Not raising funds to stay small and happy(antoine.finkelstein.fr)
antoine.finkelstein.fr
Not raising funds to stay small and happy
https://antoine.finkelstein.fr/not-raising-funds-to-stay-small-and-happy-938535c9c09d
61 comments
I moved to SF back in 2011 and I got burned by a few startups. I remember reading HN back then and someone said the average time to become a millionaire if you were chasing startup exits was 5 years. I probably in the best position now to have a successful exit, but I'm beyond the 5 year mark.
I think evaluating the viability of startups is a skill that I've gotten better at as time goes on. I've been at 5-6 failed startups (small old companies) with zero upside on exits. That being said, the time I was the happiest was when I was working for myself for about 18 months on things I was passionate about.
I think evaluating the viability of startups is a skill that I've gotten better at as time goes on. I've been at 5-6 failed startups (small old companies) with zero upside on exits. That being said, the time I was the happiest was when I was working for myself for about 18 months on things I was passionate about.
May I ask what is your bootstrapped business?
I am about to start one myself and I am curious about how and why experienced devs choose their ambitious side projects
I am about to start one myself and I am curious about how and why experienced devs choose their ambitious side projects
I am building a B2B platform for logistics and taxi companies to store dash cam footage and easily retrieve and annotate them (for accidents, training, etc.).
We already have one interested customer, so trying to finish the MVP by January!
We already have one interested customer, so trying to finish the MVP by January!
If you're only that far how do you "earn a good living"?
Building a small boot-strapped company vs a funded company is in a large part dictated by market and product rather than by individual intention.
If you try to build a funded company in a space that can't sustain one you will struggle, likewise if you try to build a small bootstrapped company in a space that can you will similarly struggle.
If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level.
There are some ways to compete by going after the customers your competitors don't want (if they're price sensitive, too small, wanting unusual customization, services, niche needs, etc.) but you should think about upfront what your strategy is going to be.
If you try to build a funded company in a space that can't sustain one you will struggle, likewise if you try to build a small bootstrapped company in a space that can you will similarly struggle.
If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level.
There are some ways to compete by going after the customers your competitors don't want (if they're price sensitive, too small, wanting unusual customization, services, niche needs, etc.) but you should think about upfront what your strategy is going to be.
> If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level.
I would disagree. If the customers are comfortable with your product, and they don't feel a big reason to switch, they probably won't. This is more true in the B2B space where customers tend to be less finicky. There are plenty of products that haven't innovated in years, but still enjoy decent sales.
I would disagree. If the customers are comfortable with your product, and they don't feel a big reason to switch, they probably won't. This is more true in the B2B space where customers tend to be less finicky. There are plenty of products that haven't innovated in years, but still enjoy decent sales.
Even a couple of percentage points of churn is a big deal in the long term as you have to keep replacing those customers just to stand still.
If you're in a moribund space you can get away with a MVP product for a long time, but if you're in a highly competitive space where your competitors have a significantly better product and a better sales team it has a real impact.
The other major factor driving churn in bootstrapped b2bs is they largely sell to SMEs who have a high-rate of insolvency.
If you're in a moribund space you can get away with a MVP product for a long time, but if you're in a highly competitive space where your competitors have a significantly better product and a better sales team it has a real impact.
The other major factor driving churn in bootstrapped b2bs is they largely sell to SMEs who have a high-rate of insolvency.
Being bootstrapped doesn't mean you can fall asleep. You still have to fight for your customers, however VC investment is usually not what will help you in the fight. It is even common for startups to fail because of the funding, when they try to reach the goals which are not realistic, just to provide returns for the investors.
>a professional sales org, marketing machine, etc.
All this costs money. We have a competitor, a big VC-funded company. They have very aggressive marketing and lots of sales people. But it all comes at a price. They spend 75-80% of their revenue on sales and marketing. We don't and it lets us keep our prices 8-10 times lower. For a similar (although, a bit more lightweight) product! We beat their product hands down every time we directly compete with them. So my point is -- it's not all black and white. It is possible to survive on a market with big VC-funded companies.
