I'm in New York, not in SV but there's a lot startups over here too. I am a contract developer and have worked with startups for about three years. I can honestly say there are founders that are getting a "free ride" on investor expense - taking long vacations over the summer, building product forever and not releasing (this gives founders an excuse not to be out talking to customers - after all, the product isn't ready), and so on. It's a scam. It's a great way to avoid getting a real job while being able to say to friends and parents that you're doing something exciting - just on the beach on Montauk.
There's a perception that raising money is "easy" in the current climate. The reality though is that it's simply not that easy and that there most certainly isn't many founders coasting on beaches.
I know a lot of entrepreneurs and founders here in SF/Bay, and every one of them is working much more than 9-5 5 days a week. And none of them got a "free ride" from an investor - but rather went through the slog of building product / traction to raise every penny. Sure, there's more capital floating around - but there's a lot more competition too.
@dquail - understood. I certainly did not mean to suggest that every startup or most startups operate like this. Only that I have personally seen at least one whose founders seemed to be out of town more often than in the office - especially over the summer. Of course, under the pretense of 'business' it's all well and good. For example, they simply had to attend a conference at SXSW but I'm sure enjoyed some of the extracurricular activities during their week-long stay. 1 week trip - for one conference.
Frankly, given the number of startups, I too think it must be easy to raise money. May be not from A16Z, YC, LSV or other experienced ones but I see so many new VC firms now days.
For the 99%, raising money is still hard: so hard that it kills more startups than succeed by orders of magnitude. Middle-class, earnest engineer and professor types just aren't bred to barge into a rich man's office and tell him to give them $8 million, and now, lest they miss out on a huge opportunity.
For the 1%, which has more to do with connections than net worth by the way, it's incredibly easy and any idiot can do it. So, many idiots do.
The difficult part can be what happens after raising money. Some investors are hadns-off and some will micromanage. Some will add and others will detract. Since your investors will determine whether you can get future funding, and will probably make the introductions that lead to partnerships and clients (if you're a service company) you want to make them happy enough that their resources are deployed to your benefit.
The one bit of good news is that "free ride" investors are a minority. Most have too much ego, which can be a force for good (if they help you succeed) or bad (if they try to manage you). They exist, but they're not common. They do seem to be more common in New York than in the Bay Area.
You can do this once, but rarely ever twice. The world is surprisingly small and word gets around quickly when you take that "free ride" at the expense of the people funding you. Besides, it's different from 1998 in the sense that VCs are placing more money on later-stage startups than seed/A-stage startups.
I wonder how does the career of Kevin Rose fit into this. Perhaps I don't know something, but I've got a feeling that despite he didn't create anything successful since Digg, he enjoys a nice career. I'm not suggesting that he is a free-rider, but his example suggests that SV decisions aren't that optimal.
How do these founders get funded without traction..Everyone i talk to in my network says I need to launch and get traction first, although they like the product so far.
