9 ms·

For the past 10 months or so I've been part of a 3 person team that is bootstrapping. I can't count how many times I've been looked at like I have two heads whe

For the past 10 months or so I've been part of a 3 person team that is bootstrapping. I can't count how many times I've been looked at like I have two heads when I tell someone that no we don't have funding, and we aren't looking for it, and we aren't planning on looking for it, and we're not entirely sure we even want it. And when I tell someone that we're more worried about building a sustainable business that can stand on its own I might as well be speaking a foreign language.

Swizec 10y ago
It smells like this is becoming more and more common. Small startups with outsized redults for founders and employees, instead of big startups with small results for founders and miniscule results for employees. It seems like the trend has been growing for the past 5 to 6 years. Or I've been wrapped in the microconf crowd bubble and have a bonkers read on reality.
coffeemug 10y ago
You seem to be attaching a moral axis to the decision on whether to raise capital. Consider that people look at you like you have two heads because you're making an irrational decision. Capital usually comes with two strings -- giving up a part of your company, and giving up control (both of which are correlated, but not the same thing). In the current climate, if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? Put a different way, how good would the terms have to get for you to take the money? In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? How far are the current market conditions from this scenario?
- gist 10y ago
  The OP hasn't actually said that he turned down funding just that he wasn't looking for it and not sure he (?) wanted it. This is really similar to someone saying they aren't looking for a job. It's implied I guess that if someone offered them a million dollar job (where they had been making $100k) with complete freedom and great working conditions they'd at least consider it. Your point is taken though and very possibly might also mean "I take the high road and would turn it down no matter what". (Which doesn't mean they would of course just that they say they would).
- ritchiea 10y ago
  Doesn't capital also come with the expectation/pressure you need some sort of liquidity event in the next X years because the VC's fund depends on it?
  - coffeemug 10y ago
    Theoretically you could negotiate a deal where you don't have a responsibility of reporting to your first round investors (not far fetched given the current climate). In practice seed investments consist of multiple $100k-$250k checks, which are generally too small for the investors to put any pressure on your startup. Seed investors write dozens or hundreds of these checks, and they don't have the bandwidth (nor desire) to put any pressure on the founders. The pressure kicks in when you raise series A and get partners on your board who only make a few investments per year.
    - dasmoth 10y ago
      Is it really true that you could take a $250k seed round, build something profitable-but-not-huge, then just quietly run the resulting business? I thought that carried a pretty strong expectatation that you'd be hiring employees and looking for series A pretty soon. Definitely interesting if there are other good routes for "slightly-too-big-to-bootstrap" ideas (beyond the obvious "savings" and "transition from consulting")
      - jdoliner 10y ago
        Absolutely, it of course depends on the terms. But in my experience investments for that amount never involve a board seat and normally involve a smallish amount of equity so investors have no means to pressure companies into taking an A later if they don't want to. There is some expectation that you'll do something with this money and normally for early stage companies that means hiring people, but I've never heard of an investor strong arming an entrepreneur into hiring people when they didn't want to. Where does your belief that they do come from?
        10y ago
- erikpukinskis 10y ago
  > In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. > if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? You have no idea when or if a liquidity event might happen or how big it might be and you want to make as few promises as possible to keep your options open, including holding no substantial assets at all. You don't want to add another person to the list of people you have to loop in to conversations. You don't want to leak information into the tech establishment. You expect big dilutions later on and you want to keep as much equity as you can initially.
  - jdoliner 10y ago