All this costs money. We have a competitor, a big VC-funded company. They have very aggressive marketing and lots of sales people. But it all comes at a price. They spend 75-80% of their revenue on sales and marketing. We don't and it lets us keep our prices 8-10 times lower. For a similar (although, a bit more lightweight) product! We beat their product hands down every time we directly compete with them. So my point is -- it's not all black and white. It is possible to survive on a market with big VC-funded companies.
This is the crux of it - the world doesn't stand still. So if you're in a small team in a space that's fast moving and very competitive then the comfortable life wont last long...
If you're in a space where the addressable market is very hard to reach or fragmented, a venture based run will probably run aground. Whereas a small player hitting a niche might be great for a long time.
If you're in a space where the addressable market is very hard to reach or fragmented, a venture based run will probably run aground. Whereas a small player hitting a niche might be great for a long time.
The key is finding a niche that simply isn't profitable to a VC funded firm.
Theoretically, I can run my small bootstrapped company and make a profit for myself of $1m a year. Thats excellent for me since I own the entire company. It's peanuts for a VC funded startup, assuming there isn't that much room to grow above $1m.
In fact, I co-founded a startup that raised millions and makes 10x more than my bootstrapped company. But it will likely fail and pay me nothing because if it can't generate an exit in the $100m+ range, then the VCs would rather run it into the ground trying to hit that Mark than sit back and let the net income flow.
Theoretically, I can run my small bootstrapped company and make a profit for myself of $1m a year. Thats excellent for me since I own the entire company. It's peanuts for a VC funded startup, assuming there isn't that much room to grow above $1m.
In fact, I co-founded a startup that raised millions and makes 10x more than my bootstrapped company. But it will likely fail and pay me nothing because if it can't generate an exit in the $100m+ range, then the VCs would rather run it into the ground trying to hit that Mark than sit back and let the net income flow.
Rarely comment, but definitely identify with this. Given HN's general focus on growth and funding, I think it's great/important for an article/concept like this to be given some reach.
I find that there isn't enough critical thought given to why one ought to pursue an aggressive growth strategy. And that generally, staying small is seen as a failure to grow, rather than a conscious effort to grow in line with ones own life. Going from 3 to 100 employees in a (relatively) short period will naturally have a large impact on one's personal life and mental/emotional state. I think it's important to ask, before one ventures into that kind of adventure, whether or not you're okay risking mental/emotional (and arguably physical) stability in place of the adventure, and the potential financial windfall.
There's nothing wrong with saying no to that risk. This is a short life we have, and spending it chasing growth to keep up w/ the momentum of the extremes of capitalism doesn't need to be your game ;)
[edit] Prefer my last paragraph be written as: There's nothing wrong with saying no to that risk. This is a short life we have, and if you're spending it chasing growth to keep up w/ the momentum of the extremes of capitalism, it doesn't need to be your game ;)
I find that there isn't enough critical thought given to why one ought to pursue an aggressive growth strategy. And that generally, staying small is seen as a failure to grow, rather than a conscious effort to grow in line with ones own life. Going from 3 to 100 employees in a (relatively) short period will naturally have a large impact on one's personal life and mental/emotional state. I think it's important to ask, before one ventures into that kind of adventure, whether or not you're okay risking mental/emotional (and arguably physical) stability in place of the adventure, and the potential financial windfall.
There's nothing wrong with saying no to that risk. This is a short life we have, and spending it chasing growth to keep up w/ the momentum of the extremes of capitalism doesn't need to be your game ;)
[edit] Prefer my last paragraph be written as: There's nothing wrong with saying no to that risk. This is a short life we have, and if you're spending it chasing growth to keep up w/ the momentum of the extremes of capitalism, it doesn't need to be your game ;)
>Given HN's general focus on growth and funding, I think it's great/important for an article/concept like this to be given some reach. [...] , it's refreshing to see an article like this
It's interesting how people get this inaccurate perspective. It's an interesting phenomenon where the majority (incorrectly) believes they are the suppressed minority. (I feel there must be a name to describe that phenomenon but I don't know what it is.)
