The Advantage of No Funding (2011)
sive.rs
sive.rs
Coming from a bootstrap background, I feel that VC backed companies have a tendency to focus way too much on vanity metrics. KPIs that make the buisness look successful, without measuring real conversions. It's like building a business purely to make a nicer looking pitch deck.
That, plus way too much emphasis on the financial/equity structure of the startup. Founders are carving out employee option pools before making their first dollar. And this focus on equity/investment/reporting becomes the CEO's full time job, when it should have been dedicated to customers.
Well-run companies focus on the right metrics. Badly run companies focus on vanity metrics. There is some of both everywhere in the business world, not just among VC backed companies.
Problem is that no one knows which one is going to be the hit in the pack of 30. So VC's push all ceo's to grow as fast as possible to find out as soon as possible who will succeed/fail.
Great for the VC, too bad for the 29 unlucky ones.
Never be the agenda of someone else, be your own agenda.
I never understand why so few people see this.
While used as an example of bootstrapping, I have to say that one of my favorite desks ever was a solid-core door on cinderblocks.
You can adjust the height to your specifications with bricks or wood shims; the cinderblocks can become cubbies for holding various bits and bobs; you can paint the door whatever color you want cheaply; it can take a huge load, as I had two giant 20" Radius monitors on it.
I even experimented with giving the desk a slight upward angle with shims, which worked pretty well.
I think I have seen standing desks for not much more
At least the cinder blocks don’t add much cost at $2 each retail
Since you don't have to support giant CRT monitors anymore, unless you're one of those people, a hollow-core door does just as well now. Not that they're much cheaper. Nowadays, you have to haunt building demo sites and go dumpster-diving.
From it I made a standing desk, and a seated desk, both on four legs.
In my current home the same desks are now supported by two legs in front, with the back edge screwed to 2x4 mounted on the wall.
Moving again this year and will take the pipe but replace the plywood as it has a lot of screw holes, ugly holes for cables I made in a rush. Maybe, we’ll see. Seems like I’d have issues securing it since the holes are in just the right places already, but I might have a go in order to keep my desk budget at $300 in 2011 dollars.
The pipe is so sturdy I expect to never need to replace one piece of that.
I've since found the next best thing, which is the Malskytt solid birch table top on top of their $15 solid pine trestles.
It's a visual upgrade. I have two, giving me ~ 9ft of solid wood workspace for ~ $200.
I've also made my own custom desks but I got obsessive about them and built every feature known to man into them. The only thing I've done with these is drilled grommets for the cables. In reality all I need is a solid workspace that will last.
1. Bought two long butcher block countertops from Home Depot. Stained and sealed them myself.
2. Bought some IKEA bookcases and desk legs.
Finishing the wood was a lot of work. I ended up doing about six coats on each piece. But for a very good price, I know have an enormous 8'x8' L-shaped desk that looks gorgeous. I wish it was a little deeper since countertops aren't quite as deep as most desks (24" versus 30"), but it's mostly fine.
How many people lost their crypto-currency because the exchanges were written by people with no experience/training in development (or security specifically).
The counter-point is to buy in people who can do better than you can for less money. In other words, if a Developer can build what you need in 1 week for $1000 (in 90s money!) what would otherwise take you 6 weeks, are you saving money or wasting it? We don't always count our own time as money but it is if you could be much better placed to sell or market your business.
I was selling CDs from my living room. Making $300 per month.
It was the appropriate solution for the situation.
If they are okay with slower growth, those people will learn a lot, may build a viable business, and will not have to deal with the stress of dealing with the board and constantly raising money.
There are many, many 5-10 person companies (or less!) that have been bootstrapped, that make a lot of money, and that have very happy founders with happy customers, and whose founders have no pressure to sell out or do things they don't want to do. The main cost is patience and willingness to not be a glitzy success story in the papers. Nobody is paid to encourage you to take this path, except for you.
Ultimately, there is no golden rule. One has to choose what's best for your customers and your stage of growth.
> We’ve seen more than a few companies raise millions of dollars in funding, go out and hire an army of people in an attempt to grow faster. However, unlike most other software products, search tech is an inherently hard thing to get right. It requires a lot of tedious R&D iterations over long periods of time and it cannot be parallelized by having X number of people working on it in parallel.
> When a large team congregates around work that cannot be parallelized, we’ve observed that new work gets created to keep everyone busy - new nice-to-have features get worked on. This ends up adding complexity to the product. New team routines are invented because there’s bandwidth available. This ends up adding communication overhead and layers between users and builders and slows down the pace of innovation. This sadly becomes a vicious cycle that dilutes the core product.
(I'd go further than "diluted" - sometimes the essentials of the core product remain broken for years because all the energy goes to managing those side features, even though they don't work properly with a broken core.)
Right, this isn't really about whether or not you take growth funding. This is about minimalism and focus.
The fact that some people who take venture funds see fit to use those funds in a vain way, doesn't mean that you're forced to use that kind of funding in a vain way. Indeed, you're more likely to succeed if you use the funding modestly, with humility, focused on where it can provide the most business growth.
Most of them force it actually so they believe invested to the right company. The best VCs won't, not all VCs aren't though.
This is my experience. I literally watched the VC board at a previous company get mad at my then CEO for not spending their cash quickly enough.
