Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?
122 comments
Congratulations on finding success and satisfaction in your work. I hope to one day find the same. Personally, I think you should keep doing what you’re doing. If you accept VC money you are now beholden to your shareholders and are no longer in control of your business. The degree of autonomy you have, the quality of your product, and the satisfaction you derive from your work will all surely suffer as a result. It’s a deal with the devil and frankly, were I running a business, I would stay away.
PS. These are merely the opinions of someone with no experience operating a business.
PS. These are merely the opinions of someone with no experience operating a business.
VC money implies that the VC will usually want an exit in 5 years (or less). With VC money clock is running. That's not what you want if you really care about your product.
I'd agree, although selling the business outright (or retaining a small percentage) and then moving on to something else would allow you to try and repeat the success (which admittedly you may never be able to), but without any financial concerns.
Apart from the financial part, whether that's interesting as an option depends what you enjoy more:
creating a business from scratch, or running and evolving a business.
creating a business from scratch, or running and evolving a business.
I've done both. Bootstrapped a business to >$10m and (now) running a VC-backed firm. The models are different because the markets the two companies operate in are different. I see VC money as getting steroids in a competitive sport (not speaking from experience on that one...): it will save time, it will probably affect your health, but if you are indeed competing in sport, and other competitors are doing it, you don't have much choice.
So, I would advise you to look around you: what is your market? is it that highly competitive? can you still be in that market without competing (e.g. a highly fragmented market)? do you want to compete and can you avoid it?
Also keep this in mind: a VC-firm is meant to exit, if not immediately, then eventually. But, a bootstrapped firm also has to exit at some point too: you'll either have to sell it (maybe at a loss), shut it down, or pass it down (death comes for us all). Are you willing to do any of these? that's part of the answer to "do you want to compete?" above...
So, I would advise you to look around you: what is your market? is it that highly competitive? can you still be in that market without competing (e.g. a highly fragmented market)? do you want to compete and can you avoid it?
Also keep this in mind: a VC-firm is meant to exit, if not immediately, then eventually. But, a bootstrapped firm also has to exit at some point too: you'll either have to sell it (maybe at a loss), shut it down, or pass it down (death comes for us all). Are you willing to do any of these? that's part of the answer to "do you want to compete?" above...
> But, a bootstrapped firm also has to exit at some point too: you'll either have to sell it (maybe at a loss), shut it down, or pass it down (death comes for us all). Are you willing to do any of these?
highlighting this because I think it's important to think about where you are headed and what your plan is
highlighting this because I think it's important to think about where you are headed and what your plan is
Let me rephrase this pithy remark in econ terms: a company by definition builds value, hopefully a lot. You as the founder at some point has to extract the value one way or the other (immediately by exiting, over a longer period by divesting/retiring/passing it on) or lose it (shut it down or watch the company wither). There are no other exits. You cannot take the money with you. So the question to the OP is, how much value does she want to build, how quickly, and whether she wants to extract all of it and when?
If the answers are "a lot, quickly, yes, soon enough" a VC-backed model is probably the best answer. But you need to know the answers to the bootstrapped option as well.
If the answers are "a lot, quickly, yes, soon enough" a VC-backed model is probably the best answer. But you need to know the answers to the bootstrapped option as well.
I’m not sure this answer is as true as you imagine. You extract money via a sale to then invest it and create a revenue stream. Which you potentially already have in the original business. It’s just it was invested in your business v someone else’s.
The question of whether to sell it is a function of how much money you need in a lump sum, how precarious or stable your business is and how much cash it’s throwing off. And of course of diversification.
It’s not defacto true that you need to sell it to realise its value though
The question of whether to sell it is a function of how much money you need in a lump sum, how precarious or stable your business is and how much cash it’s throwing off. And of course of diversification.
It’s not defacto true that you need to sell it to realise its value though
> it will probably affect your health
Is it really that bad? I hear mixed views here.
Is it really that bad? I hear mixed views here.
I wasn't joking too much... high growth is bad for a company's 'health', no matter what is driving that growth (VCs or just PMF). By health here, I mean people, processes and product. It helps, a lot, if the team has done high-growth before and understand what the compromises are and where the organizational and technical debt is and how to pay it off, but you're still going to go through hell. Again, this is a choice: are you going to leave demand on the table or not? VCs are probably not going to let you say 'yes' to that, but can/will you anyway?
On a personal level, stress is going to be bad for you as well. But both high growth and low growth (below profitability that is) will give you stress, so if you don't want that health impact, look for a salary, not for equity...
On a personal level, stress is going to be bad for you as well. But both high growth and low growth (below profitability that is) will give you stress, so if you don't want that health impact, look for a salary, not for equity...
Not sure why you're being downvoted for this comment I think this is right.
How can you tell he is downvoted?
Building a bootstrapped business (i.e. NOT taking venture capital) is a rare skill. I would keep on building without outside capital if you can continue to build growth. If you hit a ceiling (without growth) then you may want to consider looking for/accepting outside capital.
As soon as you accept VC funding, there are basically 3 outcomes for your company. Getting acquired, going public (if that's an option where you are) or going bankrupt.
If you can keep growing without VC funding, I'd keep doing that.
As soon as you accept VC funding, there are basically 3 outcomes for your company. Getting acquired, going public (if that's an option where you are) or going bankrupt.
If you can keep growing without VC funding, I'd keep doing that.
Good advice here.
> If you hit a ceiling (without growth) then you may want to consider looking for/accepting outside capital.
One other option at this point is to sell the whole business. For bootstrappers allergic to VC or lacking the drive/skill to scale further/faster, can be a nice outcome.
Seems to be a growing number of firms specializing in small saas acquisitions too (Tiny Capital comes to mind - no affiliation).
> If you hit a ceiling (without growth) then you may want to consider looking for/accepting outside capital.
One other option at this point is to sell the whole business. For bootstrappers allergic to VC or lacking the drive/skill to scale further/faster, can be a nice outcome.
Seems to be a growing number of firms specializing in small saas acquisitions too (Tiny Capital comes to mind - no affiliation).
Growth is not everything. I remember reading "Let my people go surfing" by the Patagonia founder where he mentioned multiple times that they were trying to artificially limit their growth by raising the prices for their products.
You don't need to chace ever higher profits. Staying small and enjoying your life is also an option.
This is done in tech, too: Scott McNealy famously raised the already-high prices of the new UltraSPARC powered Suns in the 90s because CPU production capacity was limited, and the products were wildly more popular than the company's expectations.
Rather than be faced with angry customers who couldn't take delivery, the price hike made sure that only the customers who really wanted the Ultra tech would be in line for it anyway. (It also removed incentives for the channel to illicitly take those higher margin dollars, when Sun needed them to grow capacity...)
FWIW, I've done between a half dozen to a dozen startups, some bootstrapped, some VC, and I can tell you that with very few exceptions, VC money is best avoided, or at least pushed out as far as possible. The chances of NOT getting pushed out as a technical founder (especially if you want to significantly influence what gets built and why) are pretty slim, and yeah, nothing wears you down quite like having to fight for influence in a company YOU created. Just dont' go there, unless you're really willing to put others in full charge of your baby.
There is nothing wrong with owning and running your own privately held company the way you see fit. (I had lunch recently with a founder who declined VC money because of the reasonable fear that the VCs would make his company "woke" (they pressed to rainbow-logo in June when negotiating the term sheet.) Since both the founders are fundamentally philosophically and religiously opposed to that worldview and will not tolerate it, they passed up the millions in seed/A to continue to grow organically. The company may grow a bit more slowly, but it will be a much stronger company growing it in a way the founders can live with.)
Rather than be faced with angry customers who couldn't take delivery, the price hike made sure that only the customers who really wanted the Ultra tech would be in line for it anyway. (It also removed incentives for the channel to illicitly take those higher margin dollars, when Sun needed them to grow capacity...)
FWIW, I've done between a half dozen to a dozen startups, some bootstrapped, some VC, and I can tell you that with very few exceptions, VC money is best avoided, or at least pushed out as far as possible. The chances of NOT getting pushed out as a technical founder (especially if you want to significantly influence what gets built and why) are pretty slim, and yeah, nothing wears you down quite like having to fight for influence in a company YOU created. Just dont' go there, unless you're really willing to put others in full charge of your baby.
There is nothing wrong with owning and running your own privately held company the way you see fit. (I had lunch recently with a founder who declined VC money because of the reasonable fear that the VCs would make his company "woke" (they pressed to rainbow-logo in June when negotiating the term sheet.) Since both the founders are fundamentally philosophically and religiously opposed to that worldview and will not tolerate it, they passed up the millions in seed/A to continue to grow organically. The company may grow a bit more slowly, but it will be a much stronger company growing it in a way the founders can live with.)