The HN community actually is heavily tilted towards no-growth or low-growth bootstrapped companies. (I use "HN" to mean the HN discussion forum and not the YC fund.) Spending any time on HN and noticing what type of business articles are popular would make that obvious. Also, a relevant quote from dang: "Far more HN commenters (and voters) identify against VC than with it.": https://news.ycombinator.com/item?id=13931617
Examples of this are the very popular David Heinemeier Hansson (DHH) articles that make a case for staying small and avoiding VC money that pressures you to grow fast:
https://news.ycombinator.com/item?id=14694434
https://news.ycombinator.com/item?id=13668746
https://news.ycombinator.com/item?id=13929398
Those get upvoted to the front page and commenters pile on in violent agreement. There's no need to be "refreshed" by the advice to stay small -- it's basically the default sentiment on HN.
It's interesting how people get this inaccurate perspective. It's an interesting phenomenon where the majority (incorrectly) believes they are the suppressed minority. (I feel there must be a name to describe that phenomenon but I don't know what it is.)
The HN community actually is heavily tilted towards no-growth or low-growth bootstrapped companies. (I use "HN" to mean the HN discussion forum and not the YC fund.) Spending any time on HN and noticing what type of business articles are popular would make that obvious. Also, a relevant quote from dang: "Far more HN commenters (and voters) identify against VC than with it.": https://news.ycombinator.com/item?id=13931617
Examples of this are the very popular David Heinemeier Hansson (DHH) articles that make a case for staying small and avoiding VC money that pressures you to grow fast:
https://news.ycombinator.com/item?id=14694434
https://news.ycombinator.com/item?id=13668746
https://news.ycombinator.com/item?id=13929398
Those get upvoted to the front page and commenters pile on in violent agreement. There's no need to be "refreshed" by the advice to stay small -- it's basically the default sentiment on HN.
I found your comment a bit abrasive, yet you’re lacking the grit to support it besides just anecdotal evidence (just as the parent comment).
I have yet another opinion - I’ve seen a wide variety of articles on HN from how to grow fast to how to stay small. We’re not going to stay productive by arguing without data.
I have yet another opinion - I’ve seen a wide variety of articles on HN from how to grow fast to how to stay small. We’re not going to stay productive by arguing without data.
>support it besides just anecdotal evidence
If it isn't clear, "dang" is one of the longtime moderators and I'm confident he's seen enough quantity of posts over the years to have an accurate pulse of the HN readership.
There are virtually zero articles giving the advice to "take VC money and grow grow grow" that made it to the front page. (If you have examples, please post them.) The YC fund emphasizes exponential growth startups but in contrast, the HN discussions downgrade it.
This thread's article from Antoine Finkelstein and the DHH posts that I cited are much more popular with the HN crowd. I'm not complaining about it; it's just an interesting observation.
If it isn't clear, "dang" is one of the longtime moderators and I'm confident he's seen enough quantity of posts over the years to have an accurate pulse of the HN readership.
There are virtually zero articles giving the advice to "take VC money and grow grow grow" that made it to the front page. (If you have examples, please post them.) The YC fund emphasizes exponential growth startups but in contrast, the HN discussions downgrade it.
This thread's article from Antoine Finkelstein and the DHH posts that I cited are much more popular with the HN crowd. I'm not complaining about it; it's just an interesting observation.
I couldn't disagree with you more. Everyday, I read articles about VC. How to pitch, how to prepare, how to strategize a startup to ensure future growth, scalability, etc.
Let's just take an article from our own backyard: https://blog.ycombinator.com/ycs-essential-startup-advice/
Almost 800 points on HN: https://news.ycombinator.com/item?id=15331016
Quoting the article, "Growth is always a focus for startups, since a startup without growth is usually a failure." This is article doesn't apply to folks who want to stay small (the discussion of this topic ~ 3 people company).
You could have approached your argument a little less strongly - simply stating your opinions. Authoritative didactic statements require data to back it up otherwise it just sounds abrasive and completely unproductive.
Let's just take an article from our own backyard: https://blog.ycombinator.com/ycs-essential-startup-advice/
Almost 800 points on HN: https://news.ycombinator.com/item?id=15331016
Quoting the article, "Growth is always a focus for startups, since a startup without growth is usually a failure." This is article doesn't apply to folks who want to stay small (the discussion of this topic ~ 3 people company).
