A lot of people think of VCs as the single gatekeepers to startups getting funded, but VCs largely rely on LPs for their cash.
So the Indie VC experiment — as well as similar ongoing experiments like @tylertringas' Earnest Capital and @robwalling's TinySeed, etc. — has always been really brave and interesting. Because it's not just a question of "Can we buck the conventions of how to make the VC model work?" It's also a question of "Can we bring the LPs along with us on this unconventional ride?"
Anyway, sad news. I've recommended the Indie VC episode of the IH podcast more than any other episode because it's so inspiring.
Like many, I'm surprised and saddened by this announcement. It shows how difficult the balance is to build something new in a space where LPs have come to expect venture capital funds to operate in a certain way, whether through the types of companies they fund or the terms they offer.
I have tremendous respect for what Bryce and Indie.vc accomplished over the past six years, and appreciate that they paved the way for funds like ours.
I'm curious to understand how traditional LPs view indie funds like TinySeed, Earnest Capital and the like.
For most venture capital and other illiquid investments, returns are generated by IPO/acquisition exits that generate a high IRR.
I would imagine that the endgame for indie businesses is neither IPO nor acquisition, so are LP returns generated by dividends? Because that's going to be a huge disadvantage in generating returns compared to getting full and immediate liquidity of an IPO/acquisition.
Institutional LPs like endowments and family offices are wary of new approaches because they are unproven. They like to see a history of returns before they risk client money.
We raised our two TinySeed funds mostly from founders and former founders who made their money building companies.
Re: indie business endgame - across our portfolio of ~40 companies there is a solid mix of founders who want to "run it forever" and pull profits out, and those who want a life-changing exit. I don't know that any of them are aiming for an IPO.
That's one of the benefits of this altFunding approach, is that you don't have to decide now whether you want to build a profitable company, sell it in the future, or IPO.
Thanks for the reply Rob, that makes a ton of sense.
I find it really interesting that TinySeed has a mix of "run it forever" and exit-seeking companies. I would have thought that the vast majority would be in the former category.
I don't hear a lot about indie businesses that are being built specifically with the goal exiting, but maybe it's just not something people want to talk about.
Let's reinvent a way to get funding for indiehackers!
The VC model rely on hyper growth and unicorns. That's not for IHs...
I'm sure we can invent a way, community-based (with crypto?) Where great projects can get 10-100k and share revenues more than waiting for an exit!
Sad to see the end of Indie.vc, but I don't think it's the end of an era. On the contrary, it's the very beginning.
I'm very excited to see the barriers coming down for "average people" to finally start investing in startups, as well as to raise rolling funds. There's more money than ever available for people looking for some cash for their companies, and it's coming from a more diverse set of people than ever, not just the traditional venture investors.
Not surprising. If I am an LP, I want exposure to companies such as, Databricks, Anyscale, Covariant Ai, Gary Marcus' Robust.Ai (etc, etc). These companies have high likelihoods of being acquired (or going public) for their expertise, strength of founders, IP, etc. and earning very large returns. But these companies have no need to seek funding from an Indie.VC - they will turn to A16Z, Sequoia, etc. Indie.VC companies (no offense) are very unlikely to achieve the returns that would make it worth for me as an LP. I rather write a $100mm check to Benchmark and get back a multiple of that $100mm in 5-10 years.
What a shame. I'm sure there are more than a couple dozen indie devs that are grateful indie.vc gave them a shot. How does one find these sort of VC funds? Can anyone recommend alternatives to indie.vc?
A lot of people think of VCs as the single gatekeepers to startups getting funded, but VCs largely rely on LPs for their cash.
So the Indie VC experiment — as well as similar ongoing experiments like @tylertringas' Earnest Capital and @robwalling's TinySeed, etc. — has always been really brave and interesting. Because it's not just a question of "Can we buck the conventions of how to make the VC model work?" It's also a question of "Can we bring the LPs along with us on this unconventional ride?"
Anyway, sad news. I've recommended the Indie VC episode of the IH podcast more than any other episode because it's so inspiring.
Like many, I'm surprised and saddened by this announcement. It shows how difficult the balance is to build something new in a space where LPs have come to expect venture capital funds to operate in a certain way, whether through the types of companies they fund or the terms they offer.
I have tremendous respect for what Bryce and Indie.vc accomplished over the past six years, and appreciate that they paved the way for funds like ours.
I'm curious to understand how traditional LPs view indie funds like TinySeed, Earnest Capital and the like.
For most venture capital and other illiquid investments, returns are generated by IPO/acquisition exits that generate a high IRR.
I would imagine that the endgame for indie businesses is neither IPO nor acquisition, so are LP returns generated by dividends? Because that's going to be a huge disadvantage in generating returns compared to getting full and immediate liquidity of an IPO/acquisition.
Institutional LPs like endowments and family offices are wary of new approaches because they are unproven. They like to see a history of returns before they risk client money.
We raised our two TinySeed funds mostly from founders and former founders who made their money building companies.
Re: indie business endgame - across our portfolio of ~40 companies there is a solid mix of founders who want to "run it forever" and pull profits out, and those who want a life-changing exit. I don't know that any of them are aiming for an IPO.
That's one of the benefits of this altFunding approach, is that you don't have to decide now whether you want to build a profitable company, sell it in the future, or IPO.
Thanks for the reply Rob, that makes a ton of sense.
I find it really interesting that TinySeed has a mix of "run it forever" and exit-seeking companies. I would have thought that the vast majority would be in the former category.
I don't hear a lot about indie businesses that are being built specifically with the goal exiting, but maybe it's just not something people want to talk about.
Let's reinvent a way to get funding for indiehackers!
The VC model rely on hyper growth and unicorns. That's not for IHs...
I'm sure we can invent a way, community-based (with crypto?) Where great projects can get 10-100k and share revenues more than waiting for an exit!
I'd be happy to talk/think more about it!
yeah, I suppose I hadn't given much thought to catering to LPs before.
Will give that episode a listen.
I also interviewed him way back in 2016, years before I started TinySeed: https://www.startupsfortherestofus.com/episodes/episode-310-indie-vc-and-a-more-realistic-approach-to-funding
Listening now!
Indie VC is Dead, Long Live the Indie.
Sad to see the end of Indie.vc, but I don't think it's the end of an era. On the contrary, it's the very beginning.
I'm very excited to see the barriers coming down for "average people" to finally start investing in startups, as well as to raise rolling funds. There's more money than ever available for people looking for some cash for their companies, and it's coming from a more diverse set of people than ever, not just the traditional venture investors.
Yeah, Sahil from Gumroad is doing a lot of work on this
This comment was deleted 3 years ago.
Not surprising. If I am an LP, I want exposure to companies such as, Databricks, Anyscale, Covariant Ai, Gary Marcus' Robust.Ai (etc, etc). These companies have high likelihoods of being acquired (or going public) for their expertise, strength of founders, IP, etc. and earning very large returns. But these companies have no need to seek funding from an Indie.VC - they will turn to A16Z, Sequoia, etc. Indie.VC companies (no offense) are very unlikely to achieve the returns that would make it worth for me as an LP. I rather write a $100mm check to Benchmark and get back a multiple of that $100mm in 5-10 years.
What a shame. I'm sure there are more than a couple dozen indie devs that are grateful indie.vc gave them a shot. How does one find these sort of VC funds? Can anyone recommend alternatives to indie.vc?
Here's a list I worked on of folks who I'd consider in the same category - true risk capital + non-exit-reliant: https://techcrunch.com/2021/01/14/12-flexible-vcs-who-operate-where-equity-meets-revenue-share/
Earnest Capital and Tiny Seed