

Plan B for Fundraising (Guy Kawasaki making sense) - sabat
http://blogs.openforum.com/2008/09/09/plan-b-for-fund-raising/

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langer
This reminds me of the Greg McAdoo vs David Heinemeier Hansson debate at
Startup School. It totally polarises 'the VC approach' and 'bootstrapping' and
talks in very general terms.

I don't believe there's a right answer to this. Surely the answer is always
"it depends". And what it depends on is the interesting part of this whole
debate.

~~~
fallentimes
I think it depends on your time line and whether you can create a working,
valuable website/application/product/whatever by bootstrapping. Some
industries you can, some you can't.

We could have easily done <http://TicketStumbler.com> by bootstrapping, but YC
moved our time line up by at least six months to a year, which we deemed very
much worth the equity we gave up.

~~~
ryanwaggoner
As Guy stated, for most companies, going the YC route qualifies as plan B more
than plan A. Two guys living in their parents basement and giving up 6% for 15
- 20k so they can scrape by for six months is a far cry from giving up 30 -
40% for $1-2m so you can hire five people and burn through that money in less
than a year building a product for all the users you're sure you're going to
get.

~~~
fallentimes
I definitely agree. I was responding more to langer's comment than the article
itself.

Now the decision is: does the money, leverage and ability to expand faster (in
theory) we'd receive from plan A outweigh the amount of additional equity we'd
have to give up.

~~~
MaysonL
And the time and effort expended in the process of fundraising.

~~~
fallentimes
And the enjoyment experienced from all the free
breakfasts/lunches/dinners/beers/paint ball outings. :)

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dennykmiu
Guy is clearly coming around to bootstrapping. Welcome to the bright side.

Why We Must Bootstrap to Succeed

<http://www.lovemytool.com/blog/2008/06/bootstrapping.html>

~~~
danielrhodes
He's not necessarily saying to bootstrap. Only during the initial stages. Lack
of money gives you a much more realistic picture of what's going on with your
company.

~~~
dennykmiu
I agree. And that's my view as well. Bootstrapping is not a lifestyle, but a
strategy.

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brianlash
Kind of surprised myself by how much I enjoyed this. It's refreshing to see
Guy writing in his old style (the way he wrote for his personal blog around
2006). Great storytelling to demonstrate the point: that bootstrapping's the
word for serious entrepreneurs.

The best piece of advice comes in the form of VC money for expansion, not
creation... it's easy to look at VC as the key to all your grandiose plans,
but that's almost never the way things play out. Better to take some or no
money, grind away, and only take the funding exactly when (or just before)
it's absolutely essential for your survival.

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furiouslol
Call me old-fashion but I wholeheartedly agree with Plan B, Plan B focuses on
being cashflow positive first before ramping up the growth strategy while Plan
A focuses on getting big fast before figuring out how to get to cashflow
positive

And that brings me to the point made by Mark Cuban about how the current batch
of entrepreneurs are being cheated by the likes of Netscape into believing
that you should follow an eyeballs-then-cash strategy, instead of the common-
sense cash-over-eyeballs strategy (or what Mark would say Cash-in-the-pocket
strategy).

Fame/popularity on the Internet is ephemeral (Geocities? Youtube celebs?) and
you jolly well make sure you are bringing in cash fast. Sony wouldn't have
bought ClubPenguins for so much if they weren't bringing in USD 80 million in
revenue every year. If ClubPenguins had twice the eyeballs but one-tenth of
the revenue, the buyout price would be way lower.

That is not to say that the eyeballs-then-cash strategy wouldn't work but it
is statistically insignificant when compared to the larger population.

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IsaacSchlueter
It makes me feel quite a bit more confident about my decision to save first.

[http://foohack.com/2008/08/why-im-not-working-on-my-
startup-...](http://foohack.com/2008/08/why-im-not-working-on-my-startup-yet/)

~~~
rantfoil
Good luck. Make sure you quit and do it, though. There is no better time than
the present... with Posterous we could have waited another 6 months to apply
to YC, but I have no regret at all that we did it earlier.

Anything can happen, and tomorrow is not promised. So start. =)

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rantfoil
This is Grade-A brilliant.

~~~
Alex3917
If you liked this, you might also like Seth Godin's Bootstrapper's Bible. It
costs two bucks as a PDF on Amazon, but I personally got a lot out of it.

~~~
sabat
I looked into this -- didn't know Seth wrote a boostrapper's bible. Turns out
it's available for free now:

<http://www.changethis.com/8.BootstrappersBible>

~~~
Protophore
Thanks for the link. Looks like a promising read!

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mixmax
_This is a fundamental fact of companies: they are bought not sold._

Excellent insight

