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Comment by katzgrau | Hacker News Reader

If you don't mind being relatively unheard of and only want to make enough money to be independent, then it actually isn't very hard to bootstrap a business. It does take time, effort, and a lot of mistake making, but it's like learning anything of value. I think it makes you a stronger and more independent person all around.

Even though this article attempts to deliver a dose of reality, it focuses on VC backed companies which is a completely different field. VC backed startups tend to do highly risky things in an effort to increase traction and valuation as quickly as possible. Most notably, spend a lot of investor money in pursuit of those things without having any real revenue. The odds of failure skyrocket.

I've seen a lot of commenters go on about survivorship bias. I believe that the real problem isn't being considered: the absolutely batshit advice and business building strategy that comes out of the world of venture capital and tech accelerators.

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>, then it actually isn't very hard to bootstrap a business.

Your "not very hard" advice also inadvertently distorts the reality of possible outcomes. Most bootstrapped businesses fail as well.

Whether an entrepreneur gets some friends with a bootstrap mindset to start a consulting business, publish a new magazine, or open a restaurant, the odds are that all of those will most likely fail. Any business that can provide financial independence has long odds. (I'm not including solo businesses such as freelance web consultant, insurance agent, home inspector/appraiser, solo attorney, etc.)

Whether it's a bootstrap-business or VC-business, founders will still proceed forward even if it disagrees with "rational" calculations of successes/failures. It's human nature.

Most bootstrapped businesses fail as well.

While that's very true of startups I think there's more to it. A lot of businesses are founded in order to scale up to something that can give the founders a decent exit. If you start a business with the explicit intention of only growing to a point where it's going to give you a good lifestyle you're a lot less likely to fail. You don't need to take the risks necessary to grow. You can focus 100% on the business instead of distractions (for example, raising a round.)

You're still more likely to fail than success, but not with the sort of failure rate that startups typically see.

> Most bootstrapped businesses fail as well.

Depends how you define failure. The statistics I've seen suggest that around half are still in business 5 years after formation.

Yeah, but the reasons for failure are different. A startup usually fails because the founders are convinced they can't do whatever they want to do without investors and they never raise any money. OR, they do raise money and eventually run out of it because they never made enough money to support the costs that were enabled by ... the investment.

A bootstrapped business is alive as long as the founder is willing to continue trying to make it work. So a bootstrapped business doesn't fail per se — usually the founder fails to make money within the timeframe they'd hoped for and gives up.

I didn't start making real money with my business until I was 4 years in. There wasn't some magical day where I got lucky and started making money. The first 4 years was me basically being an idiot and making every mistake possible. It gave me the education I needed to price my product appropriately, position it, and sell it.

Some might say I'm a "survivor" but I don't think I am. I'm just determined as hell and didn't give up when I wasn't making any money. I worked freelance contracts and kept the thing going because I knew at the very least I was getting smarter even if I wasn't bringing in money, and eventually the education would probably prove useful or pay me back. Better and cheaper than grad school anyway, right? I sometimes think about the people who are "Masters of Business Administration" on paper and have never actually built or run a business.

The people I know who have successfully done it aren't geniuses with a bunch of money and lots of connections. They all just had the same determination to stick with it, adapt, learn, and find their way to what they want. There is definitely some pain and self-doubt involved, but like I originally said, you come out stronger for it.

Any lessons learned that you want to share? As the owner of a very small consultancy shop I know it's very hard to extract generalized advice from your own failures, but still...

Sure, although my experience is in the product business. some of these might be applicable:

* Find a niche market where there is a need and the prospects aren't broke. Eg, they have money to spend for the potential of ROI with your product.

* Break your revenue goal into concrete building blocks. If you need $x/year to make this a profitable venture, how many customers do you need?

* If you need a lot of customers (IMO, > 25) you need to think about both marketing and making your product and making it possible for them to self-service. Eg, driving inbound so you don't have to rely so much on outbound.

* Right down your goal and make a plan to achieve it. Does that mean emailing / calling prospects? How many per day? How many trials does it take to convert one customer? These are simple metrics which will eventually help make your revenue "predictable." Great books on that topic.

