I have seen this firsthand. I was a finance major fifteen years ago and for the last ten years I have run a completely bootstrapped agency.
If you have to live off your own revenues, it means you don't do any premature scaling... You have to focus on the needs of your customers to reach the next level. VC backed companies have to reach the VC exit goals which means they are forced to scale immediately even if things are broken.
Your business idea could work really well if you were given a few extra months or years to work on it, but with the VC fuse burning you can't wait.
VC's generally don't care about your passion, they care about maximizing returns over the shortest time period possible. If you don't do it their way, you will be forced to leave. I have been a member of a tech Vistage group and have seen over half of the VC backed CEO's forced out by their investors. It's really sad.
From first-hand experience, however, bootstrapped companies often don't have a ton of cash in the bank. They can quickly fail if there's an adverse event (COVID, for example).
You can also get crushed by well-funded competitors who can innovate faster than you due to larger team sizes, salaries, etc.
The best small companies operate in their direct competitor's blindspot.
Stupid example: Tesla. Toyota reverse engineered their car. Can't make a competing product. Not because it is impossible, but because it is not how the entire supply chain / development is set up. It'd take Toyota a major restructuring of the company to be able to compete.
That's the idea. It doesn't matter how much cash the other side throws at you, you're working where they can't go. Time and time again I see our company out-maneuvering our competitors with less money. Not because we got some super geniuses on the team (okay we got some smart people), but because we started from the ground up working in a spot where our competitor could not go. And so we have years of experience more than our competitor in the thing that our competitor needs to get better at.
In real electric car markets, other brands than Tesla run the show. In Norway, one of the biggest western electric car markets, Tesla is way at the bottom of sales. Only 95 Teslas were sold in November, while single models of other manufacturers had multitudes of that number in sales.
I think Tesla's main contribution lies in the past, by being an early pioneer of EVs and pushing them in an environment where nobody considered EVs viable. This definitely deserves an entry in the history books. But competitors have waken up.
Tesla's monthly sales in any specific (non-US) market are completely meaningless, because total demand greatly exceeds supply, and supply is not evenly distributed. That is, there are months where individual European markets get thousands of Model 3's, and there are months where those same markets get a handful, if any. This means that both the "OMG Tesla sales grew 15005% in market X!" and "LOL Tesla only sold 3 cars in market X!" are completely meaningless non-news from which you cannot derive any information.
Just to drive the point home, new registrations of Tesla cars in Norway by month in the past 8 months:
April: 44
May: 8
June: 568
July: 348
August: 33
September: 1439
October: 95
November: 326
No, Teslas did not suddenly become hugely more popular during September and then immediately lose a lot of their popularity in the month after. It's just that in September, a lot more cars were allocated to Norway, and so a lot of the people on the waiting list finally got theirs. During the other months, those cars went to other European countries.
Tesla is still ridiculously supply-limited compared to the amount of cars they could sell, if they only had the cars. Whether they succeed or not depends mostly on how fast they can scale their production.
Good point about the data being noisy, wasn't aware of that. If we take an entire year the core of my statement still holds, although more weakly. Tesla is a competitor, but not market leader. Other cars sell way better. Check the image at the bottom of this article: https://insideevs.com/news/452441/norway-plugin-car-sales-oc...
3.2k Tesla model 3's sold in 2020, but it's only at #6, with #1 to #5 each selling more than that, like e.g. ID.3 with 4.4k vehicles.
> Surprisingly, disappointing results are seen from the two best-selling BEVs in Europe - Renault ZOE (119) and Tesla Model 3 (74).
I found this article [1] with sales figures for Europe. For H1 2020, it was 37k Renault Zoe, 32k Tesla Model 3, 18k VW e-Golf, then 4 in the 11-13k range, and 3 in the 7-8k range.
If you look at the greater european statistics it's not a real electric car market any more, as most vehicles sold have ICE components (either hybrid or solely ICE). Norway is special because of their large market share of BEV cars. They make up 56% of new car sales in Norway while only 7.2% in all of the EU.
So all the EU stat is saying is that Teslas are sold well in the niche of the market that's interested in buying EVs over more established brands. The Norway stat is more representative of what happens when 56% of all newly sold EU cars are purely electric.
Tesla had like 3-5 years head start on any competitor. Just like the iPhone had a few years head start with the iPod. They got into people's mind, built a brand, and by the time the iPhone came out, and by the time the iPhone became a beast everyone else was playing catch up.
