Why This AdTech Startup Turned Down Seed Funding | Hacker News Reader

Why This AdTech Startup Turned Down Seed Funding

forbes.com

11 pointsalexsherman5 comments

"“Whenever you bootstrap a business revenue becomes that much more important,” says Sherman. “You become very business model focused, very sensitive to cost structures and it really does force you into a kind of diligence with regards to financial performance and managing your costs.”"

That is the key, staying focused. Seed or no seed round it doesn't matter, if you raise too much it is very common to lose focus. I once explained it so someone that its like going into the grocery store with a limited amount of money to buy enough groceries for the week, and going into a grocery with enough money to buy everything in the store. The first person gets in, gets what they need, optimizes for cost effectiveness and gets out. The other person wanders the aisles imagining all of the different meals they could make, without actually deciding on a single meal to make.

There is no reason taking seed precludes you from putting your own skin in the game. Nor does taking seed force you to not do things your way. This doesn't read like they had a choice, because their reasons don't align with why you wouldn't take seed.

Typically the companies that say "we are doing this bootstrapped" rather than taking seed, are companies that don't need money to get started, they need dev time, or they can start profiting form labor/sales right away.

You want to boot strap a HomeJoy for Llama sheering? You can buy $100 worth of software, $10 a month in hosting, $300 in graphic design, and be up and running. You'd only take money to get advertising. Why give up 25% of the company for that.

You want to build the first software capable of predicting NFL games, all you need is dev time, so you keep a part time job and code while you ignore your family and girl friend. No need to give up 25% for money so you can get it out 3 months earlier because you don't have competition.

Their reasons made very good sense to me. I read their comments less as statements of precluding or forcing and more about incentives and focus.

I'm a big fan of the "tie yourself to the mast" (Odysseus and the Sirens reference) approach to managing yourself or your team. Many times the strategy of intelligently removing future options for yourself in order to eliminate distractions and temptations pays off very well. You've removed a path that you can see may be taken in moments of weakness.

The business plan you develop because you need it will be better than the one you develop because you know you should have one.

If you see people as Galts or Ubermensch or some kind of rational actor then this seems crazy to you. Why limit your choices when you can remain flexible in the face of an uncertain future?

If you acknowledge that you yourself are subject to coercion by incentives, that willpower is a depleteable personal resource, that paradox of choice type situations carry a cost? Then it makes a lot of sense.

Of course, as you pointed out, there are a lot of projects where this choice simply doesn't apply.

My friends company did the same thing. Probably the best way if you can, he does very well in ad-tech.

best logo I have seen in a while :)

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