I love being part of a bootstrapped startup. I have 100% control of the company, don't have to answer to investors, and can actually focus on making profit instead of trying to scale. Oh, and I'm traveling the world while doing it.
Bootstrapped, solo founder, and older-person-founder startups are very rarely mentioned in the press. Strangely enough, some stats show these startups are also the most prevalent. Thanks Rob!
Also, not especially popular in the press are non-exciting start-ups that are none-the-less profitable. There are many mom-and-pop web hosting companies and online stores for niche products doing just fine. But alas, this doesn't seem to be news.
It actually says "$100 million in all time sales." Which means that they had sold $100 million worth of software since the time the company was founded. Still impressive, but very different than $100 million in revenue per year.
Because Java shops/developers were their initial target customer, and Java is decidedly uncool among the current crop of startup kiddos. Additionally, there's not a significant social or mobile aspect to what they do.
I was just discussing this with my wife last night. My 2 friends and I bootstrapped our company for $300. Knowing that all the success we are enjoying now came from our hard work and that no one else can take any claim to our any part of our success is such an awesome feeling. I talk to a lot of local angels and VCs now and what they offer really doesn't seem that interesting to me anymore. The business I have now will probably never make hundreds of millions of dollars, but I don't feel the need or desire to hit those kind of numbers if it means I have to sacrifice my lifestyle now (a very awesome lifestyle).
Bootstrapped startup owner here... I am of the opinion that if a business on the Web needs millions of dollars to get off the ground, then it's probably a business that isn't worth getting off the ground.
I realize that there are exceptions and there are ideas that need funding to get going, but the whole incestious culture of venture capitalists, investors, and startup idea owners often doesn't foster real innovation. It instead lines the pockets of a select few with millions of dollars. Just a slick redistribution of wealth.
if a business on the Web needs millions of dollars to get off the ground, then it's probably a business that isn't worth getting off the ground
There are some businesses that you could simply not start without significant upfront investment. True, there are lots of businesses you could start with just very cheaply ($100's or $1000's) and grow organically over time. The easiest of these would be paid online apps/services where you could scale your expenses (servers, bandwidth, etc) with revenue. But some businesses need money upfront to get started. The most obvious example would be anything involving hardware. You could bootstrap while building a prototype, but you would likely need outside investment to manufacture and distribute your product. Even a web only business might need lots of investment to break into a market through advertising or partnerships.
That's completely true, but I think you missed the point. Most startups still focus on finding funding. People seem to think that's the right way to do it, maybe because that's all you read about on tech blogs.
I agree that many startups focus on getting funded as an end, rather than a means to a greater end. I think investment should be seen as a force multiplier, something that will get you to your goal (market dominance, acquisition, IPO, etc) faster than you could without it. I think startups could use more advice on when and if it is appropriate to seek investment or bootstrap, but I don't agree with the sentiment that startups should avoid investment like the plague.
Not like the plague, but it shouldn't be first priority. On that point, I think we're saying the same thing.
I'd argue the end goals you mentioned can be harmful to the startup itself (not to mention the tech community), but that's a different debate. If your goals start smaller, you don't need funding in most cases.
I couldn't agree with you more; it doesn't take millions to build an innovative product that actually helps people. Of course you'll run into hugely successful companies like Gilt that require significant upfront capital, but no real innovation is going on there. Yes they have a great business model and great execution going on, but if your mindset is that you need millions to go after a big idea, you're probably thinking the wrong way.
Some of you might already know about this, but 37Signals produces a series called Bootstrapped, Profitable & Proud where they interview bootstrapped companies with more than 1M in revenues.
I really enjoy this series and they do a good job of writing about the companies. However, I don't think it's fair to call companies that took an angel investment as being "bootstrapped." What does the rest of HN think? Is that being pedantic? Please share your thoughts.
I'm curious: does the term "bootstrapped" apply only to how you begin the business, or to the entire history? I tend to read it that way, but I can see where others might disagree.
Where do you draw the line? I think everyone starts with something of their own before getting investor money, eg: clothes, a computer, travel expenses. What's the cutoff? $100? $1000? etc
We've bootstrapped Stormpulse for years. Even if we take outside investment, I will still acknowledge our start as bootstrapped. At that point we would no longer be "bootstrapping" though.