    > There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. Starting a company is filled with social expectations and refusing to raise money is certainly not going to spare you from them. Founding a company is an exercise in setting expectations you're not sure you can fulfill, you'll certainly be setting those expectations with your early customers, by definition you'll be making some sort of agreement with your first customer that you've never fulfilled for someone in the past. You want to manage the expectations of course, but to say that raising money implies expectations and thus the best course is to not consider raising money is foolish. You'll likely just compromise your ability to meet other expectations.
    - mwfunk 10y ago
      This assumes that (a) they need the money and/or (b) they could even do something they want to do with the money that they aren't already doing. I could imagine all sorts of cases where neither of these things are true, and everything's going well and according to plan. If everyone's expectations are already being met, what's the point in putting yourself on the hook to someone else for something more, regardless of how much money it is or how low the additional expectations are? I could see the logic from a VC perspective- VCs aren't going to make any money from companies that don't take funding from them. Companies that don't take funding may as well not exist to them. VC firms themselves are businesses that make money by nurturing other businesses. That just means that all VC firms need startups to nurture, it doesn't mean that all startups must be nurtured by VC firms.
- optimiz3 10y ago
  Is the million dollar check going to me or the company? In the later case the company might not need it.
- crazy_ant 10y ago
  It has nothing to do with morality, it has to do with building a sustainable business while retaining full ownership. The notion that you absolutely need to accept funding is getting tired because it's not supported by facts and grounded in reality. I am currently bootstrapping a business and I have been approached by VCs who asked me to please take their money. I have turned them down because, as I politely told them, I don't need it, AND I am not looking to simply flip the company some day (no sane investor will invest unless the company can be sold in some form and they get their money back). Some people may also wish to avoid having a boss, and if you think your VC is not your boss in some capacity at least, you're in for a rude awakening. Calling someone's decision to avoid raising money irrational and attaching labels (morality?) is presumptuous. There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that.
  - exelius 10y ago
    > There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that. Nothing wrong with it at all; but keep in mind you are posting on the message boards of an organization (YCombinator) that is deeply invested in the Silicon Valley venture ecosystem. The "growth at all costs" mentality is bound to be quite prevalent among the posters on here as a result. It's just the audience that HN draws.
    - pop8row9 10y ago
      > It's just the audience that HN draws. The content of this thread seems to contradict this claim.
  - onewaystreet 10y ago
    It's irrational for someone running a startup to be categorically against raising money. It's not for someone running a lifestyle business. A lifestyle business is not a startup.
- metaphorm 10y ago
  that's not the limit case. that's an absurd statement, and venture capital isn't differential calculus.
- michaelkeenan 10y ago
  > You seem to be attaching a moral axis to the decision on whether to raise capital Which part of their comment makes you think that? I don't see it, and I'm curious about how it's coming across differently to others.
- Retric 10y ago
  There are far more 10 million dollar companies out there than 10 billion dollar companies. Which hints at the fact taking money to grow increases risks of failure. So, if you don't need funding you are better off not taking it.
- bootload 10y ago
  "Consider that people look at you like you have two heads because you're making an irrational decision." The observer is basing this on imperfect information.
gnicholas 10y ago
Don't forget the part where you're told that "it's fine if you want to create a mom-and-pop business"—which is apparently defined as anything that isn't venture-backed.
- IpV8 10y ago
  Is it not?
  - emodendroket 10y ago
    Self-funding can be slower but can eventually create a large business.
    - pjlegato 10y ago
      Got any examples of a self-funded business that was slow but eventually exceeded a venture-backed competitor? (Serious question.)
      - mediaman 10y ago
        There's a bunch, but one example would be Morningstar, the mutual fund review company. Other than some small friends and family money at the beginning ($80k), Joe Mansueto never raised any money, until seventeen years after the founding and it was making substantial money already. This was in part by selling annual subscriptions, so he got cash in advance from each customer. Even though he lost money for a while by accounting rules, he was cash flow positive after a year.
      - ThePawnBreak 10y ago
        Microsoft.
        dilemma 10y ago
        Also, Facebook was funded by Zuck's parents in the beginning, letting him retain the large equity he has in thr company today.
