoretically create a product so good it made all their competitors irrelevant (note: this is not a monopoly, it's market dominance; they are very different)?
And honestly, if they're still around in 5 years, they probably should raise prices so they can continue to be around. Fly is literally orders of magnitude cheaper than running on AWS, and orders of magnitude easier.
Why won’t you suffer the fate of every single other tech company that raises a shit load of money which is completely and irrevocably selling out any pretense of being beneficial for customers and employees (primarily) in the extreme long term?
My new heuristic is that I avoid every single company that raises venture funding. Hopefully others adopt this heuristic because by raising tons of money, so you are explicitly creating an adversarial relationship between the customers/users and your investors so everyone but your founding team and investors in the long term is worse off.
Edit: I’ve been a HN power user since 2012 - don’t ask me why I’m here.