* Sales is #1 priority. SV is hyperfocused on brilliant engineers. In bootstrapping, it's all about money. I'd spend more on a great salesperson than an engineer.

* Make yourself uncomfortable. Don't like cold calling? Cold call anyway. You'll get good (or at the very least not half bad) at everything.

* Take care of yourself. You are your own vehicle to success. Your mind and body are business partners. Your bad habits can hinder you severely. 9-5 employees can come to work hungover every day and probably get by fine - but an entrepreneur can't.

* If something isn't working, change it. If something's working, do more of it. That includes pivoting product, market, etc.

* Don't get too elated or depressed. There can be incredible highs and crushing lows. Failure is a teacher but success is a better teacher.

* Be humble. Recognize that you're an idiot and that you don't know shit, even when you think you know shit. It's how you keep your mind open to learning new things. Your own ego can be a roadblock to success.

* Learn to delegate. When you start out you'll do everything — but eventually you will find you have low-level tasks which, if offloaded, would make you far more productive. That's when it's time to hire. Resist the urge to just do it yourself. Your ultimate goal is that you become the brain of the company and you delegate the physical work to the staff you've built.

There's a lot more but those are the ones I could rattle off.

These are all the things I do to build my venture backed businesses :)

Well said. Sales is of critical importance. I try to outsource anything that costs less than my own hourly rate.

Damn this is by far the BEST advice i have read. HOLY SHIT! I would like to THANK YOU VERY MUCH whoever you are. I have been grinding it out with my tiny start up and its making $3k-$5k/month. I was thinking i need money to grow and should seek funding but then i realised what VC would fund me? i got no secret sauce no technology no VC would give a rats ass about my start up and anybody can copy me at any time. I been at it 2 1/2 years and i think now i will follow your advice and double down my efforts and use the profits to pay a contract SWIFT engineer to build an iOS. Then grow the thing AS much as i possibly can. I'm sorry for hitting you up for a sale but i always gotta be selling! If you have a tesla and would like to sell, please consider sending it to me: https://onlyusedtesla.com/

>A bootstrapped business is alive as long as the founder is willing to continue trying to make it work. So a bootstrapped business doesn't fail per se

I'm going to rewrite your comment in more concrete terms and by doing so, you can let me know if I have parsed your meaning correctly.

For example, in California, the annual filing fee for C-Corp or LLC business entity is $800. So, for as long as the entrepreneur is diligently paying the $800 each year, the business has not been formally "shut down" and therefore, has not "failed". (Alive != Failed)

With that adminstrative setup as the baseline, we consider your next comment:

>didn't give up when I wasn't making any money. I worked freelance contracts and kept the thing going [...] even if I wasn't bringing in money,

I think this means that one can get any 9-5 day job and keep the "bootstrap business" as a side hustle for years that never brings in significant money. It can never be considered a "failure" because of 2 properties:

(1) the business wasn't formally wound down (just continue to pay $800/year admin fee).

(2) a money-losing business still provides "education" and founder comes out stronger. (Not sure if this also implies that failed VC business does not provide education and strength)

It seems like your advice is dependent on a hyper technicality of what "failure" means to you instead of engaging the spirit of the comparison between VC vs bootstrapped.

I go back to your first comment which already had as a condition "want to make enough money to be independent". Many current and former bootstrapped business founders will disagree that it's "not hard." It is extremely hard to create a self-sustaining bootstrap business that brings financial independence reasonably fast. (The "fast" being relative to working 30 years at a 9-5 job.)

Also, when you rely on phrases such as "determined as hell and didn't give up", you're inadvertently falling into the same "survivorship bias" for your bootstrapped business which the article complains about for VC businesses. Being "determined as hell" is an unfalsifiable attribute. Oh, you say your bootstrapped business failed?!? It happened because you weren't determined as hell.

I'm sympathetic to bootstrapped businesses because I sold custom software that way but touting the advantage to non-VC businesses as one that let's you redefine "failure" in an idiosyncratic way which keeps the business from meeting that criteria -- is not very compelling.

In any case, if the business is in a domain that can be bootstrapped, by all means, do that option. The founder will have more leverage. Leverage is good.

