I often see thread's like this:
. And I don't get the point of some of the folks there. Bootstrappers trying to dunk on VC-backed folks and VC folks bashing Bootstrappers for not being ambitious enough? This one thread, for example, so many of the bootstrap side trying to bash the VC "side".
Just the other day, I was watching a video from 2 YC directors, and it wasn’t much different, but from the other “side”. Bootstrap is incredibly hard! But so is VC-backed. Having worked in both contexts, I honestly don't know which one is worse
.
I guess what bootstrap folks don’t like to hear is that VC isn't an option for most businesses, even some very good ones. VCs are looking for at least double digit growth YoY. A 10 to 20% even with seven-figure revenue, that's just not enough to make sense.
Even if you get through seed, A, or even B rounds with something that should have started bootstrapped make, it will end up as a non-ideal outcome for everyone. The question isn't whether to bootstrap or seek VC funding as an option.
The question is, "Are you sitting on a business that has clear potential for VC funding or not?" The more confidence you can show that, the better deal you’ll get. Some non-obvious businesses struggle to get backed.
Salesforce is a classic historical example, struggled to get funding (but had Larry Ellison to fix it). It wasn't obvious at the time that SaaS/cloud made sense.
If you decide to go VC-backed, I think you have only 3 real options:
1st. you can try your luck with an accelerator, but this will take a significant equity for a relatively small check, and you’ll need to grow fast or shut down fast.
2nd. if you come from a successful company, your network can help with a good deal for a seed round, like single-digit equity for 7-figure funding.
3rd. grind a side project for as long as possible and then get good deal based on evidence later (might even be able to skip rounds), similar to Github and Zapier. Trying to mislead a VC to back a non-VC level business is a bad idea; 1st, they're not stupid, and 2nd, the likelihood of everyone going home pissed is just too high.
We considered the VC route ourselves, twice. The first time made sense (because we found an atypical VC to partner with); the second time, it did not make sense (yet): 1st. was 4 years ago when we switched from Know Your Company to Know Your Team, deciding to focus on tools for managers instead of CEOs. We were lucky to partner with @bryce from @indievc. We weren't sure if we could grow at a VC level rate, but we didn't need to mislead Bryce either – he baked the non-VC growth into the contract as an option (this is super rare).
2nd. time was early last year, right before we launched our new Training product. In that market, with layoffs, VCs getting conservative, budget freezes, trying to raise funds seemed like a huge distraction + high chance of a bad deal at the end, if any.
We knew we could run the product for forever with our existing revenue, so that’s what we did. I get that debate is good for likes, but we'd all be better off if we just saw VC and Bootstrap as tools.
Bootstrapped folks might be missing a good opportunity if they happen to have something that could benefit from going fast, and VCs might be missing some of these opportunities for no reason (who wouldn't want to be early on Zapier, Mailchimp, Github, etc?).
Just the other day, I was watching a video from 2 YC directors, and it wasn’t much different, but from the other “side”. Bootstrap is incredibly hard! But so is VC-backed. Having worked in both contexts, I honestly don't know which one is worse
. I guess what bootstrap folks don’t like to hear is that VC isn't an option for most businesses, even some very good ones. VCs are looking for at least double digit growth YoY. A 10 to 20% even with seven-figure revenue, that's just not enough to make sense.
Even if you get through seed, A, or even B rounds with something that should have started bootstrapped make, it will end up as a non-ideal outcome for everyone. The question isn't whether to bootstrap or seek VC funding as an option.
The question is, "Are you sitting on a business that has clear potential for VC funding or not?" The more confidence you can show that, the better deal you’ll get. Some non-obvious businesses struggle to get backed.
Salesforce is a classic historical example, struggled to get funding (but had Larry Ellison to fix it). It wasn't obvious at the time that SaaS/cloud made sense.
If you decide to go VC-backed, I think you have only 3 real options:
1st. you can try your luck with an accelerator, but this will take a significant equity for a relatively small check, and you’ll need to grow fast or shut down fast.
2nd. if you come from a successful company, your network can help with a good deal for a seed round, like single-digit equity for 7-figure funding.
3rd. grind a side project for as long as possible and then get good deal based on evidence later (might even be able to skip rounds), similar to Github and Zapier. Trying to mislead a VC to back a non-VC level business is a bad idea; 1st, they're not stupid, and 2nd, the likelihood of everyone going home pissed is just too high.
We considered the VC route ourselves, twice. The first time made sense (because we found an atypical VC to partner with); the second time, it did not make sense (yet): 1st. was 4 years ago when we switched from Know Your Company to Know Your Team, deciding to focus on tools for managers instead of CEOs. We were lucky to partner with @bryce from @indievc. We weren't sure if we could grow at a VC level rate, but we didn't need to mislead Bryce either – he baked the non-VC growth into the contract as an option (this is super rare).
2nd. time was early last year, right before we launched our new Training product. In that market, with layoffs, VCs getting conservative, budget freezes, trying to raise funds seemed like a huge distraction + high chance of a bad deal at the end, if any.
We knew we could run the product for forever with our existing revenue, so that’s what we did. I get that debate is good for likes, but we'd all be better off if we just saw VC and Bootstrap as tools.
Bootstrapped folks might be missing a good opportunity if they happen to have something that could benefit from going fast, and VCs might be missing some of these opportunities for no reason (who wouldn't want to be early on Zapier, Mailchimp, Github, etc?).