Not sure if that's exactly for the YC crowd. While everyone would love to have a multi-million dollar business, the reality is that there are a lot of smaller good ideas that don't need $1mil+ funding.
I think YC takes a better approach in the way of financing. However, I think YC forces a group to be extremely frugal and thoughtful in their fiscal decissions. I think receiving large funding may lead to improper investments to younger entrepreneurs; but that's just my $0.02.
It seems like the core message (apart from getting to profitability quickly) is pretty important to YC startups keen on getting acquired - "in a poor economy, companies really need to find better, cheaper, and more efficient ways of operating."
In other words, stop making widgets that turn your Facebook friends into zombies and start creating ones that make it easier for people to sell or make things.
>- "in a poor economy, companies really need to find better, cheaper, and more efficient ways of operating."
The economy isn't that poor, though. Ignore the headlines. Watch GDP, GDP per capita, and unemployment. If those things aren't going negative, then people are still going to spend money.
Politicians live by demagoguery and fear. Businessmen should look at facts.
In other words, stop making widgets that turn your Facebook friends into zombies and start creating ones that make it easier for people to sell or make things.
I bristled at this:
"A business that needs no more than $1-$2 million in financing to become a $25-$50 million (exit value) company, simply by executing the core business plan."
That is an insane requirement for return. I'm not sure how that's even possible - or if any company has even managed to do that. Someone prove me wrong?
$25 million is a lot of money, but so is $1 million in funding. Most web 2.0 companies need no more than $100k or so to get to profitability, and can easily exit at $2.5 million. Same ratio, but it sounds a lot more achievable. So the only real issue is scale.
Bear in he's talking about enterprise software (i.e. support contracts, custom software, consultants). When you start doing custom work and get paid by the hour your revenue goes through the roof. So you can get to a $25 million valuation pretty easily, if you're willing to be a software/consultancy hybrid.
This is not the sort of situation I would invest in. If you are billing by the hour, it is unlikely to be a leveraged business, and the investment return is unlikely to be as comfortable. Additionally, due to the smaller size, there would have to be many, many investments; it's hard to find many of very good quality.
It's very hard to sell to large sized enterprise without supplying custom work. You're right that the custom work isn't leveraged, but it's a prerequisite to get your product installed into their (often silly) IT structure.
This only requires a portion of your engineering and support resources, and there is no reason you could not establish strong ties to an existing consulting organization to be the "consulting services" arm of your company.
That tends to be the cash-cow that enterprise software vendors grow into (SAP, Oracle, et al), though I agree that it's not the place you want to target from the get-go. It probably does have some seductiveness if you're boot-strapping.
I think YC takes a better approach in the way of financing. However, I think YC forces a group to be extremely frugal and thoughtful in their fiscal decissions. I think receiving large funding may lead to improper investments to younger entrepreneurs; but that's just my $0.02.