
What it's like to bootstrap a business before it can financially support you - ChanningAllen
https://www.indiehackers.com/post/whats-it-like-to-bootstrap-a-business-before-it-can-financially-support-you-3472417e29
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lsc
Oh man. I bootstrapped a business on the side, and quit my dajob when it got
to the point where it could support me (which is to say, could pay me like 1/4
of my market value in silicon valley) -

One of the clearest mistakes I made that _could_ have made the company
opportunity cost profitable had I not screwed it up was that I was conserving
capital while I had the opportunity to grow really fast. For a short period of
time, because of a blog post someone else wrote, I had a huge waiting list. I
was building servers one at a time, using the money from the first to pay for
the next one. A _lot_ of that waiting list dried up while they were waiting
for me; There is a reasonable chance I would have been 5x bigger at that point
had I maxed out my credit and bought servers all at once. And if I was wrong?
if I maxed out my credit and went bankrupt? I'd _still_ be better off than I
was in reality.

10 years at 1/4 salary is... brutal in a way that bankruptcy isn't. (I think.
I've never actually gone bankrupt.)

I guess my real point here is that you need to time box it. At some point, you
need to give up. I've never worked with VC, but I would assume that it would
act as something of a forcing function here. I think being disciplined about
"always take a better job if you are offered one" might also work.

~~~
xwdv
Why would you go bankrupt?

If you have a growing business making money it should be fairly
straightforward to get a loan under your business name.

~~~
lsc
>If you have a growing business making money it should be fairly
straightforward to get a loan under your business name.

this is not my experience, not without a personal guarantee or collateral that
holds it's value better than servers.

(Leasing servers was also an option that would have made sense then. Most of
the leasing deals I was offered that didn't include personal guarantees were
two year leases wherein I paid about as much as the servers would cost up
front over two years. It would have made sense in that case, but it's super
expensive compared to buying servers)

~~~
hpcjoe
This. Loans for small business require personal guarantees. If you are at a
point that you need the capital that badly that you cant leverage it from
existing cashflow, and VCs put you into their "maybe later" bucket (e.g. "no"
for the rest of us), then requiring a personal guarantee is a signal for you.
The signal means you should consider whether or not you should continue your
endeavor, as the bank values your net worth and its leverage, far more than it
values your business.

I've been down this road. I did not answer this question properly. Doesn't
matter how much you believe in yourself, if the bank wants a personal
guarantee, they dont really believe in your vision.

My best advice 3 year post blow up. It ain't worth it. Move on. You will save
yourself pain.

~~~
dismalpedigree
I disagree depending on the circumstances.

If you are just trying to make ends meet, then yes, probably don’t go for it.

If you need access to working capital to hire more people, increase
production, etc then it’s completely worth it.

For reference I founded a consulting company. We landed large projects. Had to
pay employees to produce the deliverables, but did not get paid until later.

Basic math here is: Typically Net 30 terms. Usually have to pay a month or so
worth of salary before hitting milestone to allow billing (then 30 more days
to get paid). With $80k/mo in salaries we required working capital.

Even at the criminal levels that are charged for startup loans (plus personal
guarantee) it is worth it when you are making 60%+ margins.

I have since paid down the loan and then sold the consulting side to focus on
some products with a small in-house team. Funded for years at this point.

~~~
o-__-o
Local bank offered $250k on a 3.8% APR. SBA offered $110k on 8% APR. bank
loans aren’t that bad in a low interest rate environment.. SBA has a much more
flexible repayment plan tho

Plus once you’re in profit, your loan frees up capital for growth.

------
kareemm
I’m bootstrapping my third company[1]. I sold the previous two.

I’m surprised my approach wasn’t mentioned: bootstrap with consulting revenue.
It’s not novel (it’s how 37Signals bootstrapped Basecamp back in the day).

The ideal way is to provide a service that aligns with the product so you can
deliver under the same brand.

In my case I’ve consulted as a fractional Product lead[2] since 2007 to
bootstrap my product businesses. Consulting has allowed me to support my
family and provided as much runway as necessary before the bootstrapped
business could support me full time.

One criticism of this part-time consulting approach is that it distracts from
the product. This is not true if you’re delivering a service that doesn’t
compliment the business.

But ironically probably more than half the founders i know are in permanent
fundraising mode for companies that probably shouldn’t have raised in the
first place. I look at consulting as a higher probability form of fundraising
and see time spent on it as little different than fundraising for the
“traditional” angel or venture funded company.

1- my current company is [https://www.savio.io](https://www.savio.io)

2- i do product management consulting through
[https://www.reemer.com](https://www.reemer.com)