> One other option at this point is to sell the whole business.
There are many weird companies preying on tired execs with small-to-medium businesses that hit a plateau. Typically those businesses are gutted slowly over a few years after the acquisition so that they bring x times the purchase price ("undertakers of software industry" like CA or ESW etc.).
There are many weird companies preying on tired execs with small-to-medium businesses that hit a plateau. Typically those businesses are gutted slowly over a few years after the acquisition so that they bring x times the purchase price ("undertakers of software industry" like CA or ESW etc.).
But if you get far enough, you can also contemplate a bank loan or loaning from a private person. I would not want to give away % if there is healthy income in the company and no drive to go nuclear (just healthy growth, which isn't 100%+/year as VC demand).
> Building a bootstrapped business (i.e. NOT taking venture capital) is a rare skill.
It is VC companies that are rare - the vast majority of businesses of any kind - and also internet businesses - are bootstrapped.
It is VC companies that are rare - the vast majority of businesses of any kind - and also internet businesses - are bootstrapped.
VC-backed businesses being more rare than bootstrapped ones does not reduce the rarity of a successful bootstrapped business or the skill needed to create one.
To your parent's point, it is likely a rarer skill to successfully bootstrap businesses than to take venture capital. The difference is opportunity. A plumber in Oklahoma can bootstrap a successful plumbing business, but wouldn't be likely to get venture capital for such a business.
To your parent's point, it is likely a rarer skill to successfully bootstrap businesses than to take venture capital. The difference is opportunity. A plumber in Oklahoma can bootstrap a successful plumbing business, but wouldn't be likely to get venture capital for such a business.
The majority of small businesses are boot strapped. Only inside the tech bubble is it a rare skill.
or the fourth option of having your business taken away from you because of politics and watch some VC-approved idiot destroy it.
I’m doing the same (small, bootstrapped SaaS, 10k MRR), previously leading tech from seed->C at a VC startup. It’s definitely okay to stay bootstrapped!
Main question to ask is whether you have considered the overall potential threats to the business, and what you’re trading off against by not taking VC; and if you are comfortable with those risks and tradeoffs.
There’s no universal answer, but there are better answers depending on the business / those risks. For example if your business is at increasing risk of a better-funded competitor eating your lunch, a bigger war chest might be prudent.
Keep in mind that there are a substantial set of skills you will need to develop, and responsibilities you will need to make time for, when taking VC investment. Not necessarily a negative, and for me it was desirable. Fundraising, managing investors (eg updating the board quarterly), hiring faster, and scaling the product faster. I’m hand waving here, but as you’ve guessed it’s likely not just take money and keep on operating exactly the same way. Big checks will come with certain expectations, and meeting them can dramatically change the culture and lifestyle you’re trying to achieve.
Lastly, there are ~boutique VC firms out there that specialize in smaller SaaS with good trajectory. The VC that is knocking may be the wrong match for your goals, but it’s OK to shop around a little.
Quick thoughts but feel free to find/dm me if you’d like any addl advice or anecdata. And, congrats!
Main question to ask is whether you have considered the overall potential threats to the business, and what you’re trading off against by not taking VC; and if you are comfortable with those risks and tradeoffs.
There’s no universal answer, but there are better answers depending on the business / those risks. For example if your business is at increasing risk of a better-funded competitor eating your lunch, a bigger war chest might be prudent.
Keep in mind that there are a substantial set of skills you will need to develop, and responsibilities you will need to make time for, when taking VC investment. Not necessarily a negative, and for me it was desirable. Fundraising, managing investors (eg updating the board quarterly), hiring faster, and scaling the product faster. I’m hand waving here, but as you’ve guessed it’s likely not just take money and keep on operating exactly the same way. Big checks will come with certain expectations, and meeting them can dramatically change the culture and lifestyle you’re trying to achieve.
Lastly, there are ~boutique VC firms out there that specialize in smaller SaaS with good trajectory. The VC that is knocking may be the wrong match for your goals, but it’s OK to shop around a little.
Quick thoughts but feel free to find/dm me if you’d like any addl advice or anecdata. And, congrats!
I'm a solo dev doing $700k yearly across two saas products. I'm also the founding engineer at Reforge (e.g. I've done the VC game from A16Z).
There are two things I look at when raising VC.
1. What's the TAM of my product and will a capital injection get me there faster?
2. Do I actually want to raise capital or do I want to work at my own pace?
The last couple of years (after Reforge), I've just been working at my own pace -- healing from my last VC run.
There are two things I look at when raising VC.
1. What's the TAM of my product and will a capital injection get me there faster?
2. Do I actually want to raise capital or do I want to work at my own pace?
The last couple of years (after Reforge), I've just been working at my own pace -- healing from my last VC run.
> healing from my last VC run
@rainbowtroutz pay attention to this line.
@rainbowtroutz pay attention to this line.
>2. Do I actually want to raise capital or do I want to work at my own pace?
Haven't VC-backed companies crushed small developers in niche markets who refused to scale? In most instances
Haven't VC-backed companies crushed small developers in niche markets who refused to scale? In most instances
Not really: some niches get competed out as a side-effect of addressing a large market.
VC almost exclusively invests in businesses that have a large TAM (Total Addressable Market) and a VC is not invested in a business that has a small, niche market. The VC model is invest x millions, aim for one win in the billions that gets all the return to the fund, and then cut the losses for all the other fund’s investments that didn’t win big (wind-up or sell - recover the VCs preferential money and don’t give a shit if common share holders like founders get $0).
VC almost exclusively invests in businesses that have a large TAM (Total Addressable Market) and a VC is not invested in a business that has a small, niche market. The VC model is invest x millions, aim for one win in the billions that gets all the return to the fund, and then cut the losses for all the other fund’s investments that didn’t win big (wind-up or sell - recover the VCs preferential money and don’t give a shit if common share holders like founders get $0).
Point 2 is very important. Do you even need more capital? What would you do with it if you had it? If you are sat there frustrated that your product could be a game changer with just a few million dollars more capital then VC's are worth considering. If you don't need the capital then why share equity!
Success to you is for you to define. Don't fall into the trap of VC funding because its all you read on HN or Techcrunch. What you have built is your baby so don't let anyone else tell you what you should be doing. It sounds like you have so much meaning and purpose in the company you have. If (and it sounds like) you don't want the vc money, then that is the right decision for you.
Given that you're enjoying what you're doing, you're making decent money, and you have a path to scale, personally I would (and did) do exactly the same as you. Once you take VC money you're in a completely different situation, where you need to grow fast to show them a return. Also, you need to grow much more to get the same return for yourself than you would if you just bootstrapped. If you want to become a billionaire (or hundred-millionaire), then yeah, you should take VC money. But if you just want to make a comfortable living and ultimately achieve financial freedom, I'm not even sure VC money improves your odds. And it definitely comes with a lot of added obligation and stress.
That said, I've never actually taken investment, so I can't speak from personal experience on that side.
That said, I've never actually taken investment, so I can't speak from personal experience on that side.
> Once you take VC money you're in a completely different situation, where you need to grow fast to show them a return.
This. The VC model is to turn the business into a gamble: grow huge, or die trying - "planet-scale growth or self-destruct". (The third outcome, "get acquired" is a wash) They an afford to lose that gamble the majority of the time, because the minority of big wins make up for it. They do it in parallel.
But for the business owner, it's just one roll of the dice. A single shot at a time.
You don't seem to want this gamble. Good for you. Tell them politely that this doesn't suit your plans at this time.
This. The VC model is to turn the business into a gamble: grow huge, or die trying - "planet-scale growth or self-destruct". (The third outcome, "get acquired" is a wash) They an afford to lose that gamble the majority of the time, because the minority of big wins make up for it. They do it in parallel.
But for the business owner, it's just one roll of the dice. A single shot at a time.
You don't seem to want this gamble. Good for you. Tell them politely that this doesn't suit your plans at this time.
I can tell from your post that you will absolutely hate ceding control to a VC
I would recommend finding a co-founder who has similar ideals but can handle the parts you don’t like doing, and has business experience. You’ll get much further without losing real control
I would recommend finding a co-founder who has similar ideals but can handle the parts you don’t like doing, and has business experience. You’ll get much further without losing real control
Why do you recommend to bring the person in as a co-founder? I'm not sure if I was OP (a person enjoying solving customer problems without the pressure of going global scale), I'd like to give up so much power to someone I barely know.
Would you recommend against bringing in the business person as an employee, or as a contractor? A CEO for hire? Or maybe someone who can help with all kinds of operational stuff?