You could have approached your argument a little less strongly - simply stating your opinions. Authoritative didactic statements require data to back it up otherwise it just sounds abrasive and completely unproductive.
>Everyday, I read articles about VC. How to pitch, how to prepare,
Ok, I see the misunderstanding. I wasn't talking about the existence of any VC startup related articles. Yes those do show up on HN. I wasn't talking about those.
I was talking about a very specific type of startup article that would advise you that "staying small is suboptimal and won't make you happy. Instead, if you want to be happy, you must get big by getting VC firms to invest in you." It's the the type of advice that's the opposite of what this article and DHH's articles are about. There are no such articles giving that type of growth-for-happiness advice on HN's front pages.
The "YC’s Essential Startup Advice" that you cited is meant for people who've already bought into the "startup" mindset and is mostly "build product fit" advice and not "growth=happy" advice. It's not a counterpoint to this article's advice nor counterpoint to the popular DHH articles.
(I see that you participated in that previous thread's discussion so it may seem like YC startup advice dominates here. You wanted tactical advice on starting a small business that wasn't AirBnb or Uber and that article didn't cater to that scenario.)
>Quoting the article, "Growth is always a focus for startups, since a startup without growth is usually a failure."
Yes, that quote about "startup=growth" is relevant to YC's and Paul Graham's definition of "startup" so it's their tautological statement in the context of their blog post. It's not advising that entrepreneurs of small businesses will find happiness by chasing growth. Yes, a small bootstrapped business that stays small is another definition of "startup" but that's not the "startup" YC/PG are talking about.
To restate the context of my comment, the gp (onassar) wrote, "I think it's great/important for an article/concept like this to be given some reach."
... which he is agreeing with the advice of the article to avoid VC money to stay "happy". He framed it as if that "happy=small" idea was some "lone voice in the woods" that everybody on HN needs to be reminded of. My point is that onassar must have some false impression because that's already the overwhelming sentiment on HN.
>it just sounds abrasive
Did you also find Daniel Gackle's (dang) comment abrasive?
Ok, I see the misunderstanding. I wasn't talking about the existence of any VC startup related articles. Yes those do show up on HN. I wasn't talking about those.
I was talking about a very specific type of startup article that would advise you that "staying small is suboptimal and won't make you happy. Instead, if you want to be happy, you must get big by getting VC firms to invest in you." It's the the type of advice that's the opposite of what this article and DHH's articles are about. There are no such articles giving that type of growth-for-happiness advice on HN's front pages.
The "YC’s Essential Startup Advice" that you cited is meant for people who've already bought into the "startup" mindset and is mostly "build product fit" advice and not "growth=happy" advice. It's not a counterpoint to this article's advice nor counterpoint to the popular DHH articles.
(I see that you participated in that previous thread's discussion so it may seem like YC startup advice dominates here. You wanted tactical advice on starting a small business that wasn't AirBnb or Uber and that article didn't cater to that scenario.)
>Quoting the article, "Growth is always a focus for startups, since a startup without growth is usually a failure."
Yes, that quote about "startup=growth" is relevant to YC's and Paul Graham's definition of "startup" so it's their tautological statement in the context of their blog post. It's not advising that entrepreneurs of small businesses will find happiness by chasing growth. Yes, a small bootstrapped business that stays small is another definition of "startup" but that's not the "startup" YC/PG are talking about.
To restate the context of my comment, the gp (onassar) wrote, "I think it's great/important for an article/concept like this to be given some reach."
... which he is agreeing with the advice of the article to avoid VC money to stay "happy". He framed it as if that "happy=small" idea was some "lone voice in the woods" that everybody on HN needs to be reminded of. My point is that onassar must have some false impression because that's already the overwhelming sentiment on HN.
>it just sounds abrasive
Did you also find Daniel Gackle's (dang) comment abrasive?
Startup is aimed at growth, to become next unicorn. If your business is not aimed at growth, then it is just regular business.
YCombinator is incubator for startups, hence their HN site is aimed at startups too.
YCombinator is incubator for startups, hence their HN site is aimed at startups too.
