Venture capitalits (VCs) fund companies with the expectation of having very high return on investment. These companies that borrow a lot of money have then the expectation of hyper aggressive growth in order to monetize a huge market later and give enormous returns on investment to such VCs.
Often, for those reasons, they make the product free and hire very aggressively, in order to maximize user acquisition and quickly building a product.
After such growth, they find themselves having to find alternative business models instead of just charging people, because if you charge users for something that was free before they will leave.
These alternative business models more often than not involve selling user data or other ethically dubious models that in the end try to squeeze the user, the data, or the product experience for money. When this is the case, these things can happen:
- You and your data are being monetized and squeezed in an immoral way. Privacy is out of the window. See Facebook, Google, etc.
- The product experience will start degrading in order to monetize with advertising until the product is terrible. See Medium and Twitter for example.
The other option is being acquired by a bigger company by a large sum that will provide returns to the investors. This usually results in sunsetting the existing product (see Our incredible journey), and the users losing their workflows, data or having a very hard time migrating.
Given how things frequently go, betting on a VC backed product is very risky. Most often than not the result is extreme amounts of pain and time wasted by the users, albeit not a lot of money lost.
I personally think we should bet and better support lifestyle businesses that focus on providing a good product with respectful practices and existing on the long term. For example, Todoist, Basecamp, Amplenote, etc.
Usually, these companies respect the user, by giving them good export options, great support, and user privacy is respected. They want to do a good job because people are paying them for the value they provide, and they want to exist for a long time. They don't have a huge ticking bomb attached in the form of huge VC expectations.
If you are not paying, you are usually the product, sadly.
Set a budget, think about the apps you need to fit your needs, and support them. They are the equivalent of local businesses in the modern age.
Basecamp has talked a lot about this kind of stuff, for example: Why we choose profit.
This is a great talk by David Heinemeier Hansson: David Heinemeier Hansson at Startup School 08.
It is always a bet, but I rather bet on someone by giving them money because it looks like they want to have a sustainable business and care about their users, rather than bet on someone that gives me something for free without a clear plan on how they are going to make money knowing they are going to put me up for sells or that the company may disappear because of the aggressive expectations of investors, causing me a lot of pain down the line.