💸 Microsoft $3.16 — Samuel Ian Rosen

Inspired by the GOAT Badass, Mr. Stone Cold.

In 1981, Microsoft raised a $1 million dollar seed round of venture capital. It was the only capital they raised before going public. $1 in 1981 is worth $3.16 today. Microsoft raised, in today’s dollars, $3.16 million.

Apparently, that’s barely even seed round “worthy” today. Has the startup community lost touch with how much money $1 million is? Yes. Completely.

A $1M check from a16z tells me you're not ready to raise money...

If you're leaving a high growth startup & convinced 2-3 other smart people to join you, that's a $3-6M round.

I don't believe anyone that can raise money, should raise money. Have a plan and play the long game.
— Bri Kimmel (@briannekimmel) April 18, 2022

The startups of 2022 are way over funded. Much of these budgets go to ad spend (50% to Facebook and Google ads) or to subsidize growth. Meanwhile the costs of starting a startup are the lowest they’ve ever been.

Great companies are going out of business and great founders are failing because capital is abundant and cheap.

Venture Capitalists need founders to spend cheap capital so markups can show paper returns and they can raise their next fund. Another fund means stacking AUM and management fees.

Founders spend that money because they like having a nice salary, large team, and comfortable office. I say this from experience.

But founders, have we forgotten legendary grit stories like:

Airbnb bootstrapping by selling $20,000 of Obama Os’s and Cap'n McCains?
Reddit getting acquired for $10 million by Conde Nast having raised less than $100K?
Atlassian founders holding a combined 75% at IPO because they raised zero in venture capital?

I certainly haven’t. The abundance of cheap capital results in venture capitalists having to tell founders that $1MM isn’t even on their radar. That’s true and unfortunate.

Not only am I, a serial founder whose previous company is on a path to IPO, not on Bri’s radar, her position means that she’s not on mine either. I have never met or spoken with Bri, nor is this a shot at her. She is stating a fact of her business and I’m grateful to her for sharing it.

I think there is; however, an obvious bias—the worst thing that could happen to a seed stage VC is if we stop taking $3-6 million of their capital for 20% of our companies. That’s why equity crowdfunding is a significant threat to venture capitalists.

$3.16 million. Your mileage may vary.

My company, Tap, has raised only $2.1 million in the last 4 years. I’m striving to not accept more than $3.16 million before taking the company public. Why? Because I’m a competitive person and I’m challenging myself. Constraint breeds creativity.

To every VC and founder who thinks pure software companies need $3-6 million seed rounds or billions of dollars of capital to reach the public markets, my response is this:

Au contraire. Microsoft $3.16.

Respectfully,
SIR