The point to my first comment is that advocates for "bootstrapped businesses" will have the same cognitive biases as the essays for VC businesses.

A few points:

* When I said, "I wasn't making any money," I meant not anything of significance. I wouldn't consider a thousand or two thousand per month significant, which is where I was at for a while. If I can't live on it and hire an assistant to delegate some work to, it's not significant. If I couldn't pay admin fees it would be a failure. But yes, I did redefine failure for bootstrapped startups because I think it's valid. VC-backed startups don't have this flexibility / time to learn the hard way.

* In regard to being determined, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it. Your product gets better. Your personal network grows. You're more yourself in more uncomfortable/growth situation. Your odds of failure drop the longer you work on achieving something — not surprising.

I'd guess 99% of the people who have taken at shot at learning a second language fail (or give up or get bored) before they become fluent. Does that mean the 1% who made it and say "practice every day" have some level of survivorship bias? It's kind of absurd. Bootstrapping a business to success is like anything that takes time and effort and is based far less on good fortune than people think.

You parsed what I said pretty deeply and I'm not that smart of guy, so if there are flaws in what I wrote here that's understood - but you might understand what Im trying to get at.

>, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it.

Yes, I agree one can get better at something by continuing to practice it. But that's independent of what "survivorship bias" means. It seems like you're thinking of "survivorship bias" as a measure of honest self-reporting instead of an unemotional mathematical bias. Your "determined as hell" example is not the same as "language practice" in the next example:

>I'd guess 99% of the people who have taken at shot at learning a second language fail (or give up or get bored) before they become fluent. Does that mean the 1% who made it and say "practice every day" have some level of survivorship bias? It's kind of absurd.

Survivorship Bias means ignoring an uncounted population (counterexamples) when considering an attribute. Yes, your language example would be absurd since it includes both the successes who practiced every day _and_ the failures who didn't practice every day. This matches our intuition; my son doesn't practice Swahili language every day so he failed at knowing Swahili.

Your "determined as hell" anecdote isn't like that. To remove sampling bias of survivors from your advice, we have to count the _other_ entrepreneurs (not you) who were also "determined as hell" but still turned out to be business failures. The _other_ entrepreneurs can also create "better products" and "grow personal network" and still fail at the business.

>but you might understand what Im trying to get at.

I understand your positive advice for a successful bootstrap business. I took issue with _how_ you presented it because it copies the same logic flaws of survivor bias that the article is complaining about. It seemed like you were so passionate about your success anecdote that you overlooked what "survivor bias" actually means. Therefore, you didn't notice that it also applied to your comments of bootstrap being "not hard" if one is "determined as hell".

>In regard to being determined, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it

This is survivorship bias. You're a survivor and can look back on the set of decisions you've made in the past to rationalize your current success. I've seen countless businesses linger for years only to shutdown later and sell their assets.

I find learning a language a poor analog here as it's much simpler and generally within your control. More effort is more closely tied to more results. Language learners aren't typically affected by seasonality, fads, or market conditions.

It's all of these other factors that make analyzing business success factors tremendously difficult. Because it's so difficult, it's easier and more straightforward to assume "I'm successful, so my decisions were the right ones" than "I'm successful mostly due to luck".

>> If you don't mind being relatively unheard of and only want to make enough money to be independent, then it actually isn't very hard to bootstrap a business.

100% agree agree agree.

TechCrunch, tech conferences and forums (including HN) fuel the startup porn aspect of fame. And the spotlighting of a handful of companies make people think that billions of dollars are out there for the taking. You aren't going to be famous and you don't need a billion dollars. Once you accept that your lens on the world comes into a lot more focus.

The last time I was in a position to raise money one of my friends said, "you're growing and there is a lot of profit...and you get to decide what to do with all the profit, include putting it in your own pocket? Raising money means you are now on a salary and have a boss. Why would you do that?" He was right and I've never thought about raising money for that project or any other ever again.

Most VC founders wait 7+ years for their cash-out moment, if it ever comes at all. Build a profitable business and stop worrying about the adoration of people you don't know. Make the money, keep the money.