I first registered on HN many years ago because reddit had started to become more “mainstream”, so to speak, i.e. the programming-related posts had become the exception rather than the rule. As such I was never interested in start-ups, no matter how the HN founders relate to the start-up world. I think I’m not the only one in this boat. I’m also not obsessing that much over money, other than having enough funds for decent rent, a low-middle-class vacation per year and for gas and insurance for my small 1.4l hatchback. Paying (sometimes) too much money for books is my only guilty pleasure, but you don’t need to own a business in order to do that.
> What to Submit:
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
--- https://news.ycombinator.com/newsguidelines.html
> On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity.
--- https://news.ycombinator.com/newsguidelines.html
Interesting view; I suppose if you look at HN as an extension of YC, then you're right: it would make sense that HN tends to focus/cater more to the growth/funding points of view.
For me, HN has become a source of news/ideas related to innovation (with an obvious leaning towards digital/technological innovation).
I guess, given how I see this community (and use it for access), it's refreshing to see an article like this :)
For me, HN has become a source of news/ideas related to innovation (with an obvious leaning towards digital/technological innovation).
I guess, given how I see this community (and use it for access), it's refreshing to see an article like this :)
You missed an important point: a startup can pursue growth in a healthy way which is not frantically scaling. It can take a decade or more to convert/pivot your company into a valuable one. The typical VC fund structure limits this approach.
I can see why YCombinator would be biased toward startups that raise funding, HOWEVER: I've always understood the word 'startup' to simply mean any new business.
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It very much depends on how you define a startup
Exactly.
Startup = Growth
http://www.paulgraham.com/growth.html
I mean, Steve Blank's definition is equally valid.
https://steveblank.com/2010/01/25/whats-a-startup-first-prin...
"A startup is an organization formed to search for a repeatable and scalable business model."
Maybe you see "scalable" and think "to a billion users". I see "scalable" and think "sustainable over the long term".
I think a small business is when you know the business model can work and have moved on to long-term execution. Until then you are a startup.
https://steveblank.com/2010/01/25/whats-a-startup-first-prin...
"A startup is an organization formed to search for a repeatable and scalable business model."
Maybe you see "scalable" and think "to a billion users". I see "scalable" and think "sustainable over the long term".
I think a small business is when you know the business model can work and have moved on to long-term execution. Until then you are a startup.
> I think a small business is when you know the business model can work and have moved on to long-term execution. Until then you are a startup.
I disagree slightly. A small business is one where the founders have a particular business model in mind, regardless if it's feasibility. If the business model is wrong, the business folds; it doesn't pivot. Until I was introduced to the startup community this was my sole understanding of "starting a business".
I disagree slightly. A small business is one where the founders have a particular business model in mind, regardless if it's feasibility. If the business model is wrong, the business folds; it doesn't pivot. Until I was introduced to the startup community this was my sole understanding of "starting a business".
This reminds me of the story of the fisherman and businessman, https://www.becomingminimalist.com/recognizing-happiness/
I can definitely agree with this. I was developing http://framestr.com (SaaS), and at the time, we had to bring on a 2nd developer and server costs were increasing (we all wanted to avoid raising funds and aim to bootstrap). Rather than raise funds, my partners and I built a small SEO business. We ended up scaling the SEO business to around $200k MRR.
Having been through the financing process before for at a previous start-up, I can say that the time invested in the side business was not a whole lot different than time invested in fund raising (+ meetings, reporting to investors after the raise).
By hustling, we were able to build a nice life style business, while being able to grow our tech SaaS. At the same time, we had much more flexibility and have been able to build / invest in what we want, and for what we believe is best long-term.
Having been through the financing process before for at a previous start-up, I can say that the time invested in the side business was not a whole lot different than time invested in fund raising (+ meetings, reporting to investors after the raise).
By hustling, we were able to build a nice life style business, while being able to grow our tech SaaS. At the same time, we had much more flexibility and have been able to build / invest in what we want, and for what we believe is best long-term.
Anecdotally, Boeing built furniture for a while to keep afloat when developing it's commercial aircraft business
http://www.u-s-history.com/pages/h1832.html
http://www.u-s-history.com/pages/h1832.html
Totally agree with this. Been bootstrapping my own thing for a while. If it hits $5k MRR I'll be more than satisfied and probably never raise money.
What worries me the most about freelancing, or being a small 3-person shop, is retirement.