Moreover - he was hardly the most fiscally responsible to begin with - exorbitant class A office space, expensive contractors, fully stocked kitchen and snacks, game systems and bean bag chairs in break rooms. Paying customers? Nah - not so much.
But they wanted him to spend FASTER. "you need to adjust spending to be at around a 6 month runway - currently you're at 18. That's too high - spend more!"
My thoughts on the process are two-fold
1. A short runway and high expenses offer opportunities for those VCs to double down in the inevitable next round sooner, at rates more favorable to them
2. They are gambling - they want to either hit the jackpot or bust. They do not want to sit at the table all day (for example, by running slow growing self-sustaining company)
It explains the behavior of VC-funded firms well though: they elected to receive VC funding, and they flaunt the results of that funding to justify it to others and themselves. It's part of the game. How will others know that you are successful if you are not showing it over and over?
https://reactionwheel.net/2021/11/your-boards-of-directors-i...
1. Spending more is easy, and it doesn't require exorbitant parties or perks. You tell marketing to increase their spend by sponsoring high-end conferences and buying out street-level ad space along major thoroughfares and transit. It gets quite easy to burn seven, even eight figures this way.
2. Of course the investors want the company to have a shorter runway, and it's not even about reinvesting in the next round. It's about control. The lower the financial pressure on the company, the less power the financiers have. The higher the financial pressure on the company, the more the financiers are needed to help ensure continuity.
Hard disagree. I certainly want to keep my customers satisfied and provide them with value, and they (along with employees and partners) are absolutely necessary to the success and continuation of the business.
But the number one consideration in any business are the needs of the owner(s), which may include financial, a desire to grow the business, family considerations, physical health, mental health, and many intangibles related to self worth, discovery, personal growth, creativity, and community.
If you can't find a balance, the business ends or gets sold. Or, the owner suffers damage, sometimes irreparable.
If your customers are only satisfied, that means you end up spending significantly more on acquisition and retention, because nobody is going to be rabidly loyal enough to your business to extol its virtues to their friends and family and colleagues and on social media. That hobbles your growth and virtually eliminates the potential for word-of-mouth. People don't tweet about how a product "is satisfactory and provides an adequate amount of value."
I'd recommend checking out an amazing talk on exceeding customer expectations[1] by a Seattle business coach named Brad Worthley. And I get it, anybody (other than John Madden) with "coach" in their title is almost universally someone to avoid, particularly when they start their talk by mentioning the books they've written, but this guy really does understand how those customer dynamics work. He ELI5s the whole topic, along with excellent anecdotes to show each of the concepts in action.
And I assure you, things work exactly how he describes. If you bend over backward for them, your customers will take care of you. But if you treat them as a "necessity for the continuation of the business," they're not going to care about you at all, which means they'll leave you the minute something better or cheaper comes along -- or the first time you make a mistake.
Do you own a real business, incorporated with real products, employees, P/L, etc.? If so, I would really like to hear your experience bending over backwards for customers and having the resulting social media and customer buzz solve everything. That's not the way things work in my admittedly limited experience (2 companies, one failed, one ongoing).
I haven't heard of Brad, but the thing that makes me hesitate is not the "coach" but rather the origin - Seattle - which is where a lot of the "obsess over customers" dogma originates.
Toward the end of 2020 I consulted with a handful of startups. Among many topics, my primary advice was to be as genuine as possible in all situations and to become "professional thankers." Universally, the ones who took that advice saw their growth skyrocket in 2021, while the ones who didn't are still wondering why they can't get traction. And they're going to keep wondering until they figure out that the personal connection between yourself, your employees and your customers is paramount, because that's how societies work constructively and successfully.
Whereas your owner-first approach is how we end up with every major company on the planet paying virtually no taxes, and selling customer data, and sometimes even literally colluding and plotting against users' mental health and well-being, never realizing that they'd be so much more profitable and personally enriched if they would only give a damn about their fellow humans.
I really hope in next years, with higher interest rate, financial markets downturns will bring attention to profitable and bootstrapped companies.
More capital is looking for returns and is effectively willing to take more risk (like funding VC startups) to find those returns since “safe” investments return almost nothing.
A brief note to your point: for many intuitives and creatives, a base net of safety is required to allow your brain to think outside the box. It even goes as far as to say with an abundance in resources, more creative things occur.
I've been suffering with you (in kindred spirit) for a few years now and am looking forward to attracting the resources to unleash.
Yes! So much free money flowing into startups that it can be hard to trust the rapid-ascent careers of people who just locked into that business early on and are now key, but only for that business.
The confine of having little to no funding forces you to be agile and creative.
1) get a loan - with good numbers, banks are easy(er) to persuade
2) put up a waitlist for new users (induce FOMO)
3) increase prices
Of course, these are antithetical to the VC mantra of maximum growth at all costs. But what's best for them is not always what's best for you.
If your bank isn't prepared to and you're struggling to handle the growth and you don't want to find an investor, maybe it's worth considering raising prices for new customers until you find a balance that works for you (or a balance that makes your bank reconsider)
One of the tradeoffs of not taking VC funding is often accepting that your growth is likely to be slower for all kinds of reasons, including sometimes being forced to intentionally slow it to a manageable level.