It seems like to MRR is pretty good and the project could afford one or two full time employees relatively easily (if you hire outside of the expensive tech hubs such as SV, NYC, Austin, Seattle).
Would you recommend against bringing in the business person as an employee, or as a contractor? A CEO for hire? Or maybe someone who can help with all kinds of operational stuff?
It seems like to MRR is pretty good and the project could afford one or two full time employees relatively easily (if you hire outside of the expensive tech hubs such as SV, NYC, Austin, Seattle).
Second this, GP's advice is terrible. The business is founded and making really decent money. The "co-founder" ship has sailed. Hire an employee and pay them a salary and maybe kick them some options if you want them to have skin in the game - max 5% if you REALLY like them. Or hire a personal coach and pay them a retainer and do the same.
Insulting and absurd notion to think that a company isn't past the "founding" stage because OP hasn't taken VC.
Insulting and absurd notion to think that a company isn't past the "founding" stage because OP hasn't taken VC.
> I would recommend finding a co-founder who has similar ideals but can handle the parts you don’t like doing, and has business experience
Why does this need to be a co-founder? You can hire people as employees to do the daily "business" grunt work.
Why does this need to be a co-founder? You can hire people as employees to do the daily "business" grunt work.
You want someone with skin in the game. A partner also helps in bouncing off ideas, figuring out a grander strategy, and in general, being support you can rely on.
Unless OP wants a quick exit, this is a decade long journey. Having friends and partners along the way helps.
Unless OP wants a quick exit, this is a decade long journey. Having friends and partners along the way helps.
> You want someone with skin in the game
Isn't a salary enough? As soon as you start involving "skin in the game" players then you're starting to cede control of your company. Run with an employee doing these tasks. I really don't get this mentality that a regular salaried member of staff can't, as part of their role and responsibility, work on strategy etc.
Maybe a couple of years down the line you might want to open up space for a co-director for a share in your company. But loads of small companies get on just fine without bleeding their ownership and control away to others.
Isn't a salary enough? As soon as you start involving "skin in the game" players then you're starting to cede control of your company. Run with an employee doing these tasks. I really don't get this mentality that a regular salaried member of staff can't, as part of their role and responsibility, work on strategy etc.
Maybe a couple of years down the line you might want to open up space for a co-director for a share in your company. But loads of small companies get on just fine without bleeding their ownership and control away to others.
Co founder is the way to go. It will increase your chances of success.
VC-backed CEO here, and I concur with this 1,000%.
I worked for a startup that had bootstrapped but eventually received VC funding. The culture change was palpable, which I can only attribute to influence from the VCs. Everything became about growth, growth, growth - which really sucked the enjoyment out the work. I and several others ended up quitting.
If you're satisfied with being paid to solve clients' problems - which is a very common and in my opinion positive mindset, whether one is a business owner or an employee - then if I were you, I'd just stick with that. You've already achieved something to be very proud of!
It sounds like your "Silicon Valley" type friends have ideologically bought in to a pipedream. Please be true to yourself and your own beliefs and try not to succumb to peer pressure, is my advice.
If you're satisfied with being paid to solve clients' problems - which is a very common and in my opinion positive mindset, whether one is a business owner or an employee - then if I were you, I'd just stick with that. You've already achieved something to be very proud of!
It sounds like your "Silicon Valley" type friends have ideologically bought in to a pipedream. Please be true to yourself and your own beliefs and try not to succumb to peer pressure, is my advice.
An old article by Joel Spolsky talking about this exact decision:
https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
Organic growth vs throwing investor money at every problem.
Juicy quote: "Still can’t decide? There are other things to consider. Think of your personal values."
https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...
Organic growth vs throwing investor money at every problem.
Juicy quote: "Still can’t decide? There are other things to consider. Think of your personal values."
I would say trust your instincts on this one. VC absolutely comes with strings attached, and those strings can easily lead to worse outcomes for both you and your customers.
Of course VC has its place, and some things are better off targeting massive scale from the beginning, but it does preclude a lot of good ideas just based on the economics. Given the scalability of software, running leaner can enable a wider variety of products that deserve a place in the world. If you want to split the difference with some funding you could consider https://tinyseed.com/.
Of course VC has its place, and some things are better off targeting massive scale from the beginning, but it does preclude a lot of good ideas just based on the economics. Given the scalability of software, running leaner can enable a wider variety of products that deserve a place in the world. If you want to split the difference with some funding you could consider https://tinyseed.com/.
> It probably won't last forever, but it's simple and it feels authentic.
(Inexperienced armchair take:) it's more likely to last 'forever' (which I take to mean 'to retirement'/'as long as you want it to'/etc.) than taking investment/being acquired. Sure that could lead to lasting 'forever' on a bigger scale (as a more stable bigger company, or a longer 'forever'), but at a much lower probability.
I don't think you're weird - I'd love to be in your shoes in this regard. Can't say for sure I'd have the stomach to turn down cash offers of course, but the VC route has never been a dream/had the appeal for me it obviously does to many. I think perhaps because I'm not so interested in 'having a successful company' for its own sake, I wouldn't want to have to 'pivot' for example, I'd rather build something I care about, and the business side would be just doing the best I could to support that; maybe that would be a large cash injection in exchange for equity, but you don't mention any massive expensive changes you want/need to make. (That sounds pretty stupid and obvious when I write it out, but it's definitely a lot more of a traditional approach than taken by most that would use the term 'startup', or really the vast majority of new software/genuine tech companies.)
(Inexperienced armchair take:) it's more likely to last 'forever' (which I take to mean 'to retirement'/'as long as you want it to'/etc.) than taking investment/being acquired. Sure that could lead to lasting 'forever' on a bigger scale (as a more stable bigger company, or a longer 'forever'), but at a much lower probability.
I don't think you're weird - I'd love to be in your shoes in this regard. Can't say for sure I'd have the stomach to turn down cash offers of course, but the VC route has never been a dream/had the appeal for me it obviously does to many. I think perhaps because I'm not so interested in 'having a successful company' for its own sake, I wouldn't want to have to 'pivot' for example, I'd rather build something I care about, and the business side would be just doing the best I could to support that; maybe that would be a large cash injection in exchange for equity, but you don't mention any massive expensive changes you want/need to make. (That sounds pretty stupid and obvious when I write it out, but it's definitely a lot more of a traditional approach than taken by most that would use the term 'startup', or really the vast majority of new software/genuine tech companies.)
Depending on the market and competition there may be paths where it doesn't last forever or it gets into a steady state business.
I suspect what happens to a lot of bootstrapped SaaS companies as they grow is the founder(s) have to take on the CxO roles and then aren't in the trenches doing the actual work. Those roles don't sound fun to me. I wonder if the fun part is the bootstrapping to where VC come knocking on the door? If that is the case then taking on VC might work to take some money off the table but the other option of selling the entire business off could work too.
I suspect what happens to a lot of bootstrapped SaaS companies as they grow is the founder(s) have to take on the CxO roles and then aren't in the trenches doing the actual work. Those roles don't sound fun to me. I wonder if the fun part is the bootstrapping to where VC come knocking on the door? If that is the case then taking on VC might work to take some money off the table but the other option of selling the entire business off could work too.
> Am I being a weirdo?
Probably, but there is nothing wrong with that! Chase you own happiness, not other people's goals, if you have the luxury of doing so, which it would appear that you have.
Just maybe have a plan B ready to change your mind to if life or your own mind changes later, and you want out to pursue something else.
> Some of my more "Silicon Valley"-type friends think I'm nuts.
I'm similar with my stance on staying in a safe, slightly stagnated, salaried lifestyle, avoiding the word "manager" or similar in my job description, when people tell me I could make a lot more contacting or managing teams on larger projects. I could do those things, but if I can support my hobbies, mental health (more or less…), and other lifestyle (mortgage on small flat being paid off in a few months) and find time for those hobbies, while making enough tinkering with interesting problems in the day job, why should I lose that to chase more later that isn't guaranteed, if I don't want to take that risk?
Though with the same caveat as above: I am currently trying to adjust my skillset a bit (bringing some rotted parts back up to date) so I have wider options for escape plans should I decide I don't like (and can't sufficiently effect from within) the changes that are going on around me.
Probably, but there is nothing wrong with that! Chase you own happiness, not other people's goals, if you have the luxury of doing so, which it would appear that you have.
Just maybe have a plan B ready to change your mind to if life or your own mind changes later, and you want out to pursue something else.
> Some of my more "Silicon Valley"-type friends think I'm nuts.
