Bootstrapping (2019) | Hacker News Reader

Bootstrapping (2019)

mattturck.com

57 pointsr_singh19 comments

Not sure how widely held this view is, but for me the main appeal to bootstrapping is that I don't have to wait until the company is acquired or until I IPO to feel like I've "made it".

I would feel like I've made it if I can make the same salary I would otherwise make as a developer building something I actually care about AND possess a degree of ownership over it that feels more real. Everything else from that point is just bonus.

Being involved in a VC-backed startup probably makes way more sense if you really, really like wealth and money. It's probably the rational course of action. I don't want a ton of money though, nor be wholly guided by what's rational or logical. I just want to really live.

> But the world is a very different place now. Unprecedented amounts of venture capital money are now available to promising startups, regardless of stage and location

This should be taken with a massive grain of salt and skepticism. Capital is available to those who are either 1 or 2 degrees separated from the VC community. In my experience, the VC community is incredibly hostile and skeptics themselves, only entertaining leads that are at the very minimum, luke-warm. If you're a founder just starting out with no connection to the VC community, you're gonna have a really rough time just getting a meeting, let alone a term sheet. It's kind of ironic but again, this is my experience.

The perfect example being elizabeth holmes/theranos. Getting access to capital is about who you know, not what you know. It's mostly a privileged position but that's the case for most things in life. Whether we like it or not. We are taught that business is about merit/hard work/etc. But ultimately, business is about relationships.

While I agree that venture is still a very tight knit network, I disagree that you cannot penetrate the bubble. Easy feeders into the venture community include accelerators like YC/Techstars, relocating to a venture hotspot like SF/NYC, or finding traction and prominence on social platforms like HN/Twitter

"Easy feeders" = being the 2% that get accepted into YC, moving your life to another city or building a large social media presence...yes, easy.

And all of these need you to give 3 to 6 months of your life for free. That is nice and all, but i need to put food on the table.

I think the last sentence summarizes the unspoken assumption in the article:

> it takes incredible amounts of courage, grit, discipline and patience to build a major company without outside financing

Maybe I've been spending too much time on Indiehackers, but I don't think many bootstrappers are trying to build "a major company", in the vein of huge, VC-funded businesses. I think the end goal for many indie hackers is a company that pays like a great job, but with less work and more autonomy and fulfillment (a "lifestyle business") - not one that puts a "dent in the universe".

I agree, however I would even say that "less work" isn't always what people strive for. If it's your company then it does not feel like work, so hours don't matter so much. It's much more about things like: not having to sit through countless meetings with no clear purpose and lots, and lots of meaningless BS.

Agreed. In my case, daydreams regardless, I'm not expecting to build a multi-billion $ exit. It's more about building something useful for people, that I can control the direction of, and guide to some kind of "success".

Success here can be a nice side-income, but also just making a solid, valuable tool for customers.

I also think that many founders aren't trying to always 'build a major company' but instead want to 'do their own thing' and earn a living without being entirely beholden to corporate types.

Don't think that the 'less work' is generally the case, even if the idea might be nice, but rewards that correspond to work can be good. Autonomy must be a strong driver.

However, once bootstrapped and operating, that can seem like a distant dream if the business requires more staff, with admin and management becoming 'a thing'. Later, looking to sell the business can mean a whole load more work but if all the stars align well, can give a large return. Or not.

My reason exactly. Hard to do so, it turned out. I had time for one "pivot", which I am doing right now. Doesn't seem to work to good so far...

I'm currently building a company in the mold described in this article (slow and steady). So a couple of firsthand observations.

First, I think every business has a natural speed. There are some businesses that can be made to grow really fast. Others, no matter how much marketing spend/growth hacking you throw at it, just aren't going to grow quickly enough to be truly venture fundable. I've seen a lot of these businesses started and they flame out quickly when the founders raise a ton of VC, build this huge staffed-up company, end up with a cost structure their revenues can't support, then don't hit the growth numbers their funding requires. Fast forward 18 months, the company is sold for parts and everyone walks away with nothing (especially if there's a huge liquidation preference overhang). That said, I do think some types of business (esp with strong network effects) need VC.

Another major factor is whether the founders are craftspeople who enjoy making great products, or are more the kind of people who want to make as much money as quickly as possible and "exit".

I think the biggest obstacle I'm going to hit is hiring. These companies don't profile as traditional "hot" VC companies which will bring certain unique challenges around hiring. I'll figure it out.

Great article, thanks for sharing.

I’ve built businesses both ways and bootstrapping is FAR less stressful. After a certain amount of money the stress of being beholden to a board that wants hyper growth just isn’t worth it.

Having seen the inside of both venture funded and bootstrapped companies from the very early days, I have a lot to recommend bootstrapped. We raised money only much later for expansion once product, market, and revenues were certain and we needed to pour kerosine on that fire.

For one thing, bootstrapping forces you to be ultra-lean, there is no money (or people, or time) for flights of fancy or to develop any of the other pathologies of richly funded competitors. You’ve no option but to “keep it real” and that really forces clear thinking.

I bootstrapped my business because I think that the venture capitalist model is unethical. Digital services should be accountable to their users, not exploitative of them - and VC moves accountability elsewhere and uses exploitation to deliver the returns VCs demand. Bootstrapping - earning money directly from paying customers - means that the line of accountability is drawn directly to those who would be affected by your decisions, and incentivizes you to work in their best interests.

Sure, it might take longer, but at least I can sleep at night.

How does the nature of venture capital force companies to be exploitative of their users? This is only true for a super narrow category of consumer startups--social media companies (specifically like 3 of them). And the reason those companies exploit their users is because they can and the nature of competition, not because of VC money.

If anything, I think it's the other way around. Users are exploiting the VC-backed companies. Because there's so many investors reaching for yield right now, the money is abundant. Startups are burning through cash to acquire you, so you can reap the benefits.

I've got 5 delivery apps on my phone and rotate based on which is providing a credit. Ditto for ridesharing. When I was doing a short contract in a different city last year, I got a mattress from whatever mattress-in-a-box company offered the longest trial period, and returned it. I've gotten 3 months of WeWork credits for doing nothing. I could go on and on and on.

The gig apps are more broadly exploiting the population, if not their users directly. Workers rights are basically non-existent in these companies. And they're doing it for the purpose of driving their more fairly-run competitors out of business. What do you think they're going to do once they get that monopoloy?

> The world has evolved towards subscription models (SaaS, subscription commerce, etc.), and those are much more cash consumptive that the perpetual licenses or one time sales from before.

It might be obvious to the author, but why would these be more "cash consumptive"?

Generally, because all the sales & marketing cost (which makes up a big share of most large SaaS companies' expenses) is front-loaded, while the revenue is spread out over time.

When you spend, say, $10k to acquire a customer, and they pay you $25k for a perpetual license, you're cash-flow positive in year 1. When, instead, the customer pays you 10k a year and stays on average 4 years, the model is a lot more profitable over the long-term, but will cost money in year 1. Combine that with large growth rates, and the need for cash investment grows accordingly (even if the business model as a whole is perfectly sound).

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