A 3-person shop might not be sustainable if me (1/3) decides to retire and has to pay someone to keep it afloat. And that is, if I find such a person. I also have to make sure that whatever service I provide, will keep making sense in ~30 years.
Saving might work in countries with stable economies, but you still have to set aside quite a bit of money -- and should you outlive your saving, you're in trouble.
A 3-person shop might not be sustainable if me (1/3) decides to retire and has to pay someone to keep it afloat. And that is, if I find such a person. I also have to make sure that whatever service I provide, will keep making sense in ~30 years.
Saving might work in countries with stable economies, but you still have to set aside quite a bit of money -- and should you outlive your saving, you're in trouble.
Why do you want to retire? It is a question out of interest as I do not know many people (many of retirement age or above) that want to retire (anymore). Most who did retire in my circles (including me) found it not very inspiring and went back to (more than full time) work.
This. Being in such a situation it keeps me awake sometimes.
There are 2 obvious solutions:
- keep making sense until your retirement (innovate, adapt, ...)
- sell (for a significant amount, at the right time) in case of a saas or shop
Neither sounds solid, but they might turn out to be less bad than we think now?
There are 2 obvious solutions:
- keep making sense until your retirement (innovate, adapt, ...)
- sell (for a significant amount, at the right time) in case of a saas or shop
Neither sounds solid, but they might turn out to be less bad than we think now?
It depends what you want and what is your market size. Due to liquidation preference, it makes sense for investors to invest in any good companies they can no matter their size.
Now that SaaS is maturing and opportunities are smaller microSaaS will become more commonplace.
I built one 10 years ago and I remember people thought I was crazy at that time...
Now that SaaS is maturing and opportunities are smaller microSaaS will become more commonplace.
I built one 10 years ago and I remember people thought I was crazy at that time...
I believe it is Bhutan that measures gross national happiness in addition to GDP, realizing growth just for growth's sake doesn't necessarily increase overall happiness. Don't know how well that works for them but good for both the nation and this startup to have it as a goal. My concern in the context of the startup would be that another player would enter the same market segment and use funding to expand aggressively, eating all of my market share in the process. Even if there is plenty of space in the market for both the slow growth and quick growth startups, there is going to be a danger of getting steamrolled by the quick growth company.
Yes, you're thinking of Bhutan. But "gross national happiness" is just a propaganda exercise.
As a Buddhist nation I doubt that is the case. Its seems fairly central to Buddhist philosophy from my understanding of it.
Out of interest having been chasing growth for decades I assume we are at the highest GDP measure ever, but do you assume that we are happier than ever? The opioid crisis in the US would suggest otherwise.
Out of interest having been chasing growth for decades I assume we are at the highest GDP measure ever, but do you assume that we are happier than ever? The opioid crisis in the US would suggest otherwise.
I was expecting more than a few paragraphs claiming that a small company is a good thing in regards to happiness and flexibility at work... oh well.
I also had these thoughts when I bootstrapped but the problem is not being able to hire a great team that can build something you would not be able to. If you’re all 3 single guys in 20s, enjoy 20s. When you’re married and have kids, then you’ll care about bills rather than lifestyle and retreats.
Depends how much you're making as a bootstrapper? If $10 or 15k a month isn't able to fund your lifestyle then you'll probably have problems later in life. Also, unless you're based in the Bay area / NYC / London, hiring people generally won't cost you $10k/mo per employee.
Also, no one says you can't sell your bootstrapped business. A project generating $30k in profit can generally be sold for $1-1.3m. Reinvest that, and you suddenly have great cash flow from investments in addition to any other income you manage to make from your next project.
All in all, a path worth taking in life if you want flexibility and freedom.
Also, no one says you can't sell your bootstrapped business. A project generating $30k in profit can generally be sold for $1-1.3m. Reinvest that, and you suddenly have great cash flow from investments in addition to any other income you manage to make from your next project.
All in all, a path worth taking in life if you want flexibility and freedom.
You can definitely make over $1m a year running a bootstrapped business. On the high end of the success scale you can walk away with more money than a successful VC backed co-founder.