I'm similar with my stance on staying in a safe, slightly stagnated, salaried lifestyle, avoiding the word "manager" or similar in my job description, when people tell me I could make a lot more contacting or managing teams on larger projects. I could do those things, but if I can support my hobbies, mental health (more or less…), and other lifestyle (mortgage on small flat being paid off in a few months) and find time for those hobbies, while making enough tinkering with interesting problems in the day job, why should I lose that to chase more later that isn't guaranteed, if I don't want to take that risk?
Though with the same caveat as above: I am currently trying to adjust my skillset a bit (bringing some rotted parts back up to date) so I have wider options for escape plans should I decide I don't like (and can't sufficiently effect from within) the changes that are going on around me.
Your situation sounds awesome, and I don't think your preference sounds weird at all. Congrats on the success!
You can find more like minded folks in the Indie Hacker community, if you haven't run across it yet.
See https://www.indiehackers.com/
You can find more like minded folks in the Indie Hacker community, if you haven't run across it yet.
See https://www.indiehackers.com/
One thing to realise is that a lot of those VCs will be junior analysts and tyre kickers looking to fill their diary. I am involved in a handful of businesses and they could all fill half of their week taking those calls, even though the investors are not serious. They conclude the call with “let’s keep in touch” even though the businesses have stellar growth and margins.
If I was to take VC funding again I would combine it with taking a big slug off the table personally to derisk things. For this to make sense you would probably need to scale the business quite a bit more before that becomes viable.
If I was to take VC funding again I would combine it with taking a big slug off the table personally to derisk things. For this to make sense you would probably need to scale the business quite a bit more before that becomes viable.
What is a slug on the table?
I’m in almost the exact same position, minus the knocking VCs. For a while I felt like I should look for funding and more growth to be a real „company“. Over time I realized that the path this would probably take me on isn’t really for me: I deeply care about delivering a quality product and managing my own time and priorities and I’m pretty sure that would fly out of the window. A VC funded competitor exists and is bigger, but the market is big enough for both (and others). I enjoy being the „weirdo“.
I make a bit less than you, and have also been approached by investors.
I'm not sure what an investor would bring to the table. I guess they would tell me to hire people, tell me to raise prices, tell me to do more marketing, etc. I doubt they would pay me substantially more than I make now without substantially increasing the amount of work I have to do.
I don't really want to do any of that. I've tried hiring people, and didn't like the responsibility. I realised I prefer working on my own. I make enough money to support my family, and I prefer having the free time to read HN instead of hustling to get more people to buy my app.
I'm not sure what an investor would bring to the table. I guess they would tell me to hire people, tell me to raise prices, tell me to do more marketing, etc. I doubt they would pay me substantially more than I make now without substantially increasing the amount of work I have to do.
I don't really want to do any of that. I've tried hiring people, and didn't like the responsibility. I realised I prefer working on my own. I make enough money to support my family, and I prefer having the free time to read HN instead of hustling to get more people to buy my app.
Either path can be right for different people. And the wrong decision can be horrible.
You can always take VC later, but you can’t un-take it. So you should be pretty sure that you want to spend the next 10 years of your life shooting for a billion dollar company. Otherwise, stay the course.
Taking seed funding (such as from YC) is not as big a risk as VC funding. Seed-funded companies often don’t go on to take VC, and while seed funders will encourage you to go for the big time, they won’t have the board fire you from your own company like a VC would if they think you’re under-delivering.
You can always take VC later, but you can’t un-take it. So you should be pretty sure that you want to spend the next 10 years of your life shooting for a billion dollar company. Otherwise, stay the course.
Taking seed funding (such as from YC) is not as big a risk as VC funding. Seed-funded companies often don’t go on to take VC, and while seed funders will encourage you to go for the big time, they won’t have the board fire you from your own company like a VC would if they think you’re under-delivering.
Bootstrapping a business is normal outside of tech, and common in tech when outside of SV. Not only is it a good thing, it allows you to be more sustainable. VC will push you to be huge - to them, a small successful business is a failure: They need monster-sized successes. So they will push you to take large risks to get you there, and not really care if those risks cause your business to fail because they are pushing a dozen other people like you to do the same.
So if you are happy with the money and passionate about the space, you'd honestly be nuts to take VC funding.
So if you are happy with the money and passionate about the space, you'd honestly be nuts to take VC funding.
You're not a weirdo, but you should also be realistic that, if a megacorp wanted, they could easily create a subpar clone of your offering, and drive you to obsolescence with marketing within months.
There was a recent story here on HN from someone who described just that. Can't remember the link, alas. EDIT: found it, see reply below.
There was a recent story here on HN from someone who described just that. Can't remember the link, alas. EDIT: found it, see reply below.
Ah, I remembered I made an anki note about it, because I liked one of the quotes. Here you go:
"Failure sneaks up on you slowly, then all at once."
Andrew Wilkinson, founder of Flow (a distributed to-do list app), on how his company withered because he didn't consider cash-heavy competition to be comparable due to an (initially) worse product. From his Twitter thread "This is a story about how I lost $10,000,000 by doing something stupid." https://twitter.com/awilkinson/status/1376985869542887425
https://news.ycombinator.com/item?id=26643608
See also: False Hope Syndrome
Corollaries: - Heed red flags early - Optimistic: Perhaps the same applies to success / learning etc.
"Failure sneaks up on you slowly, then all at once."
Andrew Wilkinson, founder of Flow (a distributed to-do list app), on how his company withered because he didn't consider cash-heavy competition to be comparable due to an (initially) worse product. From his Twitter thread "This is a story about how I lost $10,000,000 by doing something stupid." https://twitter.com/awilkinson/status/1376985869542887425
https://news.ycombinator.com/item?id=26643608
See also: False Hope Syndrome
Corollaries: - Heed red flags early - Optimistic: Perhaps the same applies to success / learning etc.
I remember it too. I think it's not purely the case you described in your first comment. We are talking bootstrapping here but they have poured 10M into it of their own money, which is not a bad funding round at all? The competing product was another startup, not a big co.
Also, they not only destroyed them on marketing, but the founder himself admitted that he noticed their product just got better over time plus they had core issues with their own product (no cross platform apps from the start, bugs, they had to rewrite all their clients) - so the competing offering was not sub-par, at least not in the long term and it turned out that the original product had issues before the competing product even arrived.
I'm curious though, are there any examples of a big corp cloning a small product and driving it out of existence? Or similar VC-backed vs. no VC-backed startups.
Also, they not only destroyed them on marketing, but the founder himself admitted that he noticed their product just got better over time plus they had core issues with their own product (no cross platform apps from the start, bugs, they had to rewrite all their clients) - so the competing offering was not sub-par, at least not in the long term and it turned out that the original product had issues before the competing product even arrived.
I'm curious though, are there any examples of a big corp cloning a small product and driving it out of existence? Or similar VC-backed vs. no VC-backed startups.
yes I remember the full story was less black and white, but still something useful to keep in mind.
You might consider taking on some debt, perhaps in the form of a convertible note, given what the economy is doing. That gives you a cushion for N years of degraded revenue. Depending on the terms, the strings might be minimal.
If you sell equity, the VC's will expect a huge multiple return on investment over ~5 years.
If your company could get to $100m-1b a quarter with the VC money (but not without), then take the cash. If projected revenues after you saturate the market are much lower than that, then the VCs will probably want you to build the company so it can be easily acquired for a quick buck. It sounds like you don't want that.
If you sell equity, the VC's will expect a huge multiple return on investment over ~5 years.
If your company could get to $100m-1b a quarter with the VC money (but not without), then take the cash. If projected revenues after you saturate the market are much lower than that, then the VCs will probably want you to build the company so it can be easily acquired for a quick buck. It sounds like you don't want that.
I joined a bootstrapped SaaS several years ago in a niche domain. They were making 10x that again in MRR, growing rapidly and still 100%-owned between the 2 founders. VC's knocked on their door every week but they had their own vision for growth.
Don't be afraid to walk your own path.
Don't be afraid to walk your own path.
How were the VCs aware of the MRR of a private company ? I'd assume some external indicator like position in the app store, but outside of that, I'm curious how'd they know ?
It's a B2B product in the FinTech space. UK-registered so their accounts are public.
I'm the kind of person who prefers a reasonable salary at a reasonable stress level. I wouldn't want to work super hard for a chance at becoming super rich, because I'll probably have a heart attack before payday.
VC money comes with the obligation to 3x it in 3 years. Unless you need it, stay away!
VC money comes with the obligation to 3x it in 3 years. Unless you need it, stay away!