> the absolutely batshit advice and business building strategy that comes out of the world of venture capital and tech accelerators

Part of this includes the whole concept of rushing a 'knocked together' MVP out there. It all depends on the product. Yeah, if you have an app to share cat pictures on a social network, then who cares if you have a flakey cobbled together app that doesn't upload half the time. The consequences are minimal.

If you have an app that is responsible for administering a life saving drug on a periodic basis, then you had better be sure the thing is polished, tested and reliable before even beginning to test it in the market.

The whole 'lean' system sausage factory is just that - creating a mass production line of ideas where only less than 1% float to the top. Very often only based on the fact that the creators shouted louder than others who may have had better (or more boring) ideas.

Or if you're, say, building a system for self-driving cars.

This Silicon Valley arrogance and recklessness has killed people. It's not just academic.

Don't understand the hang up about this. Self Driving cars were always going to kill people. It's not possible to be 100% safe but even a minute improvement over human drivers would save thousands of lives a year.

And even a slight worsening could be a worthwhile tradeoff for the economic gains it would give us.

Uber has had a fatal accident with only a few million miles driven when an average human will go more like a hundred million miles per fatality.

I don't understand why people insist on believing that they are already more safe than human drivers when the evidence suggests that they are currently much, much less safe.

I'm sorry where did I imply they were already safer? I think it's obvious they will continue to improve and surpassing human level is not far away.

Nonsense. Uber's self-driving cars currently have something like 30x the fatality rate of an average driver and that is in cherry-picked locations that they chose for testing and with a human driver constantly watching it to take over when it does something wrong. There is no evidence that they are anywhere close to surpassing human drivers.

Given a sample size of 1 I don't think there's much to be discerned form the data at all either way.

> There is no evidence that they are anywhere close to surpassing human...

Famous last words.

What's the alternative? Overfunded waterfall-style development on fewer things nobody wants?

The lean startup model seems like it works, even outside of tech. Even yes, in medicine that can kill as a failure mode. Drug development, for example, consists of trying a bunch of plausible things. (And worked until the effective, simple chemical space was exhausted.)

...and moving a very small fraction of those drugs into long FDA trials.

I've been in a couple of those trials.

They make it very clear that the drug has already been tested extensively and also do fairly extensive testing on you to make sure your vitals are within the "normal" range.

I got a very clear impression that they're not throwing pills at the wall to see which one sticks.

I'm also working at a startup that's had three names and just as many products, funded by a VC who's just going to start another one with most of the same people whether this one works or not.

It doesn't matter one bit if this startup fails. The drug was pretty clearly indicated to work by the time a person swallowed a pill.

Different worlds.

Drug development certainly does not consist of trying a bunch of plausible things on the public (or even on small carefully picked groups of human trial subjects, not until after extensive tests and trials have been exhausted). And thank fuck it doesn't.

Besides, it's rather disingenuous to act as though development falls on a binary between "overfunded waterfall-style development" and the current mess at many shops.

My apologies if my comment came off as disingenuous or overly binary. I'd agree you could take minimal MVPs too far. (Also, the phrase "minimal MVP" is RAS syndrome but how would I say it otherwise?)

What I haven't seen is "the current mess at many shops", and I'd be interested to hear about your experiences. I've only ever experienced failure by overplanning personally, and the stark divide between progress in things that can be cheaply iterated on and things that are expensive, preplanned disasters seems important to me.

This leads me to naturally think that if I wanted to make progress in e.g. medicine I should start by finding out how to make it cheap and iterable, rather than come up with comprehensive, well-funded plans.

> the absolutely batshit advice and business building strategy that comes out of the world of venture capital and tech accelerators

If the floor comes out (e.g. capital dries up), then tech founders will find themselves in "the emperor has no clothes" situations. The potential externalities of this are varied:

- A younger entrepreneurial business demographic who build initially unprofitable businesses based on venture capital and can no longer start businesses because there's no capital

- Entrepreneurs resorting to fraud (see -> Theranos, Hampton Creek, etc)

- Mental health issues, broken families, etc for people "crushing it" and realizing they're left with nothing 7 years later (see -> https://twitter.com/dhh/status/869361585613139968 )

- Fatigued investing community who no longer deploy capital because cap tables are screwed up

This is very true. Building on this, entrepreneurs also seem to make the mistake of taking a business idea that may work for something small, and pitching it to a VC. This usually involves taking an otherwise modest pitch and selling it as something that could change everything, forever.