I've heard of 3 out of 10 of these highly successful startups. I think we call ourselves successes prematurely to try to accelerate the arrival of true success. Again today a very good friend who runs a startup with great potential trumpeted the fact that he is profitable. Looking deeper, turns out he's no longer pouring cash into the company, but unable to pay himself a salary.
Lets cut the bullshit guys. You're "highly successful" when you're able to pay yourself and your employees above market rate salaries and retain profit for growth.
Edit: ...as well as being able to start making a dent in the debt you may have accumulated during the cash burning phase of your startup. If you want a really fucking scary exercise, plot your cashflows to date and do a NPV or IRR calculation on the flows. You'll have quite the come-to-jesus moment and will realize how deep the hole is you need to climb out of before you can call yourself successful.
I'm not gonna say I know your friend more than I do but what I can say is I understand why he says he is "profitable" even though he is not. Ok, lets look at it this way:-
"Looking deeper, turns out he's no longer pouring cash into the company, but unable to pay himself a salary."
Replace "company" with property and "salary" with capital gains.
Does it make sense now? He (and probably many others here too, including me) sees his startup as an investment and once an investment starts paying off by itself (break even), I will definitely declare it profitable and trumpeted it as a huge achievement. Why? Cause this investment is paying for itself and I can potentially sell it or earn more off it without bleeding any of my cash into it. Trust me, when you reach that position, you will be a very happy man.
You've failed to take into account the opportunity cost of your time spent working on the business. Lets assume your labor costs $120,000 a year and the company is not paying you. So it's costing you $120,000 a year.
Sell that "property" as you call it, to someone else and it'll cost them $120k a year to replace you or pay you.
The investment isn't paying for itself, there is no capital gain and the reality is that you would have to pay a buyer to take it off your hands so they could lose money at a rate of $120k a year.
At this point in a businesses evolution you're losing money at a terrifying rate and unable to feed your family because you're working for free, but hey you are profitable because you've managed to pay your $20 a month Linode hosting bill.
Dude, I don't want to crap all over your parade or the OP's. But unless we know what we're all working towards and what the definition of success is, we're lying to ourselves and each other and there's no way to measure whether we're making true progress towards meaningful goals or not.
A dire misunderstanding of business cashflow like this poster has demonstrated makes me worry for all the starry eyed kids on HN starting businesses. They read shit like this and gobble it up as gospel. Then they dedicate years of their lives to working their asses off for very little pay, thinking they've achieved meaningful milestones on the way to generating wealth and creating jobs, but the reality is they're wasting their time, wasting investment capital and are a distraction from truly productive endeavors and truly talented entrepreneurs.
What perpetuates this cluster fuck is the monthly talent acquisitions that Google, Facebook and other heavyweights make getting conflated with job creation, innovation and the creation of new cashflow. Building an entity that attracts top talent into a single room and selling that room full of new-hires to google for $2 million an engineer has nothing to do with entrepreneurship. Are you hearing me Levchin?
Agree with you on most points, d2, however I think you're confusing the terms "successful" and "profitable".
Successful in having their baby at least pay some bills is a milestone. Having it pay your bills as well is another, then having it pay for your future generations is yet another. Success is an arrival at a predefined milestone, may it be anything you so choose to predefine.
Given that VC-backed startups are obviously receiving far more press than bootstrapped ones, is there any statistics on how widespread are former and latter, and how successful they are, in consumer Web?
I think the companies you've never heard of are the most interesting of all, in some ways. It means that "being famous" isn't part and parcel of their success.
37signals, while being a good group of people, seem to have found success in a way that I'm not sure is as easy to repeat as some of those companies that just crank away doing their thing and making their money without needing a hugely followed blog, books, web frameworks and the like. This makes me a bit dubious of some of what they have to say.
Fair point about 37signals, but remember they didn't start with the popular blog, books, and framework. it took years to get to that point. Everyone starts somewhere.
That said, I've noticed some of the advice (mostly about marketing) doesn't really apply when you're just starting out.