Personally, I would always pick bootstrap over VCs after past experiences when I can (there are businesses that simply cannot be started without a lot of cash). But I don't want to be a billionaire; I want to live comfortably and doing what I like; also, like you say, I don't want the 'go big or go home' attitude; you can get VC money and be gone in 6 months even though bootstrapped you would've ran the same business, but slower, for a decade+.
We had VCs in the past and it can take out the fun immediately depending on your taste. They (VCs) simply demand results, fast, so you change from someone who does what they like and believe in, to someone who has to focus on numbers, growth, staffing and presentations (always be raising once you're in!). Even for me as CTO, the VCs we worked with demanded me to be more of a MBA CTO dan a tech CTO; that's not me (I ran companies as ceo/cfo and know the theory well enough; I just find it a waste of life for me personally while there are other people who love that, so why would I?), so I had some words with them over that every meeting.
In short; if you don't need to and you don't want this pressure cooker growth, I wouldn't give away % for money; only for people who really benefit your company and are willing to grow slower with you. Definitely not weird at all.
We had VCs in the past and it can take out the fun immediately depending on your taste. They (VCs) simply demand results, fast, so you change from someone who does what they like and believe in, to someone who has to focus on numbers, growth, staffing and presentations (always be raising once you're in!). Even for me as CTO, the VCs we worked with demanded me to be more of a MBA CTO dan a tech CTO; that's not me (I ran companies as ceo/cfo and know the theory well enough; I just find it a waste of life for me personally while there are other people who love that, so why would I?), so I had some words with them over that every meeting.
In short; if you don't need to and you don't want this pressure cooker growth, I wouldn't give away % for money; only for people who really benefit your company and are willing to grow slower with you. Definitely not weird at all.
When people you don't know come to you to force themselves into your business and push for a vision that is not yours, and you are wondering if you are weirdo for not wanting them to do so? I would say you are very normal.
Money is not everything and if the time come when you have a vision that requires capital and you know what you want to do with this extra cash, then you will know where to look, but don't feel bad for willing to be in charge of your business.
Money is not everything and if the time come when you have a vision that requires capital and you know what you want to do with this extra cash, then you will know where to look, but don't feel bad for willing to be in charge of your business.
Jason Cohen has an amazing talk on bootstrapping, with some very solid advice from his own experiences: https://m.youtube.com/watch?v=otbnC2zE2rw
Personally I think there is a lot of “kudos” for getting VC funding, so founders often get lured just for status reasons, joining the competition to become a unicorn.
Unless you want to (or need to) “swing for the fences”, why give up ownership?
Being a founder is already hella risky, and accepting VC money increases your leverage and your risk, which is just uneconomic for an average individual to do (unless they are already wealthy). Don’t double down on a risky bet.
VCs get preferential shares, and they have a lot of different ways of taking control in the clauses of the contracts you sign which disempower you, and in return you get shitty common shares and often lose control for the worst reasons.
I helped found a small business, and we retained full ownership which worked out great for us, although we will never get those mystical 7/8/9 figure payouts. The majority of founders only make wages[1]. We were in an incubator during our inception and I saw a lot of businesses get sidetracked by all the funding bullshit, control issues, stress, wasting time chasing investors, trying to follow conflicting or bad advice.
If you do want to chase funding, consider applying for https://www.ycombinator.com/apply/ which will help avoid you getting shafted. Other VC transactions are highly negotiation information asymmetric, because they have done many many transactions and you are doing your first, so you will get taken advantage of. By joining YC you get the help of a repeat player (game theory) with strong backing and solid knowledgeable advice, so you have far more negotiating strength.
[1] It is hard to get figures on returns for founders, but the median is bad. Most VC funds lose money[2], so VC backed founders do worse (common shares). Some analysis for YC backed founders (and YC founders are more successful on average than most): https://news.ycombinator.com/item?id=31350478 https://news.ycombinator.com/item?id=30926821
[2] https://news.ycombinator.com/item?id=24911009
Personally I think there is a lot of “kudos” for getting VC funding, so founders often get lured just for status reasons, joining the competition to become a unicorn.
Unless you want to (or need to) “swing for the fences”, why give up ownership?
Being a founder is already hella risky, and accepting VC money increases your leverage and your risk, which is just uneconomic for an average individual to do (unless they are already wealthy). Don’t double down on a risky bet.
VCs get preferential shares, and they have a lot of different ways of taking control in the clauses of the contracts you sign which disempower you, and in return you get shitty common shares and often lose control for the worst reasons.
I helped found a small business, and we retained full ownership which worked out great for us, although we will never get those mystical 7/8/9 figure payouts. The majority of founders only make wages[1]. We were in an incubator during our inception and I saw a lot of businesses get sidetracked by all the funding bullshit, control issues, stress, wasting time chasing investors, trying to follow conflicting or bad advice.
If you do want to chase funding, consider applying for https://www.ycombinator.com/apply/ which will help avoid you getting shafted. Other VC transactions are highly negotiation information asymmetric, because they have done many many transactions and you are doing your first, so you will get taken advantage of. By joining YC you get the help of a repeat player (game theory) with strong backing and solid knowledgeable advice, so you have far more negotiating strength.
[1] It is hard to get figures on returns for founders, but the median is bad. Most VC funds lose money[2], so VC backed founders do worse (common shares). Some analysis for YC backed founders (and YC founders are more successful on average than most): https://news.ycombinator.com/item?id=31350478 https://news.ycombinator.com/item?id=30926821
[2] https://news.ycombinator.com/item?id=24911009
You have drawn enough attention for VC cold calls which means your idea is attractive. Your VC funded competitors will grow faster than you unless they botch things. If that is acceptable, continue present course.
The key question is asking if a choice aligns with your exit strategy for the business. Do you want to have a small entity for fun, or give up control to a more competitive business management team with differing priorities.
In general, VC money always comes with strings attached, focuses on seeing an ROI within 3 years, and founders are usually pushed out of strategic roles as policy. While self-managed small firms are more vulnerable to competition from clown factories with $54m budgets to throw at risky projects. Thus, a lucrative market position usually degrades with time... regardless of either path chosen.
VC money is often a worse deal than debt-financing growth with a bank.. due to equity value siphons. They are both usually unnecessary if you are already in a profit mode. =)
In general, VC money always comes with strings attached, focuses on seeing an ROI within 3 years, and founders are usually pushed out of strategic roles as policy. While self-managed small firms are more vulnerable to competition from clown factories with $54m budgets to throw at risky projects. Thus, a lucrative market position usually degrades with time... regardless of either path chosen.
VC money is often a worse deal than debt-financing growth with a bank.. due to equity value siphons. They are both usually unnecessary if you are already in a profit mode. =)
These don't sound like serious inquiries. Have you been approached by a partner at a VC firm or a executive at the Megacorp? This sounds more like due diligence against other investments they are considering by having low level folks reach out to see what they can uncover.
Have you considered other sources of equity financing other than VC?
As you rightly identified, "VCs I've spoken to want to turn up the heat and take the business to the moon, planet-scale growth or self-destruct". This is the standard mental model within the VC industry - that only 1 in 10 of your portfolio companies need to moon in order for you to return your promised 20% IRR to your end investors. So push all your companies to either moon or implode. Taking VC cash and aiming for the moon is SV dogma hence your SV friends insta-calling you nuts. There's no doubt that this model has been responsible for significant value creation but it's certainly not the only way to create huge value.
Another category of equity investor is: individuals with cash (Angels, Family Offices). There are many within this category that are investing like VCs i.e. moon or bust. But there are also many within this category that are looking for long-term growth i.e. lower IRR with lower risk of failure. By the nature of them investing their own money, they will typically have more skin in the game than a VC and will able to provide more mentorship to you.
We took seed capital from several different sources including VC (including Founders Fund) and angel investors. The angel investors have been BY FAR the most helpful. It's the classic 80/20 - most angels are completely disengaged, a few have had a transformative effect on our company.
One more point, if you do decide to sell shares for money then do it when you are in a strong position so that you can get the most favourable control terms. There are the standard economic terms (valuation) that everyone talks about. But the control terms are just as important - be willing to take a lower valuation from an investor that is willing to have very founder-friendly terms.
And another point, you can always consider debt financing if you have relatively stable cashflows. But at the early stage this usually comes with all sorts of strings attached which is why in the majority of cases a the early stage, founder-friendly equity financing is preferable. But keep an open mind here.
As you rightly identified, "VCs I've spoken to want to turn up the heat and take the business to the moon, planet-scale growth or self-destruct". This is the standard mental model within the VC industry - that only 1 in 10 of your portfolio companies need to moon in order for you to return your promised 20% IRR to your end investors. So push all your companies to either moon or implode. Taking VC cash and aiming for the moon is SV dogma hence your SV friends insta-calling you nuts. There's no doubt that this model has been responsible for significant value creation but it's certainly not the only way to create huge value.