I worked for a startup that did this. We took $2M to fund an idea that was going to change everything, but only in the .001% chance of hitting it big. Investors bought that pitch up. Over the course of 2 years we spent that money and tried to position the business to hit it big. In doing so, we forwent plenty of opportunities to grow the business incrementally; any time spent not aiming for the fences was a waste, because the business didn't have a future without a home run success. Taking $2M up front meant we had to meet absurdly high expectations for investors to return that money. Moderate success of the business meant a failure for investors. Even a sustainable business was a failure for investors. The only success story would be a 10x success.

In the end, we took a swing at the fences and missed. We had opportunity after opportunity to pursue revenue early, to grow slowly, to take on smaller customers. But we skipped all that because in the very beginning we lit a fuse by taking too much VC money thinking it would give us more freedom, but it chained us and ultimately ruined the company. Because VCs would rather have a ruined company than a 1x success (if VCs encouraged 1x successes, they'd see fewer 10x successes since fewer startups would even try).

In startup world, mediocre success meant failure. People don't understand that enough. You could make a useful product that people love, build a great company with great people and talent, attract customers, generate revenue and even profits. You could achieve all the hallmarks of a healthy, successful company and it would still be a failure in the eyes of some VCs.

> then it actually isn't very hard to bootstrap a business

As someone with a degree from Oxford (however much that may or may not mean) I find it tremendously hard even six years into it.

Here I am, 13 years in. Still hard, and getting harder even though we are bigger.

"The financial challenges remain the same, you just add more '0's to them."

And you can no longer cover payroll on your own credit card...

Lol. Well played (and been there).

I mean this in support of your business-building quest, not as a slight: the worst businessman I know is a Professor at the Wharton School of business. Your market, competition, and execution are orders of magnitude more significant than your in-classroom education. Keep pushing, you'll get there!

No offense taken. I just mentioned my education to give one data point about my background.

(and thanks!)

the absolutely batshit advice and business building strategy that comes out of the world of venture capital and tech accelerators.

Would you mind elaborating on this? What advice concretely are you talking about and what exactly is batshit about it?

I think the point is that while the economics might be sound in terms of anticipated risk, risk management, and expected growth; the 'folklore' that arises to relate that learned experience in a convenient, easily understood way is often only a shadow - a poor construct - of the experience that actually keeps these systems running.

Whether that's because 'trade secrets' or 'elevator speeches', whatever the reason, information gets lost, exaggerated, and permuted along the way. So sometimes it can easily become kind of batshit because of how far removed from reality - the actual guiding forces that sustain that economy, are.

I don't know if you can point out concrete examples, because for every concrete example there's probably a successful startup out there that followed that model. But the exception doesn't prove the rule in systems that are fundamentally opened, like the relationship between culture (consumer, startup, academia, enterprise) and the economy. That's because those rules (advice) influence the system.

You can't simultaneously account for the effect the advice will have on the system while following and dispensing the advice, unless the advice and it's effects on the system are immutable. But that's not how capitalism works.

Not OP but I would assume one of the issues would be building and growing a business while having no monetisation strategy, but chasing growth at all costs nevertheless.

Or monetisation can in no way sustain the current and future costs of the business.

There are many examples, like twitter, whatsapp, homejoy, various food delivery services, springpad... etc etc etc

Sometimes the strategy works though, for example Google and Facebook.

It seemed to have worked pretty well for WhatsApp, no?

Growing up I had a friend whose dad was a regular business starter. At first he had his own computer stores, which was put out of business by CompUSA, who sold parts cheaper than he could source them. Then he started his own internet cafes, which the ubiquity of broadband put out of business. Eventually he moved onto various profitable online websites.

The point is he made money every step of the way. You never heard of his companies, he never took VC, and despite starting companies at the edge of what was modern technology he never ran a "startup" by Paul Graham's definition, and he still made fuck you money.

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