Right but in many cases the companies don't really want to share their revenue numbers. It's sort of saying to people who would like to compete here is how little it cost to build, how much people have been willing to pay, and how big of a win starting this business would be.
I don't really see myself talking about revenue numbers for my company. Not sure how I benefit from it besides the ego and status boost which isn't interesting to me.
Certainly good points. A counterpoint might be patio11's bingo card thing. If there's anything where "I could build that in a weekend!", it's something like that. I'm not sure if the publicity here helped his bingo business at all, but it doesn't seem to have killed it either, and it certainly opened up other profitable avenues for him.
I think the main reason to share numbers is to encourage others starting businesses. I don't care at all when someone says they make millions. But when I see someone who started out by making $100 a month and grew from there, I can learn from what they did. Others can do it too.
Is it a lack of coverage or just strategically staying under the radar?
I think the lopsided press coverage of VC-backed vs. bootstrapped makes sense when you think about the incentives: VCs are focused on liquidity events (acquisition, IPO), so their startups might aim to be in the tech press and divulge details about revenue, growth, etc in an effort to pump up their valuations.
If you run a profitable bootstrapped company and you are reaching your customers, why speak to the tech press and discuss your financials? It would attract competition and I can't think of any upside.
"If you run a profitable bootstrapped company and you are reaching your customers, why speak to the tech press and discuss your financials? It would attract competition and I can't think of any upside."
I don't know about disclosing financial details, but the answer to the rest of your question is ego. Many people succumb easily to the desire for social recognition, even at the cost of strategic advantage.
Speaking from personal experience, it is sometimes difficult building a solid business that goes completely unrecognized outside of your own customers. It's a normal and accepted part of doing a boring business, but I can at least understand those who allocate resources to the pursuit of a little bit of ego gratification.
Those of us who are running profitable bootstrapped companies tend to put less effort into getting our name in the tech or business press. It is more important that we get our name into the minds of our customers, as our cash flow does not come from Sand Hill Road.
So, this lack of coverage should come as no surprise.
+1000 on this. It took me a long time to realize, but I can either spend my time trying to be a big deal in the tech blogosphere, or try to engage with my actual customers.
If HN users aren't your customer base, then coverage in TC or HN frontpage will do nothing for you. It may stroke your ego, but it won't pad your pocketbook.
That's something I've been wrestling with lately. LiberWriter has started to turn a profit, and I'm wondering if I should copy Balsamiq's transparency / blog posts about early success. In some ways I'd like to, because publicity should help a bit in any case, but getting on HN really isn't going to get us any new customers.
If SEO is a meaningful part of your marketing strategy, then you should invest time in getting links. Linkbait on HN and elsewhere is a good path for this... Though you'd obviously be better served getting links from places where your customers spend their time, that's not always available/easy.
I would say don't do it. I'm in a similar position (profitable company with an interesting back-story) and it seems like a bad idea to start giving out your personal financial details to the world.
What would that be, though? Either you're talking about your company and making some information public, or you aren't. If you're going to go down that route, granted you may not want to reveal everything, but you should probably do enough to get some attention, if that's the point. Otherwise you're just revealing information for no benefit.
I find Rand Fishkin incredible in sharing all the details of SeoMoz. It takes guts to do that.
Balsamiq, Bingo Card creator and a few others on HN are transparent when it is not a great deal of money.
(I haven't seen Balsamiq post detailed revenue and their breakup lately.)
I would say do what feels comfortable to you. Most likely, it is to keep revenues etc. secret. Revealing those details might get some eyeballs in the short term but not customers.
I think the distinction is between getting some eyeballs who are easy to convert into customers, like Balsamiq or SEOMoz, and something like BCC, where the publicity is less obviously useful, because no one at HN would buy it. LiberWriter is definitely in the latter category.
Agreed. Just look at the Techcrunch Deadpool and you'll see many examples of companies that have "Featured in Techcrunch, NY Times, etc" in their homepage, yet managed to fail. Winning a popularity contest isn't what it's all about. Boosts your ego, sure, but not necessarily revenue. If you get featured in a publication, great, if not don't fret about it. Maybe <1% of people who find you thru Techcrunch will become loyal customers.