Another category of equity investor is: individuals with cash (Angels, Family Offices). There are many within this category that are investing like VCs i.e. moon or bust. But there are also many within this category that are looking for long-term growth i.e. lower IRR with lower risk of failure. By the nature of them investing their own money, they will typically have more skin in the game than a VC and will able to provide more mentorship to you.
We took seed capital from several different sources including VC (including Founders Fund) and angel investors. The angel investors have been BY FAR the most helpful. It's the classic 80/20 - most angels are completely disengaged, a few have had a transformative effect on our company.
One more point, if you do decide to sell shares for money then do it when you are in a strong position so that you can get the most favourable control terms. There are the standard economic terms (valuation) that everyone talks about. But the control terms are just as important - be willing to take a lower valuation from an investor that is willing to have very founder-friendly terms.
And another point, you can always consider debt financing if you have relatively stable cashflows. But at the early stage this usually comes with all sorts of strings attached which is why in the majority of cases a the early stage, founder-friendly equity financing is preferable. But keep an open mind here.
You should look into TinySeed. You’d get a little bit of money, great guidance on growing the SaaS. The terms are reasonable. They’re looking to generate same returns as VC funds, but without the swinging for the fences approach.
Program Director of TinySeed here, appreciate it! Check us out here: https://tinyseed.com
If you're happy, then live your life, man. We're all weirdos in our own ways.
The advantage of VC etc. is that if you have objectives for your company that you can accelerate with money, then you can do that faster than if you do it solo. That's useful because the only really irreplaceable resource on the personal scale is time.
But if you feel fulfilled doing your thing then maybe live it. There's hundreds of businesses of this size that can live forever because the TAM isn't high enough. And anyone who attempts venture scale in those will just fail. So this could be a very rational decision.
Enjoy and congrats!
The advantage of VC etc. is that if you have objectives for your company that you can accelerate with money, then you can do that faster than if you do it solo. That's useful because the only really irreplaceable resource on the personal scale is time.
But if you feel fulfilled doing your thing then maybe live it. There's hundreds of businesses of this size that can live forever because the TAM isn't high enough. And anyone who attempts venture scale in those will just fail. So this could be a very rational decision.
Enjoy and congrats!
I am bootstrapping a SaaS for 13 years. We are at $100M+ ARR and almost a hundred people.
Still enjoying it. We've slowly built a strong team during these years and it is a real pleasure to participate and see them solve problems, innovate and iterate. There is nothing VC funding can offer that would make my life better or my work more enjoyable.
I am thankful to myself for ignoring VC funds and acquisition offers.
My advice would be to listen to yourself.
I am thankful to myself for ignoring VC funds and acquisition offers.
My advice would be to listen to yourself.
> Am I being a weirdo?
"Weird" would be if someone chimed in here to say that what you're doing is not OK.
"Weird" is those so-called friends of yours telling you you're "nuts", not acknowledging that your priorities may differ from theirs.
"Weird" is founders taking VC money before they've found product-market fit, which is something you've already accomplished on your own, without their "help".
If someone aspires to build an Uber-sized business, good for them. Not everyone falls in that camp. I definitely do not, and it sounds like you don't either. It's honestly exhausting that this still needs to be explained to some people.
Lifestyle choices such as the one you describe are inherently subjective, like what kind of food is your favorite. Some people like Italian food, and some people like Chinese food. Some people prioritize blitz-scaling and take pride in "sleeping on the factory floor"[1], and some people would rather have a semblance of work-life balance.
1. https://www.cnbc.com/2018/04/11/elon-musk-says-he-is-sleepin...
"Weird" would be if someone chimed in here to say that what you're doing is not OK.
"Weird" is those so-called friends of yours telling you you're "nuts", not acknowledging that your priorities may differ from theirs.
"Weird" is founders taking VC money before they've found product-market fit, which is something you've already accomplished on your own, without their "help".
If someone aspires to build an Uber-sized business, good for them. Not everyone falls in that camp. I definitely do not, and it sounds like you don't either. It's honestly exhausting that this still needs to be explained to some people.
Lifestyle choices such as the one you describe are inherently subjective, like what kind of food is your favorite. Some people like Italian food, and some people like Chinese food. Some people prioritize blitz-scaling and take pride in "sleeping on the factory floor"[1], and some people would rather have a semblance of work-life balance.
1. https://www.cnbc.com/2018/04/11/elon-musk-says-he-is-sleepin...
Just a question, is there even a reason to keep pursuing revenue growth? VS taking more time off, focusing on yourself? I mean if you're making 15k monthly...
You do have a real business already: understanding potential customer problems, solving it and charging for it. If you want to grow your activity, VCs are one way that has been pounded for the last decade or so, but not the only one! You could start by looking for an associate, you could employ someone to help with tasks you’re not comfortable with, etc. Be the entrepreneur you want to be, not what the crowd tells you to be!
It will depend a lot on the situation.
In my personal observation, bootstrapped businesses fare better in many important aspects. But this might be due to survivorship bias. If you are patient and your business allows, I think there is a lot of advantages of keeping full control and having to go through all of the lessons at a slower pace and, more importantly, at the pace of your choosing.
The company I am currently working with ran into some problems and decided to pause the growth and fix some stuff before resuming. This is only possible because the the founders are fully owners of the company and can do whatever we decide makes best sense.
On the other hand there are situations where the winner takes it all. If you are in this kind of situation you probably should take funding as long as it is not going to be distracting you from your product and growing your company.
I think you use the funding like any other loan. What are you buying with it? Do you have to take it? How much do you really need? Are benefits higher than the costs?
In my personal observation, bootstrapped businesses fare better in many important aspects. But this might be due to survivorship bias. If you are patient and your business allows, I think there is a lot of advantages of keeping full control and having to go through all of the lessons at a slower pace and, more importantly, at the pace of your choosing.
The company I am currently working with ran into some problems and decided to pause the growth and fix some stuff before resuming. This is only possible because the the founders are fully owners of the company and can do whatever we decide makes best sense.
On the other hand there are situations where the winner takes it all. If you are in this kind of situation you probably should take funding as long as it is not going to be distracting you from your product and growing your company.
I think you use the funding like any other loan. What are you buying with it? Do you have to take it? How much do you really need? Are benefits higher than the costs?
You are not nuts but knowing what you feel in the future is very hard while having money can almost guarantee that you will be able to take more choices that make you happy.
Just heard about someone working on a passion project for two years alone and he got burned out and only wants to sell it to someone so he can stop. Did he enjoy doing it for a year? hell yeah! could he have anticipated he will burn out? not sure.
Will you want to continue do this particular project in a year? two? ten? what about family, kids health issues? each one can take something that you used to enjoy and turn it into a burden.
VCs will push you forward, getting co-founders will push you forward, getting employees will push you forward. Will this reduce the joy that you feel now? almost certainly. Will it improve the chances that you can have a life changing amount of money that will let you make more enjoyable choices in the future? very likely so.
A business is not always fun, but fun things usually don't stay fun forever anyway. Ask anyone that used to have a band :)
Just heard about someone working on a passion project for two years alone and he got burned out and only wants to sell it to someone so he can stop. Did he enjoy doing it for a year? hell yeah! could he have anticipated he will burn out? not sure.
Will you want to continue do this particular project in a year? two? ten? what about family, kids health issues? each one can take something that you used to enjoy and turn it into a burden.
VCs will push you forward, getting co-founders will push you forward, getting employees will push you forward. Will this reduce the joy that you feel now? almost certainly. Will it improve the chances that you can have a life changing amount of money that will let you make more enjoyable choices in the future? very likely so.
A business is not always fun, but fun things usually don't stay fun forever anyway. Ask anyone that used to have a band :)
Some part of the equation depends on the size and structure of the market.
If you can scale to a large business with little competition, say $100m+ in revenue per year, it's strongly worth considering. You might be able to exit with generational wealth. However, if the market is very competitive and/or mature, it's much harder to reach that scale. If it's not capital intensive, has few potential entrants, and is growing organically, you might be able to grow without investment and be fine.
The question to ask yourself is what's your long term objective (10+ years) and is meeting that objective worth the risk?
ps. I'd add that failure for a VC is not like failure to me and you. If you are the 3rd place in a market and exit for tens of millions (to you) that might still be a poor return for the investor, but life changing for you.
If you can scale to a large business with little competition, say $100m+ in revenue per year, it's strongly worth considering. You might be able to exit with generational wealth. However, if the market is very competitive and/or mature, it's much harder to reach that scale. If it's not capital intensive, has few potential entrants, and is growing organically, you might be able to grow without investment and be fine.
