Is Bootstrapping Becoming Sexy Again? | Hacker News Reader

Is Bootstrapping Becoming Sexy Again?

sramanamitra.com

27 pointsnewsit21 comments

Bootstrapping is always sexy.

Revenue and profits are becoming sexy again. Hopefully dividends too.

>>Revenue and profits are becoming sexy again

My brain knows that there were times and places where this sentence makes sense and yet I still cringe hearing it. Businesses are rediscovering that they are in business to make money. Next thing you know banks will rediscover that their business model is loaning money to people who pay it back.

I was talking more about VCs going after companies with business models than without. And based on what's happened over the past year, those seem like much needed reminders.

Dividends for who? Startup investors? Even conservative/revenue-centric startups have a staggering failure rate. What kind of dividends would be necessary for surviving startups? i.e. I invest $100,000 each in 10 scrappy/revenue-centric startups. 6 die or fail to generate meaningful profit (a much better rate because they aren't "swing-for-the-fences" startups). What sort of dividends would the other 4 have to produce to seem appealing to an investor to compensate for the fact that $600k is lost forever and $400k more is sunk into the survivors. I'd love someone to lay down some math that would make investors say, "Wow-- dividends ARE sexy!"... Any takers?

If you mean traded stock dividends, then nevermind. ;-)

Divvies don't necessarily decrease the value of the company. If you're startup is at a point where it could issue dividends, you could probably sell it as well.

I meant traded stocks, as many companies who issue dividends are trading at historic lows. Makes for good yields.

Depending on the situation it could bode well for some startups...

Also, sometimes there's no where else to invest profits (within the Company) without expanding outside of what you're good at (I think MBAs call this core competencies).

In general if you sell your company (or pieces of it) you will get something less than the net present value of all its future dividends, as estimated by the buyer.

You or your VC shareholders may choose to do so anyway because it's more comfortable and less risky to cash in earlier. But the party/parties who buy the company will demand a discount as compensation for the inconvenience and risk they're taking on.

Dividends?!? gasp

I've always heard about VC funds liking exits and The Flip, but what if your plan was to get good cashflow going and issue dividends... does the idea become less investable?

I was coming to make nearly the exact comment. Working hard, being frugal, learning how your business works and how your customers think, and getting money to provide something to them - always a good thing. Create junk and flip it for big cash will always appeal to the human desire to get something for nothing. But create something meaningful and get something for giving the other person a lot more they paid - Damn, that's sexy. I love business.

"Gone are the days when entrepreneurs boasted at cocktail parties"

Surely there is at least some negative correlation between "Good Ideas" and "Things Boasted at Cocktail Parties." The mythical (and hypothetical) cocktail party that pops up in everyone's mind once and a while is always a block on logical thinking.

Bootstrapping was never sexy. It's not sexy now. What's going on is that most VC firms have no idea how to actually identify themes or teams in which to invest and times like this expose them.

Unlike Dan, I'd love to get funding, even as we have a revenue model that doesn't require scale to get profitability. What VC funding does is dual risk mitigation - money reduces my personal risk of paying the bills and the very act of investing in the company makes the opportunity less risky by providing a cushion to try and make a few mistakes. I am, and most entrepreneurs, are grateful to bear less risk so that they can focus on making a great product.

At the end of the day, however, I'm well aware that eBay didn't need a dime of the Benchmark money they took, and that allows me to say no to the scrubs that come a-knocking.

My abundance of ramen noodles, lack of $$$ to take girls out on dates and bulging belly from giving up the gym membership all point to "no" on the "sexy" question.

go outside and run. works wonders.

I do when I can. City sidewalks wreak havok on the knees etc.

Bike!

It's nice to own 100% of your company and turn a profit, especially given the current economy, but you really need to have faith in the 'less is better' philosophy.

The pace of development feels excruciatingly slow when you have to multitask on everything. I sometimes wish I had someone's else millions to speed things up a bit.

Try not being a developer and having no movement at all. Having some money to pay a programmer would be nice ;)

we only have developers

Out of all the people that have filtered through the Hackers and Founders Meetup this past year, the only people that I know of that took funding were the 2 Y Combinator companies we had speak at an event last fall.

As far as I know, only one member has been actively looking for funding for an enterprise app. It may be selection bias. But, the rest of us are bootstrapping.

March 9 2007?

It really surprises me how many companies seek VC funding. I can't imagine giving away part of my business.

I understand that for some businesses to work they need to start off big, but IMHO loads of YC and other VC backed businesses just aren't in that boat.

Maybe I'm a different kind of business person though. My goal is to build a small business that will sustain me and my family and get me out of the office grind - seems like a much more realistic and attainable goal than the "go big and exit with millions" strategy :)

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