Hmm. Let's see. We're AirBnB. After 4 months of bootstrapping by selling Obama-O's, do we take $20K from YC? Of course! It's YC, and we can still bootstrap if we want. After a few more months, do we take $600K from Sequoia and another firm, and let rapacious VCs into our tent? Well, we're hungry because the Obama-O's ran out, so OK. The next year, do we let Ron Conway and Ashton Kutcher(!) and others give us $7.2M more? Tough decision--we can control everything and have a nice, small business like--what was that highly successful company? Carbonmade--and bring in $1M in revenues a year, 100% ours, or give up a third of the business for seven times that. What to do, what to do? We cave in to The Man and take the $7.2M. What, you seriously wouldn't want to hang with Ashton and Demi? Another year goes by and Mark Andreessen and Jeff Bezos want to join in with a crazy Russian and give us $112 million for another 10%. No way! This kind of offer insults our bootstrapping dignity. Besides, if we're highly successful like Carbonmade, we could make that much in 112 years on our own and keep 100% of it, after expenses. But we sell out anyway, at a billion-dollar valuation. We might each get a few hundred million with a successful IPO, but it's just not worth it compared to the satisfaction we could have if we owned 100% of a million-dollar company. Paul Graham must be ashamed of us. We drown our sorrows in an apartment in Saint-Tropez that we rented through AirBnB with Ashton and Demi. Bruce Willis stops by to say, "What's with the sad face, boys?" He's not as tall as we expected. We give him a glass of absinthe. The Mediterranean sun is not unpleasant.
I'm glad to see coverage of bootstrapped startups and the supportive comments. I've worked at both highly funded startups and most recently I've worked at a profitable bootstrap for the last 3.5 years. The bootstrap startup is definitely more fun... It's nice that we don't have any investors to answer to and micro-manage every aspect of our business and that also have their hands out to get paid first when an acquisition event occurs.
The great thing about not having to report to investors, is that you can focus on your job, and on your product.
You do not have to focus on profit (provided you can afford living with low income).
I love the story behind GitHub, they managed to live to a few bucks, and with patience all their effort is paying themselves, not having to share their effort with others.
Congratulations to those guys behind those Bootstrapped Startups.
Clicky is a great company with a great product, I've been using the paid version for some time now, and I can only say that they fit my company's needs better than other real-time analytics start-ups. Really happy that bootstrapped start-ups are as competitive and innovative as those which use VC financing.
The media needs the sports-like entertainment that lives inside startups to sell their stories, don't get upset because these other successful businesses are not talked about all the time, they just are not that mainstream and IMO some people don't like the attention, so they go low profile and still are extremely successful, just like you know someone did something great at some point that changed your life, and you never got to know who did it.
Fotki.com never got funded, always were profitable and we are online for 13 years now. And I agree that bootstrapped companies mostly do not get covered by the press. When we did talk to the press in the last 13 years, one of question they ask is who are our investors, and when we tell them that we had no investors, their tone would change, and then they would loose interest, or just mention once about us somewhere at the end of the article :)
Reminds me of one of the lessons from Soul of a New Machine: forced scarcity can breed creativity. Too much money allows you to defer hard decisions for too long.
I have a bootstrapped startup, I work long hours for 1/3 my market value (1/25 if I'd move to the US).
But, I wrote a distributed database and when we show it to prospective clients and they compare it to the competition and they benchmark it, we always come out on top in terms of performance and architecture. So, although it's not "happy times" right now, it's worth it.
Love to see lists like this as there is way too much talk about VC backed companies that never have any real success and never even create any value with customers.
Self-funding is pretty much the default for consulting companies, because all you're doing initially is collecting an hourly that you theoretically could have collected working for some other consulting company or going to work for someone FT.
Consulting is also a common way of bootstrapping a company (see Joel on Software for his history of starting Fog Creek this way), because you use consulting revenue to keep the company afloat while working on an actual product in any time you have left over. The goal is to grow the product to where you can build a revenue base from it and wean the company off of consulting revenues.
Although they were bootstrapped for a while, they ended up accepting a private investment from Jeff Bezos (mainly to get Jeff as an advisor). So, I'm not sure if we can call them truly bootstrapped anymore.