The question to ask yourself is what's your long term objective (10+ years) and is meeting that objective worth the risk?
ps. I'd add that failure for a VC is not like failure to me and you. If you are the 3rd place in a market and exit for tens of millions (to you) that might still be a poor return for the investor, but life changing for you.
If you see your Saas remaining under 10 million revenue / annum, VC is pointless. VC businesses between 10 million to 100 million exits make no sense imo. Either go full out and sell for over 100 million or fail early under 10 million. Over 100 million is the VC sweet spot.
The founder of SaaStr Jason Lemkin wrote a pretty good article that can help you think about this decision
https://www.saastr.com/the-10x-rule-what-raising-1-of-ventur...
The immediate impact is that that MRR that you have is no longer eligible for dividend payment. Expectation will be that you reinvest all income for growth until you exit (acq, IPO).
On the positive side, you’ll get to explore how big your idea can really become. And with much less worries about immediate cashflows than you otherwise would have if you were to grow your headcount.
tldr; think big or enjoy your small scale success. (As others have pointed out, absolutely nothing wrong with the latter.)
https://www.saastr.com/the-10x-rule-what-raising-1-of-ventur...
The immediate impact is that that MRR that you have is no longer eligible for dividend payment. Expectation will be that you reinvest all income for growth until you exit (acq, IPO).
On the positive side, you’ll get to explore how big your idea can really become. And with much less worries about immediate cashflows than you otherwise would have if you were to grow your headcount.
tldr; think big or enjoy your small scale success. (As others have pointed out, absolutely nothing wrong with the latter.)
> Is it okay (...) Am I being a weirdo?
Even assuming that it that makes you a weirdo: you can be weird if you want.
Even assuming that it that makes you a weirdo: you can be weird if you want.
If you want to take a middle ground, so you can get some funding without the pressure of high-powered VCs you could look at something like Calm Fund: https://calmfund.com/
>I'm enjoying the lifestyle of "solve client's problem, client pays me money, innovate, iterate". It probably won't last forever, but it's simple and it feels authentic.
Don't underestimate that! It's better to have a good source of income, freedom of action, and be happy doing something enjoyable and meaningful in life, rather than chase unicorns by dealing with investors you don't like forcing you to do things you don't like. Up from a certain income level, extra money doesn't bring more happiness. And that income level isn't that high.
Don't underestimate that! It's better to have a good source of income, freedom of action, and be happy doing something enjoyable and meaningful in life, rather than chase unicorns by dealing with investors you don't like forcing you to do things you don't like. Up from a certain income level, extra money doesn't bring more happiness. And that income level isn't that high.
Hi, I'm exactly in the same situation, bootstrapped saas (that I care a lot about!) at $15k mrr and getting vc offers. I'm 100% on prioritizing lifestyle and bootstrapping it all the way. Follow your gut, it's what's taken you this far.
I was recently recommended by more advanced bootstrappers to try to form a small closed mastermind (group of people with the same goals/values/stage in business). I suck at socializing but if you think it can help both of us to be in touch feel free to answer :)
Let's keep shipping!
I was recently recommended by more advanced bootstrappers to try to form a small closed mastermind (group of people with the same goals/values/stage in business). I suck at socializing but if you think it can help both of us to be in touch feel free to answer :)
Let's keep shipping!
You’re getting unsolicited term sheets?
Congrats! It's a great position to be in! I've been running a bootstrapped business for 6 years.
You're not nuts at all, it all comes down to what you want. I personally want to start a VC backed business next year. They're both different types of businesses, where you'll learn different skills and live life in different ways.
If you don't want to do any of that, then you've just answered your own question! Enjoy where you're at and don't worry about comparing yourself to what others think.
You're not nuts at all, it all comes down to what you want. I personally want to start a VC backed business next year. They're both different types of businesses, where you'll learn different skills and live life in different ways.
If you don't want to do any of that, then you've just answered your own question! Enjoy where you're at and don't worry about comparing yourself to what others think.
VC money is for the situation "we could grow so much by tacking this one opportunity that a bunch of money would help solve" or if you need the clout of having it, or the introductions or advice those investors would give.
If you want to grow slowly and focus on solving problems and are already doing well and at a pace you are ok with, then they don't have what you need.
If you want to grow slowly and focus on solving problems and are already doing well and at a pace you are ok with, then they don't have what you need.
I love the philosophy of bootstrapped companies, and would love for there to be more of them out there to work for (on the employee end), and a healthy ecosystem of them to compete in (rather than just being immediately eaten alive by whatever VC wants to throw money at).
If you can make it work for you, and you're happy, do that thing. Chasing money at all costs is a very different path than what appears to motivate you, but is what VC would require.
If you can make it work for you, and you're happy, do that thing. Chasing money at all costs is a very different path than what appears to motivate you, but is what VC would require.
I agree with most comments that it’s ok to prefer not being VC funded. Looking at what other possible outcomes you may have by taking an alternate route: if you take VC money and the company self-destructs, you might end up with considerable capital (depending on how things ended) at the expense of the business and your clients.
But that’s a gamble. If you think the current MRR is sustainable then I would personally stick with it (I assume you’re a solopreneur)
But that’s a gamble. If you think the current MRR is sustainable then I would personally stick with it (I assume you’re a solopreneur)
Do you run it all by yourself or you have a team in place? If it is solo operation, perhaps middle ground would be to develop it into self functioning company first. There are many obvious reasons why you would want to do it (and why you wouldn't). Perhaps one less obvious one - you will get tired of it eventually. And if it can't survive without you - you will hate leaving it to die off and you will hate keeping running it...
I'm reminded of the fisherman story. Money is just a means to an end. Take some time, decide if you have a particular end in mind, and if you really need boatloads of money to achieve it. Otherwise, enjoy your freedom!
Fisherman story - https://bemorewithless.com/the-story-of-the-mexican-fisherma...
Fisherman story - https://bemorewithless.com/the-story-of-the-mexican-fisherma...
IMHO, keep doing what you're doing! Not much better than being beholden to no one but yourself. I don't think it's weird at all to want to keep that going.
Personally, I'm pretty inclined to shy away from VC unless it's unavoidable for the domain the company is in (e.g. hardware companies, which tend to require an unbelievable amount of capital outlay just to survive development + manufacturing).
Personally, I'm pretty inclined to shy away from VC unless it's unavoidable for the domain the company is in (e.g. hardware companies, which tend to require an unbelievable amount of capital outlay just to survive development + manufacturing).
I've had several small successes that would pay for my life in the last years. When I lost interest I just sold and moved on.
Thing is I enjoy my life. I value free time and low stress way more than luxury. I have all the things I want and can afford everything I need.
My point is you are in the position to choose what is best for you. Don't follow the money just because money, except that's what you value most.
Thing is I enjoy my life. I value free time and low stress way more than luxury. I have all the things I want and can afford everything I need.
My point is you are in the position to choose what is best for you. Don't follow the money just because money, except that's what you value most.
Don't say "No". Just tell the interested parties that you are not looking for funding or M&A at this time. At present you are concentrating on building according to the roadmap you already have. Once you are in need of money for further growth, you will certainly give them a call. You will be keeping then in your contact list.
That should help you keep the channel open for future.
That should help you keep the channel open for future.
Not weird. You just gotta build a shit ton of MOATS around the product. Its not easy but its also not an unreachably hard thing to do.
I'd have MOAT as a top 3 priority, basically constantly asking myself how can I make it as close to a category of one as possible.
Put it this way, opportunity doesn't strike often so when it does its your moral responsibility to grab it and put yourself in a position of strength.
I'd have MOAT as a top 3 priority, basically constantly asking myself how can I make it as close to a category of one as possible.
Put it this way, opportunity doesn't strike often so when it does its your moral responsibility to grab it and put yourself in a position of strength.
Thanks for MOAT comment.
Do you mind elaborating on that last sentence? How is it a moral responsibility you mean?
I'd also like to hear an elaboration, but here's what is driving me right now:
My father taught me that when you see work that needs to be done (before anyone else sees it), it becomes your responsibility to see it done.
Think of all the people who will benefit from your work. If you were to let them down, could you live with it?
My father taught me that when you see work that needs to be done (before anyone else sees it), it becomes your responsibility to see it done.
Think of all the people who will benefit from your work. If you were to let them down, could you live with it?
I like that philosophy!
Are we talking MOAT as in moat, or is there an acronym here?
As you say it, it might not last forever. VC startup is a more recognized "unit of business". Equally, VC objectives may be different than yours and they may spoil the dream for you.