nxzero 10y ago
Raising capital is not foolish, doing so without reason is. Nothing wrong with bootstrapping, but unless you and your partners publicly commit to not doing it and promise to leave without any compensation of any kind if you do raise capital - it is what it is to say you'll never do so, and to be honest, it would foolish to do so.
caseysoftware 10y ago
That's a good call for many situations. Once you accept cash from someone else, you give up some control and you get a giant ticking clock. Even if you're "successful" by most measures, if you're not successful by their measure, you might as well be dead.
- crazy_ant 10y ago
  Absolutely. That's why we are bootstrapping here, despite being offered funding in the past (unsolicited, I might add). For someone who is trying to build a healthy lifestyle business, accepting money from a VC is equivalent to agreeing to having a boss. When entrepreneurs who have accepted funding are not able to meet certain targets, they routinely get sidelined and/or replaced. I don't know why so many people here pretend that's not the case.
- daniel_levine 10y ago
  I know many situation where the only control given up is basic minority shareholder rights, which you give up with a partner or employee. And I know even more where there isn't a clock. You can always pay dividends instead of selling or going public. Too much hyperbole. For some examples see my previous comment. https://news.ycombinator.com/item?id=12385952 https://news.ycombinator.com/item?id=12385952
ngoldbaum 10y ago
You might find the community at https://barnacl.es/ https://barnacl.es/ more to your liking.
- angry-hacker 10y ago
  Thank you. Interesting community. Wish there's more info besides anti VC :)
  - ngoldbaum 10y ago
    See the about page: https://barnacl.es/about https://barnacl.es/about
  - ivm 10y ago
    This one is more active: http://discuss.bootstrapped.fm/ http://discuss.bootstrapped.fm/
dustingetz 10y ago
Also bootstrapping here, but dont have infinity money, do you work full time on your project? What are you doing to cover burn?
tailrecursion 10y ago
There are three possible reasons for the quizzical look you get. 1) They misunderstood you to mean that you have no money and that you will run aground any minute. Whereas in reality you're fine for now. 2) What you got was a "first reaction" from someone caught up in money worshipping. People sometimes act contrary to their personal beliefs for the purposes of conversation. 3) You're making a horrible miscalculation and you're fated to be punished by unseen forces.
cft 10y ago
Some basic Googling https://www.quora.com/What-great-companies-did-not-raise-venture-capital https://www.quora.com/What-great-companies-did-not-raise-ven... https://qph.ec.quoracdn.net/main-qimg-197e2d2c5a20d31682ea09e5609e0500?convert_to_webp=true https://qph.ec.quoracdn.net/main-qimg-197e2d2c5a20d31682ea09... Apparently Dell had no external capital
- gnicholas 10y ago
  posted too high in the thread? looks like a (very useful) response to a specific query below.
elmar 10y ago
A very good read on the subject, "How startup funding works, and why we've decided to bootstrap" https://www.lessannoyingcrm.com/resources/How_Startup_Funding_Works https://www.lessannoyingcrm.com/resources/How_Startup_Fundin...
foxylad 10y ago
Don't worry, you're doing the right thing. Bootstrapping is a 100% thing: you take 100% of the risk; you get 100% of the rewards; and most importantly you can focus 100% of your energy on the product. That focus feeds back nicely into lower risk and higher reward. Finding capital will divert a lot of your energy into non-productive directions, and probably they are directions that you are not hugely efficient in. And if the time comes that you do need capital, you will get it on much better terms because you have a more mature product. We bootstrapped, and for a couple of years I had the same uncomfortable feeling as you - all my peers seemed to be focused on raising capital. But now we earn far more than we can spend (we're not profligate people, but we're more than comfortable), and one of the most satisfying things is we can continue to operate on our own values. We don't feel we have to jack up rates or reduce support to improve returns for investors, for instance, which makes our customers love us, which makes it a joy to come in to work, which makes our customers love us even more... life's good, and you really can't ask for more than that. Finally, you used the magic word "sustainable". You get this in a way that most in our industry don't, so just smile at the unbelievers - you know an important secret they don't.
Tempest1981 10y ago
Who is looking at you this way -- your 2 employees (hoping for a "wealth event"), or outsiders (who want to live vicariously through your wealth event)?
jagermo 10y ago
Good on you - please keep going. I think this scene of Silicon Valley really hit the nail on the head regarding a lot of the money flowing into startups: https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo

Swizec 10y ago

It smells like this is becoming more and more common. Small startups with outsized redults for founders and employees, instead of big startups with small results for founders and miniscule results for employees. It seems like the trend has been growing for the past 5 to 6 years. Or I've been wrapped in the microconf crowd bubble and have a bonkers read on reality.

coffeemug 10y ago

You seem to be attaching a moral axis to the decision on whether to raise capital. Consider that people look at you like you have two heads because you're making an irrational decision. Capital usually comes with two strings -- giving up a part of your company, and giving up control (both of which are correlated, but not the same thing). In the current climate, if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? Put a different way, how good would the terms have to get for you to take the money? In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? How far are the current market conditions from this scenario?

gist 10y ago
The OP hasn't actually said that he turned down funding just that he wasn't looking for it and not sure he (?) wanted it. This is really similar to someone saying they aren't looking for a job. It's implied I guess that if someone offered them a million dollar job (where they had been making $100k) with complete freedom and great working conditions they'd at least consider it. Your point is taken though and very possibly might also mean "I take the high road and would turn it down no matter what". (Which doesn't mean they would of course just that they say they would).
ritchiea 10y ago
Doesn't capital also come with the expectation/pressure you need some sort of liquidity event in the next X years because the VC's fund depends on it?
- coffeemug 10y ago
  Theoretically you could negotiate a deal where you don't have a responsibility of reporting to your first round investors (not far fetched given the current climate). In practice seed investments consist of multiple $100k-$250k checks, which are generally too small for the investors to put any pressure on your startup. Seed investors write dozens or hundreds of these checks, and they don't have the bandwidth (nor desire) to put any pressure on the founders. The pressure kicks in when you raise series A and get partners on your board who only make a few investments per year.
  - dasmoth 10y ago
    Is it really true that you could take a $250k seed round, build something profitable-but-not-huge, then just quietly run the resulting business? I thought that carried a pretty strong expectatation that you'd be hiring employees and looking for series A pretty soon. Definitely interesting if there are other good routes for "slightly-too-big-to-bootstrap" ideas (beyond the obvious "savings" and "transition from consulting")
    - jdoliner 10y ago
      Absolutely, it of course depends on the terms. But in my experience investments for that amount never involve a board seat and normally involve a smallish amount of equity so investors have no means to pressure companies into taking an A later if they don't want to. There is some expectation that you'll do something with this money and normally for early stage companies that means hiring people, but I've never heard of an investor strong arming an entrepreneur into hiring people when they didn't want to. Where does your belief that they do come from?
      - 10y ago
erikpukinskis 10y ago
> In the limit case, if someone wrote you a million dollar check, no strings attached, what would you do? There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. > if you could raise a seed round while giving away a minimal amount of your company and not giving away control, why wouldn't you? You have no idea when or if a liquidity event might happen or how big it might be and you want to make as few promises as possible to keep your options open, including holding no substantial assets at all. You don't want to add another person to the list of people you have to loop in to conversations. You don't want to leak information into the tech establishment. You expect big dilutions later on and you want to keep as much equity as you can initially.
- jdoliner 10y ago
  > There are never no strings attached. At the very least there are social expectations. Some people feel expectations very acutely and try hard not to set expectations they aren't sure they can fulfill. Starting a company is filled with social expectations and refusing to raise money is certainly not going to spare you from them. Founding a company is an exercise in setting expectations you're not sure you can fulfill, you'll certainly be setting those expectations with your early customers, by definition you'll be making some sort of agreement with your first customer that you've never fulfilled for someone in the past. You want to manage the expectations of course, but to say that raising money implies expectations and thus the best course is to not consider raising money is foolish. You'll likely just compromise your ability to meet other expectations.
  - mwfunk 10y ago
    This assumes that (a) they need the money and/or (b) they could even do something they want to do with the money that they aren't already doing. I could imagine all sorts of cases where neither of these things are true, and everything's going well and according to plan. If everyone's expectations are already being met, what's the point in putting yourself on the hook to someone else for something more, regardless of how much money it is or how low the additional expectations are? I could see the logic from a VC perspective- VCs aren't going to make any money from companies that don't take funding from them. Companies that don't take funding may as well not exist to them. VC firms themselves are businesses that make money by nurturing other businesses. That just means that all VC firms need startups to nurture, it doesn't mean that all startups must be nurtured by VC firms.
optimiz3 10y ago
Is the million dollar check going to me or the company? In the later case the company might not need it.
crazy_ant 10y ago
It has nothing to do with morality, it has to do with building a sustainable business while retaining full ownership. The notion that you absolutely need to accept funding is getting tired because it's not supported by facts and grounded in reality. I am currently bootstrapping a business and I have been approached by VCs who asked me to please take their money. I have turned them down because, as I politely told them, I don't need it, AND I am not looking to simply flip the company some day (no sane investor will invest unless the company can be sold in some form and they get their money back). Some people may also wish to avoid having a boss, and if you think your VC is not your boss in some capacity at least, you're in for a rude awakening. Calling someone's decision to avoid raising money irrational and attaching labels (morality?) is presumptuous. There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that.
- exelius 10y ago
  > There are certain goals that are incompatible with accepting funding, such as: operating a lifestyle business, not reporting to anyone, freedom etc. I am not sure what's so difficult to understand about that. Nothing wrong with it at all; but keep in mind you are posting on the message boards of an organization (YCombinator) that is deeply invested in the Silicon Valley venture ecosystem. The "growth at all costs" mentality is bound to be quite prevalent among the posters on here as a result. It's just the audience that HN draws.
  - pop8row9 10y ago
    > It's just the audience that HN draws. The content of this thread seems to contradict this claim.
- onewaystreet 10y ago
  It's irrational for someone running a startup to be categorically against raising money. It's not for someone running a lifestyle business. A lifestyle business is not a startup.
metaphorm 10y ago
that's not the limit case. that's an absurd statement, and venture capital isn't differential calculus.
michaelkeenan 10y ago
> You seem to be attaching a moral axis to the decision on whether to raise capital Which part of their comment makes you think that? I don't see it, and I'm curious about how it's coming across differently to others.
Retric 10y ago
There are far more 10 million dollar companies out there than 10 billion dollar companies. Which hints at the fact taking money to grow increases risks of failure. So, if you don't need funding you are better off not taking it.
bootload 10y ago
"Consider that people look at you like you have two heads because you're making an irrational decision." The observer is basing this on imperfect information.

