Hacker News Reader

Comment by danvoell | Hacker News Reader

Define Bootstrappers. Just people who don't raise money after your initial investment? Also, what percentage equity do you take?

View on HN

Bootstrappers = people who haven't raised money yet, and don't wish to ever raise venture capital (i.e. institutional money). Typically it's folks who have an idea for a nice "base hit" business that can grow to $1M-$10M in ARR, but could never get traditional VC funding.

Percentage equity => We're working on that now. More info to come.

Hello Rob,

  institutional money

And what is the definition of this one ? :) Won't TinySeed be institutional after funding businesses ?

Or are you saying that TinySeed will be a social platform for connecting angel investors to boot-strappers ?

Oh, Good question. Technically we will be institutional, but not by the traditional definition that implies a series A, B, C, etc. then an IPO or large liquidity event. With a valuation north of $100M, etc. The typical "Unicorn" play where 1 startup returns 100x the fund so all companies backed need to have that potential.

TinySeed will be able to back companies with smaller aspirations, but that are much more likely to succeed, and don't aspire to get on the funding treadmill of raising every 18 months.

Alright thanks for the explanation. Are you focused on USA ?

don't wish to ever raise venture capital

How can you know? What happens if somebody wants to raise VC money after raising money from you?

could never get traditional VC funding

Which one is it then: founders who dont want to raise VCs money or founders who could never get it?

Either one. It's more about a founder who has decided they don't want VC money, or the idea is such that it could not raise VC funds (because it doesn't have the potential to be a unicorn).

You know, it used to be that being a good VC fund meant picking out the diamonds from the rough - companies that had small ideas, but could grow into becoming big companies. Most big tech companies today pivoted into their current models from small-focus ideas, and those small-focus ideas are important because it what gets you quickly to market so you can start iterating and finding PMF.

The point being, I'm not sure how you're really differentiating yourself from any other seed/pre-seed investor. If you're really bootstrapping, then even if you're looking for resources, you're not looking for investment (and the loss of control that comes with it), at any level. Why should someone philosophically limit themselves to seed funding? Does your potential investment view seed investors as having different perspectives than VC investors, i.e. not seeking as quick an ROI as possible? Does anyone really start a company anymore seeking to give up control to VC investors as quickly as possible?

If I were you, I wouldn't say that you're focused on bootstrappers per-say, I'd say that you're focused on companies with limited growth potential, where there are profits to be eked out but not large ones. Your investment model, therefore, recognizes that successful portfolio companies will not re-invest profits back into growth, and you should therefore seek to make back your investment by capturing first future profits, rather than taking equity (which may not fly with bootstrappers).

Hi there,

I think you're right that a lot of big businesses grew into big ones.

However, our thesis is that if you're early stage, there really aren't a lot of places where you can pitch for funding for a business that does not have a shoot for the moon focus.

For example, I don't think ConvertKit would have gotten any kind of VC funding when it was doing $3k MRR (and he was considering shutting it down). Now it's doing $1M MRR and money is probably getting thrown at him.

You've probably already thought the following but just in case:

"A year of runway" will vary by individual. Thus part of the infrastructure for your accelerator should be a series of locations where costs are minimized. a.k.a. We know a great hacker house in Kansas, or "we've done the numbers and if you want to work out of Mexico, you still save money even if you need to fly to California once a week."

You might also consider a structure whereby participation also offers health insurance as a bunch of individuals / tiny companies buying market rate care is usually not an efficient use of capital. This will also attract a more mature crowd who (testable hypothesis warning) might be particularly good at building this kind of business.

These are good suggestions, thanks! I'm noting them down...

People I know who've been through YC tell me that one of the most valuable and continuing pluses is the social network for YC founders, I believe they call it BookFace? Definitely consider doing something similar. Since you don't compete maybe YC would give you the source code?

Offering health insurance is a great idea. It probably wouldn't even be that hard. Set up a subsidiary of TinySeed to employ all the founders on W2 and then set up that subsidiary on something like Justworks that offers cost effective group health insurance. Part of the runway could be delivered as W2 salary.

Probably a little off the beaten path: However, I know of government supported accelerators/incubators in China that will give free office space and a small stipend for foreign companies to register and work in some cities. Combine this with tinyseed and you are looking at a nice runway.

I would suggest converting to a fixed dollar amount and fixed amount of equity. It encourages people to make choices that are efficient. (i.e. $200k -> 20%)

You also probably want to organize group discounts for basically any common service you can. (i.e. Insurance...but not just health. Business related insurance products. Hosting/CDNs will often offer discounts for larger groups/dollar amounts)

It probably will be easier to get those sort of discounts if you have a fixed start/stop date for an entire group as well since you can buy in bulk up front. (i.e. Jan 2019 -> Jan 2020)

Bootstrapped would be any self-funded, usually single-person-founded, company. You might have revenue or not, but the key component is that you are doing this on your own time or money. Not VC-funded.

Don't know what equity take they have, I'm guessing it depends on the size of the investment.

Reply on news.ycombinator.com