There are more businesses that are totally inappropriate for VC than should take VC money. The problem is everyone is equating tech businesses with VC. There are plenty of dead tech startups that actually have modest economics and would have worked if VC, and the high expenses of the top tier US talent, had been avoided.
Another note, something I’ve learned more recently. Some businesses won’t make more money even if you force more capital in to them. You can end up with a really good company that can be profitable for decades, but destroy it by force feeding it outside capital (VC or other.) It is important to identify this early.
There are more businesses that are totally inappropriate for VC than should take VC money. The problem is everyone is equating tech businesses with VC. There are plenty of dead tech startups that actually have modest economics and would have worked if VC, and the high expenses of the top tier US talent, had been avoided.
Another note, something I’ve learned more recently. Some businesses won’t make more money even if you force more capital in to them. You can end up with a really good company that can be profitable for decades, but destroy it by force feeding it outside capital (VC or other.) It is important to identify this early.
Funding is just another form of employment (or slavery if you wish).
What’s the ultimate value of growth anyway? If a startup is VC backed, then growth is the pathway for investors to get rich. If growth is a way to have a sustainable competive advantage of that’s a value too. However there are also enough small companies with a sustainable competitive advantage. Depends very much on your positioning etc
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I think about the controlled growth of Amazon. They're the tortoise than won the race. Others grew fast and crashed and burned. They were careful not to overleverage and to make sure they were doing what they could handle.
> Not raising funds to stay small and happy
But in this winner-takes-all reality, is that possible? If your business concept becomes successful, what prevents a bigger player to copy it, improve upon it, and steal away your customers?
But in this winner-takes-all reality, is that possible? If your business concept becomes successful, what prevents a bigger player to copy it, improve upon it, and steal away your customers?
> But in this winner-takes-all reality, is that possible?
This is an assumption, and I would say, an invalid one. The reality is actually that there are many successful businesses in any given industry. This is thanks to the fact that one-size does not fit all. Niching down is a good way to build a small, profitable business, because you can address the needs of the niche better than those bigger players that have to try to solve the problems of many different customers using the same systems.
This is an assumption, and I would say, an invalid one. The reality is actually that there are many successful businesses in any given industry. This is thanks to the fact that one-size does not fit all. Niching down is a good way to build a small, profitable business, because you can address the needs of the niche better than those bigger players that have to try to solve the problems of many different customers using the same systems.
Good point
They might out-advertise you, but it's not at all easy to beat a well oiled team of three talented persons on the technical front. Just throwing money at a problem does not guaranty a superior product.
They can just offer an decent clone of your product for free. Given the popularity of the "grow now, monetize later" approach, investors will likely not see a problem with that.
> what prevents a bigger player to copy it, improve upon it
Its size can be as much a hindrance as a help. Big companies turn more slowly and are less likely to put out elegant ideas for the same reason a committee is.
Paul Graham writes about how his small online store was able to turn out features faster because he was leaner. I can't find it among his essays (http://paulgraham.com/articles.html) but Getting Real, a small book by the makers of Basecamp, says the same thing (https://basecamp.com/books/getting-real).
Its size can be as much a hindrance as a help. Big companies turn more slowly and are less likely to put out elegant ideas for the same reason a committee is.
Paul Graham writes about how his small online store was able to turn out features faster because he was leaner. I can't find it among his essays (http://paulgraham.com/articles.html) but Getting Real, a small book by the makers of Basecamp, says the same thing (https://basecamp.com/books/getting-real).
Because, realistically, those big companies aren't interested in competing for your little $10k/month niche. Even a million dollar a year revenue stream would be seen as a failure for them.
The bigger player may consider the idea more valuable in their hands.
Your $10k MRR niche won't be "app that lets people hail taxis, and network of contract drivers." It'll be "reception table plan designer for wedding coordinators".
Google is not now, nor will they ever be having a meeting where they decide to allocate a few hundred engineers and marketers to crush that space.
There are tens of thousands of niches like this that will pay for teams of 1-3 people to live on the beach after a few years of work.
Google is not now, nor will they ever be having a meeting where they decide to allocate a few hundred engineers and marketers to crush that space.
There are tens of thousands of niches like this that will pay for teams of 1-3 people to live on the beach after a few years of work.
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