gnicholas 10y ago

Don't forget the part where you're told that "it's fine if you want to create a mom-and-pop business"—which is apparently defined as anything that isn't venture-backed.

IpV8 10y ago
Is it not?
- emodendroket 10y ago
  Self-funding can be slower but can eventually create a large business.
  - pjlegato 10y ago
    Got any examples of a self-funded business that was slow but eventually exceeded a venture-backed competitor? (Serious question.)
    - mediaman 10y ago
      There's a bunch, but one example would be Morningstar, the mutual fund review company. Other than some small friends and family money at the beginning ($80k), Joe Mansueto never raised any money, until seventeen years after the founding and it was making substantial money already. This was in part by selling annual subscriptions, so he got cash in advance from each customer. Even though he lost money for a while by accounting rules, he was cash flow positive after a year.
    - ThePawnBreak 10y ago
      Microsoft.
      - dilemma 10y ago
        Also, Facebook was funded by Zuck's parents in the beginning, letting him retain the large equity he has in thr company today.

nxzero 10y ago

Raising capital is not foolish, doing so without reason is. Nothing wrong with bootstrapping, but unless you and your partners publicly commit to not doing it and promise to leave without any compensation of any kind if you do raise capital - it is what it is to say you'll never do so, and to be honest, it would foolish to do so.

caseysoftware 10y ago

That's a good call for many situations. Once you accept cash from someone else, you give up some control and you get a giant ticking clock. Even if you're "successful" by most measures, if you're not successful by their measure, you might as well be dead.

