

Bootstrapping vs. Venture Funding? - markpeterdavis
http://www.markpeterdavis.com/getventure/2009/11/bootstrapping-vs-venture-funding.html

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tom_rath
A business which "...generates single-digit or low double-digit millions in
revenue..." is "a lifestyle business"?!?!

I thought lifestyle businesses were small craft or bespoke software
development shops which allowed an individual to earn modest revenue while
following their lifestyle of choice.

A few million dollars per year in revenue provides one awesome lifestyle!

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bobbyi
Yes, that's pretty much the standard lifestyle business. It puts you in a
similar situation to someone owning a local store or restaurant. You will be
able to live a solid middle class life (or a little better), but you aren't
going to retire to a tropical island any time soon.

If you were instead doing $100k a year in revenue at (say) a 20% margin, that
would mean you take home $20k a year (assuming you revinvest nothing in the
business), which would be more of a "hobby" than a "lifestyle".

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tptacek
I know I'm repeating myself, but: I think this is exactly _not_ the idea of a
standard lifestyle business.

Distilled: a lifestyle business is one that makes choices to optimize the
lifestyle of its owners rather than the success of the business.

For that reason, "lifestyle business" owners are more likely to drive Porsches
than startup owners.

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tptacek
An acid test for presentations like this: does it ignore the elephant in the
room? The real breakdown is, "go for VC, or actually start a company?"

The overwhelming majority of people who "go out for VC" will never get it, no
matter how good their idea, no matter how good their technical execution. The
people who execute well enough as a business to get funded without a track
record are, it seems to me, already committing to bootstrapping their company.

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skmurphy
Exactly! This the real choice: start a company or seek VC funding. The real
reason to bootstrap, if your product/market permits it (e.g. doesn't require
millions in up front investment), is that it preserves your options. You can
seek VC money later if your business--not just your plan or your team--can
justify it, and often at more favorable terms. And bootstrapping has a much
higher chance of success than the 1 in 200 seeking venture funding gives you.

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credo
imo "lifestyle business" is a silly label used in vc circles (to describe
people who don't want their money)

A venture-funded business supports VC lifestyles as well as founder
lifestyles, while a bootstrapped startup doesn't impact vc lifestyles (unless
it competes with a vc-funded business).

vc-funding and bootstrapping are both legitimate options, but to describe the
latter as a "lifestyle business" and the former as something else is absurd.

~~~
tptacek
"Lifestyle business" is _also_ a dismissive term used by financiers to
describe the early stages of bootstrapped companies, but the nice thing about
not needing VC money is: you don't need to care what financiers think about
you.

Look at it this way: 5 years ago, investment bankers were laughing at _all_ of
us. Did we care? Where do you think venture capitalists come from?

~~~
delano
They laughed when I spoke about my lifestyle business, but when I started to
turn a profit!

