

Bootstrappers Beware - bfioca
http://www.tonywright.com/2008/bootstrappers-beware/

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gscott
If you build a solution to solve a business problem and have an underserved
market ready, then you can make money.

If you build something like Twitter then you need funding.

Personally, I think most people would be over there head if they trying to
develop something so generic like a twitter or a video upload site. Not that
it is hard but if you are not solving a problem that people are willing and
waiting, no begging, to pay for then well you need venture funding for sure.
The chances of venture funding is about squat for your average joe.

~~~
webwright
I'm not sure why I'm responding to someone who didn't seem to actually read
the post, but...

It's not a question of whether customers will pay (and that's not what the
post is about). It's a question of how many customers will pay and how quickly
they sign up.

No one would argue (I hope) that Basecamp doesn't solve a real problem... But
it took them 12 months before they could afford to focus on it full-time.

SpanningSync looks cool and quite successful. So does PlentyOfFish, but that
doesn't mean that you're any likelier to build an overnight AdSense money
machine.

Most bootstrappers I meet think that SpanningSync stories are the norm. They
aren't.

~~~
gscott
I work for a bootstrapped company. Back in 1999 the guy had to borrow $50,000
from his mom because his credit card debt was too much. He was getting about
$5000 a month from the sale of a small travel company he sold to the co-
founder.

Once he figured out what would work (and that took awhile after a few missed
tries) he had his market and intial funding based upon a really bad working
demo I created (that would break when more then 1 person was using it at a
time and I would have to reboot the server after about 5 minutes or so). The
intial funding came from the customers who were going to use it. There were 40
and each paid $3,000. That was enough money to hire some very inexpensive
"programmers" from a local trade school and we were able to upgrade the demo
into a full product.

The company is doing just fine, has 4000 monthly subscribers, I am making him
a new product and I believe he will double the number of subscribers.

I did just read the article :) But I am familiar with bootstrapping. On my own
I am about to release "OfficeZilla Pro" and pray that there is enough take up
to at least pay the $500 a month hosting bill. I am working on versions for
vertical markets and one day will see it to profitability.

------
davidw
I think that's the sort of cold shower that a lot of people need. DHH waves
his hands about working 10 hours a week, and "all you have to do is ask for
money, it's so fucking simple!!!", but the reality is that it's far from
simple.

~~~
tptacek
Yes, the VC people have it right. It is much simpler to spend 6 months hoping
for the money fairy to appear, and then give up when it doesn't.

~~~
davidw
Oh, I'm not saying they're right either, but at least they don't sprinkle all
this "easy", "simple", and "work less" over everything.

~~~
tptacek
You're the first person to say "work less". I agree that "working less" is a
luxury only 37Signals has. I've never worked harder in my life.

~~~
umjames
Why does 37Signals only have the luxury of working less? I'm sure when they
were starting out (for their consulting business, not Basecamp) they had to
work hard.

Maybe it doesn't feel like work so much when you really enjoy solving the
problem that your software is addressing.

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tptacek
I don't understand what's so hard to understand about the bootstrap business
plan. I'll repeat it:

(1) Consult. (2) Take a half salary. (3) Use the other half to pay for an FT
dev. (4) Wean off consulting with product revenue. (5). Vary as necessary.

If you call the developers at my company "half-assed" because of the
consultants who currently pay their salary, I'll take offense. Tony Wright is
smart, has an awesome product, and has done this before. What's his problem?

~~~
webwright
I agree that's a great plan (so would 37s, I imagine!). But it's not the one
that most people follow because of (IMO) insanely optimistic projections about
organic growth/sales fueled by (presumably) word of mouth and, er, TechCrunch.

Depending on the market timing-- the half-assed effort might kill you, too.
People who bet big can win big, and people who hedge can lose as a direct
result of their hedging-- so I don't think your formula is perfect for all
markets or goals.

The half-assed stuff is from a headline from a previous post of mine (that was
syndicated on VentureHacks and in BusinessWeek). You're the first to take
umbrage that I'm aware of. It was playful and tongue-in-cheek, but you're
welcome to take offense if it suits you.

~~~
tptacek
Taking offense _always_ suits me. My question for you: what does it matter
whether your market projections are wrong if your company has cash flow? I
look at the funded companies that aren't cash flow positive in their 2nd and
3rd years of operation and wonder why people think that's such an awesome
plan.

~~~
bfioca
It makes sense to not be cash flow positive in the 2nd and 3rd year if you can
show that investing in R&D or sales/marketing will accelerate growth by a nice
factor. I think you're oversimplifying.

