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Comment by sjwhevvvvvsj | Hacker News Reader

Bootstrapping a business with my savings to retain full control is both the wisest and hardest thing I’ve done.

I don’t understand why people are so quick to start giving up control out of the gate for software companies. Servers are cheap, it’s not like in say, manufacturing where you need a factory.

You’re gonna let some VC bro tell you what to do for a SaaS product? Why exactly? Just go to market on the cheap.

I’ve had every quarter profitable since founding, and never taken a dime in VC. I’m not going to be a billionaire, but that’s fine, I want to chart my own path.

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Bootstrapping requires a rare breed of founder who is financially secure enough (or frugal enough) to manage life on a reduced salary, capable of building useful products on a budget, and willing to risk the missed opportunity cost of a cushy Big Co position. In my experience, the hardest thing to master is the actual building - plenty of people are bootstrapping "theoretically useful" inventions in basements/garages/etc, that don't solve actual problems. Such people can really benefit from VC oversight and business acumen.

I don’t know that it’s really that rare. I look around and I see people with the fiscal responsibility, knowledge and ability to get things done in every quarter.

Depends on your circle. Most of my peers have families and mortgages, and don't have inherited wealth or sufficient savings. They are fiscally responsible but bootstrapping a company requires more resources than just being sensible with your money.

Absolutely right. My point is just that it isn’t that people couldn’t, but that they can’t. The former meaning that people generally do have the needed skills, the latter meaning they don’t have the opportunity.

> Such people can really benefit from VC oversight and business acumen.

Would it not be financially more prudent to hire/consult experts, particularly if you can get access to a startup/accelerator program? Even without easy access, there is no dilution of ownership.

It is not easy to hire/consult that level of person though. They are too busy being VCs

Thank you, that makes sense.

I run a bootstrapped business and I hear you. However, VC Funding can make sense for certain cases. I do think that too many people raise VC prematurely. The best path in my opinion is:

0-PMF/100 customers: Bootstrap it

PMF-Scale: VC Fund if you can show 100% growth each year and forward. If the market is big enough (TAM etc), This can become a billion dollar company and for this to happen fast enough, you will need funding. Also, the reason you need funding here is because it is very tough to scale a business slowly. Either you grow fast from here or die/stay average growth.

Again, like you said, nothing wrong with "chart my own path" but VC funding has its needs. It's just that most people try to raise funding way too early and hence cannot keep up with the growth requirements and eventually either die or sell/pivot for peanuts.

> PMF-Scale: VC Fund if you can show 100% growth each year and forward. If the market is big enough (TAM etc), This can become a billion dollar company and for this to happen fast enough, you will need funding. Also, the reason you need funding here is because it is very tough to scale a business slowly. Either you grow fast from here or die/stay average growth.

This makes sense, but I wonder how truly "necessary" funding is. I understand that funding very (relatively) quickly can help turn a "eating ramen for dinner" salary to a a-regular-job levels of salary which is very good. But is there a business risk to grow "organically"/through word of mouth? Assuming it is possible to grow the company only working part time (which is admittedly a very big assumption), bootstrapping sounds slightly better.

> It's just that most people try to raise funding way too early and hence cannot keep up with the growth requirements and eventually either die or sell/pivot for peanuts.

Thanks, that's insightful!

The business risk is that another company with more money and therefore resources will see your PMF and will move faster to capture the market.

Thanks, that makes sense. I would imagine patents could help somewhat but from what I've learnt they're not cheap and can still only help so much.

The thing with Funding is that you shouldn't really need it but it's more of a fuel when there already is fire (aka PMF). Once you have the fire (most people fail to get to this point anyway), then you decide if fueling that fire with VC dollars make sense or not for your goals.

The problem is that lot of entrepreneur need funding to even start because they don't have enough resources to start something (may be they need cash, people etc). But VC dont fund because you need cash. They fund because you are able to convince them somehow that you are building a unicorn.

Thank you, that makes sense. Btw is PMF = product market fit in this context?

> They fund because you are able to convince them somehow that you are building a unicorn.

I'm admittedly very naïve about this, but do they really expect this all the time? (Especially in physical and non-digital markets?) If you have a healthy growth and projection but no plans to say exceed 100M are you limited by how many VCs are interested?

The big VCs typically will expect extreme growth, because the big wins are needed to make up for the losses they will incur on many of the their other portfolio companies. That said, there are smaller VCs and private equity firms who will be happy to fund companies with lesser aspirations. Just don't expect comparably big valuations and you'll likely need to cede more control for less money.

Thanks!

"do they really expect this all the time"

This is an interesting question. I don't know if they believe but they def want to believe because without unicorns, they won't survive as most startups fail or have mediocre returns which is not enough for VCs to justify to their own investors/LPs.

Thank you, that makes sense.

It works as long as you don't have funded competition. Especially if they start giving away the thing that you charge for. Then you need to have deep pockets to wait it out.

Therein lies the rub, but if you are turning a small, but real profit, and you then need a cash infusion you’ll retain far more control if you already have proved you can make money.

Been there, done that and no, you're wrong. You won't find any investors if there is already a very well funded competitor that gives away the same product. They will spoil both the market and your funding chances. You can only get that funding before such an entity appears, afterwards it's a matter of patience until they inevitably self destruct.

I’ll keep that in mind. Thanks.

(Also, FWIW my revenue is diversified enough that I can weather some storms in one area or another.)

That last point is worth gold.

I presume this would not really apply to "mature" hardware markets with a large number of companies already present and selling?

Entering an established market as a start-up is a completely different ballgame than 'greenfield', both funding wise and how you need to tackle the whole problem.

Thank you, do you have any recommendations for learning specifically for established markets? Eg books/podcasts etc

I'd seek out the founder of a company that did this and succeeded. Most don't!

Thanks, appreciate it!

In a nutshell: it's war from day #1, the only advantages you have is that you are more nimble and have less burn so changes in conditions will work to the detriment of your opponent. But they likely have more capital and a solid revenue stream as well as more mindshare with their customers.

If you ever plan on going head to head with an incumbent I'd take a leaf out of the playbook of the flea, find a single customer somewhere that you are going to make totally happy whilst conserving those two advantages, keep your burn down and focus on the speed of your turnaround in the interaction with the customer. Then, when your customer runs out of ideas for you to add to the package generalize as much of it as possible and pull in customer #2. Never retire a feature that you built for someone else but do focus on the emerging 'core platform' of features, the overlap between your customers and move peripheral stuff into its own environment (in software: a separate repo with customer specific stuff).

With a more physical product it's going to be harder (but then, everything is harder with a physical product) so you'll need to either go slower or have deeper pockets.

Another reply, much later, hope you'll see it. It kept nagging me because I thought I had written about this, here it is:

https://jacquesmattheij.com/how-david-can-beat-goliath-small...

Would you feel comfortable telling a VC-funded business about your market? Or having one find you?

It's a dark forest. They see you, they covet your traction, and then they raise to outmaneuver you.

You might win, but that's a tremendous amount of stress dealing with a better-capitalized foe.

This also assumes you have the skills required to get your business to the point where it’s self-sustaining.

If you don’t maybe you shouldn't be starting a business in the first place.

The number of “zero interest rate” business that’s still need to be culled is too damn high.

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