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Comment by j45 | Hacker News Reader

Bootstrapping is a self-funded startup that makes money from real paying customers, often from Day 1, or close to it.

Bootstrapping hasn't changed.. one test to being bootstrapped is: If they didn't get funding, would they run out of money and have to shut down?

It's not uncommon for a bootstrapped startup, which has baked 'making money' into the bread from the beginning, to accept funding to grow faster once they have a business model that's already making money. They already have a repeatable and scalable _business model_. Without funding, bootstrapped startups would continue to exist, and would most probably keep growing, though.

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I would argue that these companies represent "Companies that realized they needed to raise funding to remain competitive"

A lot of startups that taking early funding could take this route too but realize that's not the most optimal path to success?

I'm not sure what you mean.

A company that needs investment to survive is quite different than a company that's self-funded and profitable prior to funding, who decides to take funding to accelerate growth using the growth engines already discovered as a starting point.

Companies who raise funding, do so to start looking for a business model that scales, is repeatable, and generates revenue (and hopefully profit) because they don't have one already.

I think what he means is that even if the company is profitable now without making an extra push someone else could take a large portion of their market share by spending a lot of (VC) money.

Correct. I agree reading back I was a little opaque. These companies made it to profitability. But then they realize that they're a risk of not being able to stay at profitability, or even survive in the long run, without raising significant capital and thus invest ahead of revenues. I think the spirit of this post is to highlight profitable, bootstrapped, long term companies. It's questionable whether GitHub, BigCommmerce, Braintree etc are in that group.

I think there might be an assumption that a company can't stay at profitability without funding.

Profitability itself means having more money than you need to cover your expenses, and pay for growth.

If you look into highly profitable bootstrapped businesses, you'll see they are not at risk of dying without funding.

One thing I've always been curious about is how investing in a company like 37signals makes sense for an investor. I obviously don't know everything about their future plans, but it doesn't seem to me to be a company that's focused on generating an exit for an investor - they seem committed to staying at least relatively small, and a buyout doesn't seem very realistic. How would an investor expect to get a return on their investment?

More to the point, why would 37signals ever want to take investor money, much less need it? Surely, the founders are wealthy enough now that getting more would just be bouncing the rubble (see Jason Cohen's "Rich vs King"), so money is unlikely to motivate them. And from reading Jason Fried's extensive writings, it's very clear that they're more interested in making a company that's a truly excellent place/way to work than they are with making a company big.

The only reason to take investor money is to grow the business faster than you can with cash flow alone - or to sell it in order to become wealthy and/or go on to the next big idea. The 37signals apparently don't want either of those things.

I can imagine a line of venture capitalists basically begging for them to take some investment, and them just refusing.

DHH discusse that here: http://youtu.be/fPrvnlvnu-k?t=1h12m11s

He says it was just to take some money off the table, and should encourage the founders to stay in the game.

Cash flow: distributions/dividends.

So is any startup that has a sustainable business model from day one considered bootstrapped?

I would call a bootstrapped startup one that was entirely self-funded to begin with and had to operate under the bootstrapper mentality (cheap marketing, cutting costs, low employee count, etc).

Bootstrapping implies being self-funded.

To some who might have some seed funding, they might make sure the business is making money from day one.

One thing that was really attractive to me about the YC model (besides having PG as a mentor) was when there was only $10-20,000 of funding. You likely have little choice to focus on anything except making value for customers that pay. As other funding streams have come online the types of ideas have broadened.

Having no choice but to learn how to make money is how I had to learn business as a teen. I started in bootstrapping because YC didn't exist in my late teens or early 20's or I most certainly would have known it was a place for me to seek out. I had to learn to make money to pay for what I wanted to do when starting business full time in my late teens that was one valid way to make sure no one could tell me to go home because the money ran out.

In Canada, one source found that 98% of all startups across all industries are bootstrapped / self-funded. It wouldn't be surprising if this was largely true in other places too.

http://www.techvibes.com/blog/how-canadian-entrepreneurs-fin...

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