It's a choice of being your own, maybe small rocket, and strapping yourself to another, bigger rocket, which is going roughly up, but maybe not where you want it to. Either can explode, but in different ways...
It's a choice of being your own, maybe small rocket, and strapping yourself to another, bigger rocket, which is going roughly up, but maybe not where you want it to. Either can explode, but in different ways...
If you’re happy, continue to enjoy your bootstrapped success and the lifestyle you’ve created. Sounds wonderful.
If it starts to become unenjoyable, or if you’re not capable of running it anymore, there will be plenty of companies willing to acquire it.
Consider coaching a wing-person so you can hand over the reins when the time comes. You don’t wanna be the single point of failure.
If it starts to become unenjoyable, or if you’re not capable of running it anymore, there will be plenty of companies willing to acquire it.
Consider coaching a wing-person so you can hand over the reins when the time comes. You don’t wanna be the single point of failure.
Not everyone wants to follow the Silicon Valley Model: https://www.youtube.com/watch?v=BHR2py46co4
Find a group of likeminded bootstrapped founders who can support you in your journey. It's easier when you don't feel alone..
Find a group of likeminded bootstrapped founders who can support you in your journey. It's easier when you don't feel alone..
> I'm enjoying the lifestyle of "solve client's problem, client pays me money, innovate, iterate". It probably won't last forever, but it's simple and it feels authentic.
Then carry on.
Then carry on.
We bootstrapped our company all the way even though we tried to raise VC money but failed. However if you keep grinding and can manage growth there is a clear path how you can become successful without external funding. We got acquired after 2.5 years without looking for an exit.
Sorry for the dumb question, maybe this is just my english skills falling short: What does MMR mean?
And to answer the question even though I have no experience being in a such a position nor running a business: I would probably keep running it myself as long as it gives meaning and is driven by your passion
And to answer the question even though I have no experience being in a such a position nor running a business: I would probably keep running it myself as long as it gives meaning and is driven by your passion
Monthly Monthly Revenue. https://medium.com/@appflame2/mmr-monthly-recurring-revenue-...
If you want to go this round, find someone who can help/coach you. VCs and boards, in particular, need to be adequately managed. This is no rocket science but requires some experience managing stakeholders. It’s a “game” you need to know how to play.
Any insights into what kinds of lessons one would need to learn to play with the big boys/girls?
What you are doing is the normal (non-startup) way of founding a business.
Don't take money unless
1. You really need it 2. You feel the VC can give you something nobody else can
When you take money from an investor you are selling YOUR own equity in turn reducing your ownership.
1. You really need it 2. You feel the VC can give you something nobody else can
When you take money from an investor you are selling YOUR own equity in turn reducing your ownership.
Borrowing money from someone comes with a lot of risks. The question is whether the risks outweigh the benefits for your situation.
Also, it's very much okay to ignore financial advice from friends.
Also, it's very much okay to ignore financial advice from friends.
That sounds fantastic! Making good money solving problems for people and enjoying it is pretty much the dream right?
if a VC takes 10% for $2M or whatever is appropriate at whatever valuation then as long as it is less than 50% or less than what the founder holds in shares or as long as founder shares have more in voting rights then why should the founder not take the money? They'll still be in control, no?
I'd sell to be set for life and start another bootstrapped project but with more money.
I had a job like that for 20 years. Wouldn’t change anything in retrospect. It’s a beautiful life.
How do these VC firms find you?
VCs don’t want you to know that you can start a business without them.
May a well post a link to your company…
Enjoy!
If you get outside funding, you lose control. Steve Jobs was kicked out of Apple Computer company which he founded, because it went public and sold stock and all stockholders are then owners for their shares. The board of directors, which represents the shareholders, basically fired Jobs (sidelined him I think, and he quit).
So if Steve Jobs can be fired, anyone can.
However, depending on what you want, it can be fine. Steve Jobs did have billions of dollars when it went public. Nothing wrong with cashing out, if that's what someone wanted to do. Probably without funding, 99% sure he would never have turned Apple into the huge success it is today...the most valuable company in the world.
Nobody can see the future, and maybe your $15,000 MRR goes down to $200 MRR in a year, who knows? Maybe it goes up to $30,000 in a year, who knows? Maybe if you get a VC, it goes up to $10 million MRR. Maybe they sell it to Facebook (or whomever) for $1 billion, and you wind up with $300 million, and Facebook tries to run it a year and shuts it down. Maybe the VCs just tank it after a year because they suck. Maybe with VCs, you will grow great and without them, someone bigger company will swoop in and complete hard and take all your future prospects because they market hard.. Maybe, maybe, maybe. There are a thousand scenarios.
The other thing is that taking off like a rocket ship to the stratosphere is completely different set of skills than what you are doing now, which I don't know if you have the skills to transition from where you are now to what is required to grow like hell. Maybe you might have to hire 240 people a year, 20 people a month, onboard them, fire some, know what kind of benefits to give, manage them, get a CFO because now you're making millions per month and you have to stay on top of that, you have to have meetings all the time with the VCs and other people who have nothing to do with the day-to-day running of the company, publicity, press, all kinds of stuff like that. It goes on-and-on. And to be sure, some people can do that, Zuckerberg as one example. But can you, that's the question.
Personally, personally, I would never use a VC-type thing, because fuck them. There might be a few good VCs, but there's a zillion VCs, and they all are different. Depending on the VC, they can either be hands-off or they can be up your ass every week wanting to know how their investment is going, and everything in between. They might make you go in a different direction than your vision is, just because they think what they think is better than what you think, which 100% it is NOT. Only one out of a hundred investments make money for VCs, so they don't know crap about what will work and what won't. They just play the statistics - 99 bad investments, and one that makes a billion dollars to cover the bad investments. This is how it is.
I think that if a company has a high margin product, then getting VC money is not good. You can bootstrap if you have high margins. If you have low margins product, then you need investers.
Good luck to you.
So if Steve Jobs can be fired, anyone can.
However, depending on what you want, it can be fine. Steve Jobs did have billions of dollars when it went public. Nothing wrong with cashing out, if that's what someone wanted to do. Probably without funding, 99% sure he would never have turned Apple into the huge success it is today...the most valuable company in the world.
Nobody can see the future, and maybe your $15,000 MRR goes down to $200 MRR in a year, who knows? Maybe it goes up to $30,000 in a year, who knows? Maybe if you get a VC, it goes up to $10 million MRR. Maybe they sell it to Facebook (or whomever) for $1 billion, and you wind up with $300 million, and Facebook tries to run it a year and shuts it down. Maybe the VCs just tank it after a year because they suck. Maybe with VCs, you will grow great and without them, someone bigger company will swoop in and complete hard and take all your future prospects because they market hard.. Maybe, maybe, maybe. There are a thousand scenarios.
The other thing is that taking off like a rocket ship to the stratosphere is completely different set of skills than what you are doing now, which I don't know if you have the skills to transition from where you are now to what is required to grow like hell. Maybe you might have to hire 240 people a year, 20 people a month, onboard them, fire some, know what kind of benefits to give, manage them, get a CFO because now you're making millions per month and you have to stay on top of that, you have to have meetings all the time with the VCs and other people who have nothing to do with the day-to-day running of the company, publicity, press, all kinds of stuff like that. It goes on-and-on. And to be sure, some people can do that, Zuckerberg as one example. But can you, that's the question.
Personally, personally, I would never use a VC-type thing, because fuck them. There might be a few good VCs, but there's a zillion VCs, and they all are different. Depending on the VC, they can either be hands-off or they can be up your ass every week wanting to know how their investment is going, and everything in between. They might make you go in a different direction than your vision is, just because they think what they think is better than what you think, which 100% it is NOT. Only one out of a hundred investments make money for VCs, so they don't know crap about what will work and what won't. They just play the statistics - 99 bad investments, and one that makes a billion dollars to cover the bad investments. This is how it is.
I think that if a company has a high margin product, then getting VC money is not good. You can bootstrap if you have high margins. If you have low margins product, then you need investers.
Good luck to you.
I am sometimes contacted by eager megacorp M&A departments and VC funds, but... Is it weird that I don't want to do any of that?
I'm enjoying the lifestyle of "solve client's problem, client pays me money, innovate, iterate". It probably won't last forever, but it's simple and it feels authentic. The megacorps and VCs I've spoken to want to turn up the heat and take the business to the moon, planet-scale growth or self-destruct---I don't think that's what I want. I'm sure my potential acquirers or VC-funded competitors will build it with or without me eventually but... I don't think I give a shit.
Am I being a weirdo? Some of my more "Silicon Valley"-type friends think I'm nuts.