Our idea of success is all messed up
carsonified.com
carsonified.com
Bottom line: he says you can do it to, and he's right, but you have to really know your target market at the start (which he did with targeting Dropsend to the designer/agency market, that he knew well due to his work on BD4D) and have contacts in it to spread the word (at the start, eventually your client demographic expands)... but it isn't as easy as he makes it seem on a blog post based on one of his successes, when that formula didn't work out well for his other projects.
There are plenty of people in Silicon Valley working on mundane, income-producing businesses. In addition it has Googles.
Not to say that you are wrong, but what data do you have to justify that statement?
In which case it would seem logical to make x million the quickest and easiest way possible. I think many will agree its easier to do that building "mundane, income-producing businesses" than trying to create the next Google. In which case, keep the mundane apps coming...
It's also possible to have a mixed model, which is working very well for us. We do some consulting work but only pick clients that are interesting in terms of improving our products or doing work we like. This allows us to be profitable and work on our own interesting stuff without the pressure of concerned investors.
update - just to be more explicit, the founders of a business need not be involved in its future to make it successful.
I'd imagine 37signals is in that category too...it sounds like they're making a few million in profit each year.
I don't think I'll ever be able to see eye to eye with the people who put forward this kind of argument. Maybe we're talking about different things, or maybe we just see life differently. Maybe it's a lack of imagination, I don't know.
The $100 million, or 10, or even 1, isn't about the number of zeroes in your bank account, it's about freedom. Freedom to scratch my "itch to do something else". With the money, that can be bumming around and travelling, or it can be creating something I enjoy but which is very unlikely to ever pay the rent, or it can be trying to start a second $100 million company, or it can be "a small web app business". Without the money and with a small web app business, it can be... a small web app business.
In other words, running a small web app business is all you need to be happy, as long as what you need to be happy is running a small web app business.
bottom line: if you're going to be doing the same exact thing whether you have 10 million or not, just give me the 10 mill. I guarantee I won't be doing the same thing.
The work should be the reward itself. You shouldn't be creating a product because you think it will make you $$$. You should be creating a product because you think it will have a true and substantial positive impact on the world.
I remember when I visited France, one of the things that really struck me, was the number of shopkeepers I met, who owned their shop, often selling stuff they had a hand in manufacturing, and had decided that this was what they wanted to do with the rest of their lives -- to create something beautiful and share it with others who could appreciate them.
Is this attitude because they know that if you get old and have no money in america there will be no one to look after you? I don't know.
Their example re: dropsend and how they're turning a $200k profit with no additional time or effort is impressive.
It's much harder - possibly impossible - to measure the success rate of bootstrapped ventures, because the boundaries are much fuzzier. For example, my current venture started with 5 founders (none of whom are still with it) and is now just me. We've launched 3 websites, all failures, and have one still under development. If the new website succeeds, should this count as 5 failures, one per founder that left? 1 failure, treating the original founding team as a failure and me as a success? 0 failures, since none of the other 5 founders quit their day jobs, and so it was just a hobby for them? 1 failure, since one of the other founders committed significantly to this and did a lot of work for it (even while still holding his day job), yet the other 4 didn't really care? 3 failures, one per failed idea? 1 failure, since two of the failures were launched while we were all still at our day jobs? 0 failures, since it all worked out in the end? 2 failures, since the hypothetical success builds upon one of the failures? 5 failures, since there were a couple other hobby projects that weren't intended as startups but might've become so had there been interest?
With VC, there's a clear delineating line between startups. You just go by the corporate entity, which must exist for them to take investment. But bootstrapped startups frequently don't incorporate until it looks like they'll be successful, and often success comes from accidents.
And by many of the definitions of bootstrap failure, the big VC-funded startups are failures too. My first employer (VC-backed) went through 4 business plans in the year I was there. Paypal did too, as did Flickr. Should those be counted as 3 failures and 1 success?
I'm skeptical about any sort of statistical data anyway, because (as with any economic data) the act of publishing that data changes the data itself. If a study comes out showing that you should not take VC money, there will be a flood of entrepreneurs into those markets that can be serviced without VC funds. That'll necessarily drive down success rates, as the market becomes oversaturated, competition drives down margins, and bootstrappers find it unprofitable to continue. Similarly, if a study comes out showing that you should take VC money, there'll be a flood of entrepreneurs into the markets that are considered "hot" by VCs, like what happened in social-networking/bookmarking in 04/05. That'll drive down success rates, companies will fold or be acquired for peanuts, and the next study will say you shouldn't take VC money.
If the new site succeeds the whole thing is a success. Who cares about the failures? Certainly not you.
Once you succeed the narrative will immediately fall into place. Your earlier "failures" will turn out to have just been stumbling blocks, correctable mistakes, and/or learning experiences along the road to success.
Which just makes your main point stronger: You can't rationally measure the "success" or "failure" rate of "ideas" until you define "success", "failure", and "idea" -- all of which are arbitrary and vary from company to company, from founder to founder, and from time to time.
One should be skeptical of any statistical study (didn't you know that 60% of statistical studies are flawed? :) ) but I think it would nonetheless be interesting to analyze a larger data set of startup outcomes to answer the VC funding question.
I'm not saying that you're wrong, but you must be eating a lot of salt, because the opposite advice -- "take VC money" -- also suffers from selection bias, despite the eloquent efforts of Philip Greenspun.
This is one of those situations where science lets you down. I guarantee that if you wait around for a real study of any given market, you will forever be ten years behind the curve. (I think people are still just beginning to understand what the dotcom boom of the 90s was really about, for example.)
And when you do finish collecting and collating and interpreting all the data, and you make your Spock-like decision about which path to take... you'll probably be miserable, because it will turn out that the most rational choice is to become an accountant, but you fscking hate tax forms.
Taking VC money is one way to build a company. Angling to be bought by Yahoosoft is another way to build a company. Aiming for independence, small size, and modest profitability is yet another way. All of these strategies fail more often than they succeed. The most important difference between them all is probably which kind of failure will make you happiest. All else being equal, I would probably rather fail to build a modestly profitable Basecamp-like app than fail to win a million-dollar VC dice roll... but all else is never equal, so it depends on the circumstances.
IMO, if you think you have an idea for a Basecamp-like app that you can develop quickly with no outside investment and sell enough subscriptions to make it self sustaining, go for it. It's probably a safer strategy than betting on a 100mil exit in VC funded company. However, it's also possible that 37signals has picked a low-hanging fruit the likes of which aren't always easy to find and that the "avoid VC money" advice doesn't work for companies that need a longer runway to profitability.