~~~
tptacek
More startups fail than exit successfully. "Investment years" are a gamble.

~~~
bfioca
Yeah but that's the point. :)

~~~
tptacek
No, it's a terrible idea for the founders. "2 out of 3 businesses fail. So
investors need the third to make up for the other 2." Remember, all three of
the companies got pushed into a stupid business plan by the "hockey stick"
requirement, when a less risky plan could still have made the founders
millionaires.

------
skmurphy
I don't understand why bootstrappers are any more unrealistic than YC
applicants or anyone else starting a company. Folks in the "talking to VC's"
loop are often woefully unrealistic about how long it will take to raise funds
(and 199 out of 200 won't). Tony writes a great headline but if it's taking
longer than he anticipated to make a profit with Rescue Time perhaps he might
have abridged the post to the need to focus on the profit model earlier. I
find bootstrappers who are consulting in parallel with product and customer
development--provided they are working with at least one other person--to be
more grounded in reality than the individuals or teams who are seeking money
from investors before they have a viable application with paying customers.

~~~
webwright
Strangely, I think a lot of funded startups are more realistic about the
challenges involved. It's well documented. We read about flameouts every day.

All of the bootstrapped businesses that get 6 months into their business and
realize it's a much longer road just sorta fade away. We don't hear much about
'em, don't read about 'em... But a lot of people have latched onto the (very
inspiring) story of 37s and a few other bootstrap stars. Good on 'em.

The volume of people chasing the (more realistic) 37s-style dream is high, but
I've been struck by the unreasoned optimism-- not the "we can build something
really good" optimism (which is required, I think) but the "we'll be rolling
in money within 6 months". Thus the post!

Regarding abridging my post to say "focus on profit earlier" - nope. I don't
think I'd go back and go that route, even if I could... But that's probably
another post.

~~~
skmurphy
There are very very few funded startups, so the question for me is the
comparison between those seeking funding and those that are bootstrapping
(seeking revenue from paying customers). I find the former to be much less
realistic than the latter but we are probably looking at different data sets.

------
terpua
Here's a company that's a little over a year old with paying customers.

<http://blog.spanningsync.com/2008/06/spanning-sync-p.html>

Solve a real problem and customers will pay.

~~~
tptacek
Look at any Mac software company and you will see it again and again --- the
white whale of entrepreneurialism! --- companies that achieved success without
taking a dime from investors.

------
edw519
I agree with everything OP has to say.

OTOH, if you are addressing an immediate need; that is, if you have prospects
whose hair is _really_ on fire and you can put together a good (not perfect)
solution fairly quickly and cheaply, then you have a "sugar daddy".

That's right, a customer who can bootstrap you. You have a nice influx of
cash, real user feedback, a raving referral, and a tangible asset in your back
pocket as you go out into the world. Not easy, but not unusual either.

Imagine writing software for 3 months, selling the first copy for $50K, and
keeping the IP. It's very doable if you know what you're doing. Not a bad
springboard for a bootstrapper, huh?

------
tptacek
This article simply ignores the fact that 37Signals was a thriving business
_before_. _they_. _launched_. _product_. It could have taken them _ten years_
for people to start paying for Basecamp. They would not have gone under.

~~~
boucher
Actually, he pretty much states that fact directly. 37signals _already had_
the money to survive long term. This article specifically addresses people who
think they can work on products full time without a plan for paying the bills
for 12 to 18 months (or maybe longer), because its going to take that long to
start a business from scratch and generate significant revenues.

~~~
tptacek
They did not have the money to survive long term. They had a _business_ that
generated _cash flows_. There's a huge difference. They didn't inherit it.

My point is, you can do the exact same thing. If you have the talent, consult.
Tens of thousands of developers spend their entire lives freelancing.
Consulting dev work is not a crazy pipe dream. Now, instead of dropping all
your 1099 wages into your bank account, create an LLC, get it an ING account,
and send your money there. Hire. BANG. Now you're a business. Go do something
cool.

~~~
davidw
Sounds sensible, but... how common is it, really? If it isn't, what's the
missing ingredient that makes it a difficult transition that many people never
seem to accomplish?

