There is an emphasis on hacker news and in the startup scene on VC funding. But I think this is a mistake. The mission of a startup is not to get VC funding. The mission of a startup is to get product-market fit. Angel funding or some other solution is necessary to sustain you until you get that product-market fit.

But until you do, I think you're going be in a worse position for getting VC funding. You might not be able to get it at all, or if you're in a hot area, you might get it but at terms that aren't' really great. Certainly, when you can show traction, or massive growth, or profits, or massive growth in profits, at each level the terms you'll get for outside investment get better.

We're about to enter an incubator program (Startup Chile) and I have no idea what their funding rate is. I'm guessing that less than %50 of the startups get funded, certainly by VCs, within 6 months, mainly because Startup Chile supports very early stage companies.

Here's our goals in startup chile:

1. Have 6 months to not worry about our burn rate because its covered while we try to get product market fit.

2. Have 6 months in close association with others doing startups to exchange ideas around technology, business, marketing, etc, that will help us get to product market fit.

3. Test our product in latin america as we try to get product market fit.

4. Expand our relationships with developers in latin america.

For our product and market, a successful product market fit should make us immediately ramen profitable, and probably "we don't have to take money on bad terms ever" profitable. If at that point we want to pursue money, or pursue the go-big-really-fast california venture capital style startup, we'll be in an excellent position to do so because we'll have traction.

If we fail to find product market fit, or we get close but things don't take off, maybe we'll be well set up to apply to Tech Stars or YC, or start offering Dave McClure rides to the airport.

One things for sure, after those 6 months funding or no, we'll be a lot more incubated than we are now.

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Wanted to clarify:

The goal of Startup Chile is to incubate a startup culture in Chile. Thus they're bringing around 300 companies to Chile each year (3 overlapping groups of 100 that stay for 6 months). In exchange you get $40k, and they take zero equity, but you also "have" to network with chileans to help jumpstart their startup culture. For us this networking is a feature.

We're not solving a small problem, we're solving a large one, and we're addressing the global market. Chile gives us an opportunity to test in a small market, if we choose to (haven't decided) but in no way will we be restricted to the Chilean market for our product.

I removed the term "lifestyle business" because it isn't really what I meant to say, and I just hate hate hate it anyway.

Scaling a startup these days doesn't take the money it used to. This makes VC terms even less attractive. Thus the goal of a startup going thru an incubator should be less focused on getting VC money. If you've got an internet based business model, and you've got a way to cost-effectively address your market, you can scale up by keeping headcount growth below the rate of revenue growth.