Remember how blackberry was so desperate to make an app store, and it was an absolute heap of shit?
Well Apple basically created an ecosystem where engineers were running apple hardware with a decent development environment. By the time anyone else could compete a few years passed, apple was a clear market winner, and all competitors were just trying to not get decimated. Took android a while before it was a real good apple competitor, and still playing catch up in many ways.
Tesla is in the same boat. Eventually there will be better EVs for less money for specific needs. But Tesla will always be synonymous with EVs. First thing you think about. The thing you judge everything against. Not to fanboy Tesla. That company has many many problems.
One can perhaps think of this as Teslas blind spot. People living with California wages don’t necessarily see the difference in prices mattering that much.
This is not a blind spot, it's explicitly part of their company's long-term strategy; Musk's plan from the beginning was to start with a luxury-tier offering (Roadster), and gradually work their way down the price-points as they achieved greater economies of scale.
> Almost any new technology initially has high unit cost before it can be optimized and this is no less true for electric cars. The strategy of Tesla is to enter at the high end of the market, where customers are prepared to pay a premium, and then drive down market as fast as possible to higher unit volume and lower prices with each successive model.
You might criticize their execution for failing to reach the mass-market sedan price-point fast enough (though I think that they have done an impressive job of starting a car company from scratch), but I don't think the "blind spot" claim really holds water.
Good point. So they simply were not able to ramp up faster than it took for the existing manufacturers to start catching up and leveraging their scale better.
Yep, it's a classic "new market entrant is racing to become the incumbent before the incumbent(s) can copy their innovations" situation.
It's a good illustration of why software is such a different paradigm than traditional physical economies; VCs can pour funding into a software company and since the marginal costs are close to zero, the innovator can blitz-scale and take over the market before the incumbent has time to react. However when "scaling" means building global logistics infrastructure, including factories for batteries and factories for cars, it's a lot harder to get the drop on the incumbents.
I think the GP's comment is spot on though, if Tesla fails to win this race, they will still have been the driving force in bringing EV adoption forward by 5-10 years (perhaps more), which is an incredible achievement.
However they are not selling more EVs than everyone else in every market, which isn't a bad thing IMO. A smaller piece of a bigger pie is what they seem to be shooting for.
Also Musk's response during this pandemic has changed the tone around Tesla I think. Plus he has moved out of the bay area. I wonder how it will impact sales in the long run given California is their main market.
It's not more relevant, because disposable income ignores things Norwegians get 'free' (because it is already deducted).
Part of that 'deduction' pays for heavy tax-breaks and subsidies for electric cars in Norway.
But then GDP is also an abhorrent metric to use for basically anything.
If you use either GDP or 'disposable income' as a proxy metric to compare anything between countries, you should seriously re-evaluate what you're doing.
Teslas cost more (after those tax-breaks and subsidies) in Norway than in California. You're lacing the conversation with a lot of value judgements, but those aren't particularly relevant to the question of whether the people of California or Norway are more able to buy Teslas.
Maybe, but we went on a cruise to Norway last summer and every single time we were on the streets we saw at least a few Teslas. It was a game to see who could spot the most Teslas first.
VCs are a slightly less evil version of PE IMO. Don't get me wrong, they're still evil. Anyone who makes money from money should really question their place in the world.
My personal and vicarious experiences with VC's have been that they are very much a mixed bag, and choosing to work with them in general is a necessary evil depending on the type of company you want to build. For my future startup attempts, if I can help it I will not work with VC's.
And if I have to work with VC's, then I will have a strong preference for working with VC partners who are former operators. The investor having substantial experience in the trenches (such as former founders) makes a massive difference in the productivity of the founder/investor working relationship.
Very expensive. It's only worth it if you have over 50k a month in profit. At that level it is good for a year or two of training and then it gets repetitive.
If you have to live off your own revenues, it means you don't do any premature scaling... You have to focus on the needs of your customers to reach the next level. VC backed companies have to reach the VC exit goals which means they are forced to scale immediately even if things are broken.
Your business idea could work really well if you were given a few extra months or years to work on it, but with the VC fuse burning you can't wait.
VC's generally don't care about your passion, they care about maximizing returns over the shortest time period possible. If you don't do it their way, you will be forced to leave. I have been a member of a tech Vistage group and have seen over half of the VC backed CEO's forced out by their investors. It's really sad.