Comment by paraschopra | Hacker News Reader

Comment by paraschopra | Hacker News Reader

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My experience of bootstrapping vwo.com for the last 5 years has been the most phenomenal experience of my life. I've realized that constraint for our growth is not money, rather learning and understanding what matters in business and what doesn't. It's slow and gradual learning that I'm enjoying the most.

Last year, I was exploring whether funding could help us grow faster. Talking to VCs and the firms that got VC funding gave me the perspective that raising funds is RARELY a one-time thing. Once you raise funding (and dilute 25-30% of your company), no VC wants that money to be sitting in your bank and earn 0% interest. So your burn rate increases exponentially and most VCs want their funding to burn within 18 months. This means that in order to sustain the company you'd have to raise the next round and dilute another 25-30% of the company, and this keeps happening until exit/IPO where the investors typically end up holding 80% of the company and pretty much controlling its destiny. And remember it was who you toiled day and night to make your dreams successful.

Someone who had raised funding advised me - as long as things are going fine, you the founder are in control of the company. And if you're not growing fast-enough (think 100% year on year), the investors are in control. It's not that VC money is bad per-se, however, I think losing control of your company as a consequence of external funding is bad. Disruptions happen, new competitor emerges and you could be thrown out of your own company.

For us, having HQ in India gives us a good cost structure (although funding scene in India is changing that fast, salaries are getting through the roof) so we've been able to fund, reinvest profits and grow the company profitably (and have a nest egg for worst case). However, given the costs in SF / bay area, I'm not sure how would one go about bootstrapping a company for long. Would love to hear thoughts from fellow bootstrappers in high cost-of-living cities/countries?

PS: A bootstrapped company I really admire is Zoho. They're 1700 people and they say they have two IPOable products within the company. Very admirable.

Paras, great answer. Zoho founder in one of his interviews said that it is possible to drive down costs of a mature stable software product by following model similar to theirs. This can be a key differentiator for such products. What is your opinion on that ?

Paras, huge fan of what you've accomplished. Were you a solo founder or did you have co-founders when you started?

I started alone and worked alone for 1+ year, but after that Sparsh came onboard and joined me as my business partner and our CTO.

VWO is an excellent product. Thanks for sharing your story.

I would like your advice. Often I feel like I'm doing so much, I'm throwing everything and trying everything but nothing seems to stick. It feels like I'm not getting anywhere but very very subtle and small increments I see changes.

It's at this stage where the stress is greatest. You feel like you are ineffective, you start to doubt yourself, doubt your vision, you look at your competitors and feel less confident.

How did you manage this?

More importantly, what worked well when it came to marketing as a bootstrap company? Often the results are hard to see, for example, writing content, getting eyeballs to it is hard enough but not sure if the time and effort invested is worth it.

Lot of other questions, but mostly, that leap from being a one man company to hiring others, that's the most challenging part for the early stages, what would you say to those that are in this phase?

> It's at this stage where the stress is greatest. You feel like you are ineffective, you start to doubt yourself, doubt your vision, you look at your competitors and feel less confident. How did you manage this?

On the stress side, the way I manage is that I see bootstrapping v/s raising funding as a tradeoff between slow growth, higher chance of controlling your destiny v/s fast growth, higher chance of fizzling and higher chance of giving up control. Since it's chances and not certainties, what might seem successful competitors today might just be a matter of time. And what might seem struggle today could be totally worthwhile tomorrow. Since there are a number of variables that influence startup success, I think being clear of why you are bootstrapping v/s raising funds relives of a good amount of anxiety.

Anxiety is at peak if you want to raise funds but can't, and hence are forced into bootstrapping.

>what worked well when it came to marketing as a bootstrap company?

I wish there was a simple answer. Content worked well for me in 2010. But I hear that it no longer works.

I would argue that content still works, it's just that the bar is higher.

can you elaborate what you mean by bar is higher?

Sorry, I'm not sure if you want me to address the colloquialism or the statement so I'll address both.

"The bar is higher" essentially means that a task is more difficult than it previously was.

In the past it used to be easier to create low-medium quality content around a subject and be ranked well for specific phrases in search engines. This has gotten progressively harder to do and will likely only get harder going forward.

However, if you create high quality content in the area around your product then people will seek it out and you will also get the benefit of good search engine ranking. High quality content can vary, but it is essentially stuff that truly adds value in the area of your product.

You can look on Hacker News and other similar sites for companies that are doing this well. In some extreme cases you even have companies generating content that doesn't seem to be remotely related to their product, but it is still getting eyeballs and very likely sales (e.g. http://priceonomics.com/ and their blog).

In addition to blogging and generating content you should also be spending time cultivating and nurturing an email list of potential prospects.

Does this take a lot of time? Yes. I believe that it is a generally accepted rule that you should spend as much time marketing as you do developing. This is something that is easy to say and hard to do though. I know that even I, a full-time digital marketer in my day job, spend more developing my product than I do marketing it.

Yeah you addressed it fine. It's interesting that priceonomics seem like a blog directed towards their web crawling service. This is a very interesting play.

What most people don't realize about VC is that:

First, there are two VC industries. There is the one that funds biotech and clean-tech and there is the bubble-centric consumer web one that gets all the press here. The first exists to fill a gap (R&D projects that the mainstream private sector is too cowardly to try) and isn't sexy because the upfront capital costs are very high, meaning VCs take a lot of the money, meaning that founders becoming billionaires is next to impossible. But on the whole, the VCs in that sector are actually pretty ethical. Obviously, they're in the game to make money, but they're trying to make it the honest way: by capitalizing good businesses. The second, sleazier VC industry-- the one with the slimy co-funding/back-channeling culture that funds a lot of stupid ideas and frat boys-- is the one that gets all the press here.

As for that sector of VC, they're in the business of taking strategies that are profitable but illegal in public markets (e.g. market manipulation, insider trading) and applying them to private stocks that are less well-regulated. They encourage (and, sometimes, demand) extreme risk taking because they don't really care which businesses go up and down, they just want volatility (for it's own sake) in the market, never mind if this leads to bad decisions and damages the careers of people they view as peasants.

The slimy consumer-web build-to-flip VC will also never leave California. Why? Because a lot of the note-sharing that VCs engage in is illegal and simply can't be done except in-person, because it would be too devastating if the phone logs or emails ever surfaced in discovery. For one of many examples, they make a lot of back-channel reference calls in deciding whether to fund someone, and it's a well-known fact of HR that the main (if not the only) reason to make a back-channel reference call is to violate EEOC provisions.

Didn't see the username and while reading the comment a thought came to mind - this seems like something Michael Church might have written. Looked up and it was indeed Michael Church

I agree with the extreme risk-taking part 100%. VCs (and that's a bit of a misnomer, since real Venture Capital funds typically don't get involved until the $100MM level or so) don't care about your business in particular, they depend upon a ~10% hit rate in their portfolio of at least 10X returns.

That means they will push the executive team to take huge risks for the tiny chance of becoming a billion dollar unicorn, possibly destroying any chance of the business surviving at a more modest level. They don't want $10 million/year businesses and would rather see them go under ("aqui-fail") and move on to the next thing.

Michael, interesting point of view. It seems that you are well versed into these things. What's your specific experience, and would you mind sharing some specific stories (without naming names)?

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