Highly Successful Bootstrapped Startups
softwarebyrob.com
softwarebyrob.com
I realize that there are exceptions and there are ideas that need funding to get going, but the whole incestious culture of venture capitalists, investors, and startup idea owners often doesn't foster real innovation. It instead lines the pockets of a select few with millions of dollars. Just a slick redistribution of wealth.
There are some businesses that you could simply not start without significant upfront investment. True, there are lots of businesses you could start with just very cheaply ($100's or $1000's) and grow organically over time. The easiest of these would be paid online apps/services where you could scale your expenses (servers, bandwidth, etc) with revenue. But some businesses need money upfront to get started. The most obvious example would be anything involving hardware. You could bootstrap while building a prototype, but you would likely need outside investment to manufacture and distribute your product. Even a web only business might need lots of investment to break into a market through advertising or partnerships.
I'd argue the end goals you mentioned can be harmful to the startup itself (not to mention the tech community), but that's a different debate. If your goals start smaller, you don't need funding in most cases.
You can see a list of interviewed companies at: http://37signals.com/bootstrapped
Lets cut the bullshit guys. You're "highly successful" when you're able to pay yourself and your employees above market rate salaries and retain profit for growth.
Edit: ...as well as being able to start making a dent in the debt you may have accumulated during the cash burning phase of your startup. If you want a really fucking scary exercise, plot your cashflows to date and do a NPV or IRR calculation on the flows. You'll have quite the come-to-jesus moment and will realize how deep the hole is you need to climb out of before you can call yourself successful.
"Looking deeper, turns out he's no longer pouring cash into the company, but unable to pay himself a salary."
Replace "company" with property and "salary" with capital gains.
Does it make sense now? He (and probably many others here too, including me) sees his startup as an investment and once an investment starts paying off by itself (break even), I will definitely declare it profitable and trumpeted it as a huge achievement. Why? Cause this investment is paying for itself and I can potentially sell it or earn more off it without bleeding any of my cash into it. Trust me, when you reach that position, you will be a very happy man.
You've failed to take into account the opportunity cost of your time spent working on the business. Lets assume your labor costs $120,000 a year and the company is not paying you. So it's costing you $120,000 a year.
Sell that "property" as you call it, to someone else and it'll cost them $120k a year to replace you or pay you.
The investment isn't paying for itself, there is no capital gain and the reality is that you would have to pay a buyer to take it off your hands so they could lose money at a rate of $120k a year.
At this point in a businesses evolution you're losing money at a terrifying rate and unable to feed your family because you're working for free, but hey you are profitable because you've managed to pay your $20 a month Linode hosting bill.
Dude, I don't want to crap all over your parade or the OP's. But unless we know what we're all working towards and what the definition of success is, we're lying to ourselves and each other and there's no way to measure whether we're making true progress towards meaningful goals or not.
A dire misunderstanding of business cashflow like this poster has demonstrated makes me worry for all the starry eyed kids on HN starting businesses. They read shit like this and gobble it up as gospel. Then they dedicate years of their lives to working their asses off for very little pay, thinking they've achieved meaningful milestones on the way to generating wealth and creating jobs, but the reality is they're wasting their time, wasting investment capital and are a distraction from truly productive endeavors and truly talented entrepreneurs.
What perpetuates this cluster fuck is the monthly talent acquisitions that Google, Facebook and other heavyweights make getting conflated with job creation, innovation and the creation of new cashflow. Building an entity that attracts top talent into a single room and selling that room full of new-hires to google for $2 million an engineer has nothing to do with entrepreneurship. Are you hearing me Levchin?
Successful in having their baby at least pay some bills is a milestone. Having it pay your bills as well is another, then having it pay for your future generations is yet another. Success is an arrival at a predefined milestone, may it be anything you so choose to predefine.
37signals, while being a good group of people, seem to have found success in a way that I'm not sure is as easy to repeat as some of those companies that just crank away doing their thing and making their money without needing a hugely followed blog, books, web frameworks and the like. This makes me a bit dubious of some of what they have to say.
That said, I've noticed some of the advice (mostly about marketing) doesn't really apply when you're just starting out.
So, this lack of coverage should come as no surprise.
(I haven't seen Balsamiq post detailed revenue and their breakup lately.)
I would say do what feels comfortable to you. Most likely, it is to keep revenues etc. secret. Revealing those details might get some eyeballs in the short term but not customers.
If HN users aren't your customer base, then coverage in TC or HN frontpage will do nothing for you. It may stroke your ego, but it won't pad your pocketbook.
I don't really see myself talking about revenue numbers for my company. Not sure how I benefit from it besides the ego and status boost which isn't interesting to me.
I think the lopsided press coverage of VC-backed vs. bootstrapped makes sense when you think about the incentives: VCs are focused on liquidity events (acquisition, IPO), so their startups might aim to be in the tech press and divulge details about revenue, growth, etc in an effort to pump up their valuations.
If you run a profitable bootstrapped company and you are reaching your customers, why speak to the tech press and discuss your financials? It would attract competition and I can't think of any upside.
I don't know about disclosing financial details, but the answer to the rest of your question is ego. Many people succumb easily to the desire for social recognition, even at the cost of strategic advantage.
Speaking from personal experience, it is sometimes difficult building a solid business that goes completely unrecognized outside of your own customers. It's a normal and accepted part of doing a boring business, but I can at least understand those who allocate resources to the pursuit of a little bit of ego gratification.
I love the story behind GitHub, they managed to live to a few bucks, and with patience all their effort is paying themselves, not having to share their effort with others.
Congratulations to those guys behind those Bootstrapped Startups.
Reminds me of one of the lessons from Soul of a New Machine: forced scarcity can breed creativity. Too much money allows you to defer hard decisions for too long.
But, I wrote a distributed database and when we show it to prospective clients and they compare it to the competition and they benchmark it, we always come out on top in terms of performance and architecture. So, although it's not "happy times" right now, it's worth it.
It might be too much to ask, but I wish I could see/know revenue or profit for all the companies on the list–especially the freemium ones.
Consulting is also a common way of bootstrapping a company (see Joel on Software for his history of starting Fog Creek this way), because you use consulting revenue to keep the company afloat while working on an actual product in any time you have left over. The goal is to grow the product to where you can build a revenue base from it and wean the company off of consulting revenues.