crazy_ant 10y ago
Absolutely. That's why we are bootstrapping here, despite being offered funding in the past (unsolicited, I might add). For someone who is trying to build a healthy lifestyle business, accepting money from a VC is equivalent to agreeing to having a boss. When entrepreneurs who have accepted funding are not able to meet certain targets, they routinely get sidelined and/or replaced. I don't know why so many people here pretend that's not the case.
daniel_levine 10y ago
I know many situation where the only control given up is basic minority shareholder rights, which you give up with a partner or employee. And I know even more where there isn't a clock. You can always pay dividends instead of selling or going public. Too much hyperbole. For some examples see my previous comment. https://news.ycombinator.com/item?id=12385952 https://news.ycombinator.com/item?id=12385952

ngoldbaum 10y ago

You might find the community at https://barnacl.es/ https://barnacl.es/ more to your liking.

angry-hacker 10y ago
Thank you. Interesting community. Wish there's more info besides anti VC :)
- ngoldbaum 10y ago
  See the about page: https://barnacl.es/about https://barnacl.es/about
- ivm 10y ago
  This one is more active: http://discuss.bootstrapped.fm/ http://discuss.bootstrapped.fm/

dustingetz 10y ago

Also bootstrapping here, but dont have infinity money, do you work full time on your project? What are you doing to cover burn?

tailrecursion 10y ago

There are three possible reasons for the quizzical look you get. 1) They misunderstood you to mean that you have no money and that you will run aground any minute. Whereas in reality you're fine for now. 2) What you got was a "first reaction" from someone caught up in money worshipping. People sometimes act contrary to their personal beliefs for the purposes of conversation. 3) You're making a horrible miscalculation and you're fated to be punished by unseen forces.

cft 10y ago

Some basic Googling https://www.quora.com/What-great-companies-did-not-raise-venture-capital https://www.quora.com/What-great-companies-did-not-raise-ven... https://qph.ec.quoracdn.net/main-qimg-197e2d2c5a20d31682ea09e5609e0500?convert_to_webp=true https://qph.ec.quoracdn.net/main-qimg-197e2d2c5a20d31682ea09... Apparently Dell had no external capital

gnicholas 10y ago
posted too high in the thread? looks like a (very useful) response to a specific query below.

elmar 10y ago

A very good read on the subject, "How startup funding works, and why we've decided to bootstrap" https://www.lessannoyingcrm.com/resources/How_Startup_Funding_Works https://www.lessannoyingcrm.com/resources/How_Startup_Fundin...

foxylad 10y ago

Don't worry, you're doing the right thing. Bootstrapping is a 100% thing: you take 100% of the risk; you get 100% of the rewards; and most importantly you can focus 100% of your energy on the product. That focus feeds back nicely into lower risk and higher reward. Finding capital will divert a lot of your energy into non-productive directions, and probably they are directions that you are not hugely efficient in. And if the time comes that you do need capital, you will get it on much better terms because you have a more mature product. We bootstrapped, and for a couple of years I had the same uncomfortable feeling as you - all my peers seemed to be focused on raising capital. But now we earn far more than we can spend (we're not profligate people, but we're more than comfortable), and one of the most satisfying things is we can continue to operate on our own values. We don't feel we have to jack up rates or reduce support to improve returns for investors, for instance, which makes our customers love us, which makes it a joy to come in to work, which makes our customers love us even more... life's good, and you really can't ask for more than that. Finally, you used the magic word "sustainable". You get this in a way that most in our industry don't, so just smile at the unbelievers - you know an important secret they don't.

Tempest1981 10y ago

Who is looking at you this way -- your 2 employees (hoping for a "wealth event"), or outsiders (who want to live vicariously through your wealth event)?

jagermo 10y ago

Good on you - please keep going. I think this scene of Silicon Valley really hit the nail on the head regarding a lot of the money flowing into startups: https://www.youtube.com/watch?v=BzAdXyPYKQo https://www.youtube.com/watch?v=BzAdXyPYKQo