~~~
toyg
The problem with consulting is that it only scales linearly with the amount of
bodies you throw at it, and it takes a lot of time away. I have been
"consulting with a view to bootstrap" for a year and a half now, and the
result is that I still have no real product, because most of my brain energy
is spent on the consulting side to keep the lights on.

~~~
kareemm
In my experience the ideal is to have a little lead gem machine that spits out
leads, and discipline around how much time I consult every week vs time spent
working on the product.

------
clon
I spent some of my best years bootstrapping a business (trying to avoid the
word "startup"), growing steady each year 30-50%. No hockey stick so far, but
our customers are happy and the product rocks.

1) It is hard, properly HARD.

2) It does not seem like it is fair to yourself - you might feel like you are
not really giving yourself a proper chance, be it capturing the market, hiring
the best possible talent etc.

3) It might make you more risk averse, as you are gambling with your baby.

4) On the other hand, it is not the low risk path either, so it sort of
conflicts with #3. I mean that there are a lot of risks involved in raising
capital at an early stage, but going the tortoise path has other kinds of
risks. Also see #2.

5) Your type of market needs to support it, obviously. Low investment product,
stable customer base. In our case, the customers are large semi-governmental
organizations and in all of history we have lost just 1 established customer.
This gives a lot of consolation that you are building a house, one brick at a
time.

6) You need a lot of mental stamina - everyone else seems to be doing things
more cleverly. Your buddies will move on to work for the big bucks and
establish their careers, others might be busy burning through VC money. It
will take time.

8) Sometimes an investor will come along and try to offer you their money. But
it often turns out as if your are playing a totally different ball game. One
thing I learned was to ask not just how many X they expect us to deliver, but
straight out ask how many X-s their "family" or whatever expects _them_ to
deliver.

But in the end you _might_ have a company that is actually self sustaining,
fantastic people around you and customers that appreciate what you are doing
to them. I consider myself lucky, though. Feels like all odds were stacked
against us.

------
Enginerrrd
> * opt only for business ideas that can generate good revenue upfront

The fact that this isn't a fundamental requirement perplexes me. But I
consider the generic silicon valley startup model a sickness. You sell your
and the company's soul to VC's before you even make a dime at the expense of
the people who sweat and bled for you and who you also promised stake, only to
routinely get screwed by the VC's who get paid out first.

> * jump into bootstrapping full time while relying on personal savings

It can be done, but I don't recommend it.

> * bootstrap on the side while working a day job

This is what I did. About the time you're pulling your hair out because you
don't have enough time in the day to follow through with taking people's money
is a great time to finally quit that day job.

~~~
koolba
Keeping your day job and being willing to slog through your nights and
weekends is a level zero test of whether you believe in your own success. “I
don’t have time” is the sorriest excuse for an excuse.

If you really want to make it you’ll make time. If you don’t, consider it an
indication that you don’t have what it takes.

~~~
ludocode
I have a four month old daughter. My job takes eight hours, almost two hours
more for the commute, at least an hour each day for cooking and meal prep, six
hours for sleep, and the rest is taken up with the baby. I get some work done
on weekends or in the middle of the night but it's not enough.

I recently negotiated with work to drop down to four days a week. They refused
to let me do three days a week for the worst reason: my coworkers depend on me
too much, so they need my butt in the chair. I tried it for a bit, but it's
still nowhere near enough time to bootstrap my side project. So I decided to
quit. I'll burn savings for a bit while I try to prove out my idea.

My wife knows she married a starving artist. I feel a lot older than I wanted
to be when starting a family, but we're getting old enough that we don't have
the luxury of putting it off any longer. I don't know if I'll ever be able to
afford a house.

Am I failing your level zero test? Not everyone is a 21 year old college
graduate with zero expenses or obligations. Saying it's just the "sorriest
excuse for an excuse" and "you don't have what it takes" is just insulting.
Real people have real time commitments in the real world.

~~~
Enginerrrd
For what it's worth, I did launch a side-project into a full-time company the
same year my first kid was born. I would contend that if you have difficulty
managing all the competing interests in your life between work family and
side-projects now, it will not likely improve when you launch your former side
project into a full time gig. Elon Musk is notorious for not taking vacations
and sleeping on the factory floor when exciting shit is going down. His
partner knows this and is ok with that. If yours isn't, then frankly, yeah
it's going to be a major uphill battle and stressor on your relationship to
try and pull that off.

It's totally ok to not be in a position to do this. In fact, it's arguably a
healthier way of living. But it may still be an indication of failing that
level zero test because you just aren't into it enough. Business is not the
make-a-wish foundation.

------
ilamont
I was revenue-positive by the second month but couldn't draw a salary until
the end of year two. Everything was reinvested into the business. Having a
spouse who contributed household income and health insurance was the only way
I was able to do it. I am eternally grateful to her.

I also picked up a few consulting gigs (including one that was quite steady)
and still do that now.

------
lwb
I am pleasantly surprised to see Amir Rajan on that list. From this reddit
post I thought that after his game went viral he couldn't capture any long-
term success and went back to working a regular job:
[https://www.reddit.com/r/Entrepreneur/comments/7m96wn/a_dark...](https://www.reddit.com/r/Entrepreneur/comments/7m96wn/a_dark_room_from_sabbatical_year_to_800000/)

It's a fascinating story. He has several other iOS games besides A Dark Room,
but none of them seemed to go anywhere. Glad to hear his business is doing
better now.

I suppose there's always money in the Skyrim business model -- just port your
one successful game to every platform ever :)

------
harlanji
I’ve pretty much given up on working as a coder, as it seems too hostile to
side endeavors. From manager squeezing time, to contracts squeezing IP, it
creates a fearful mentality. Working as a laborer not touching computers feels
like the way. As a bonus, I barely have to go to the gym to stay ripped. My
phone never rings and everything I touch is mine. I worked in SV startups and
corps for some years, always felt too risky to work on the side if I wasn’t
sleeping or getting drunk. I’m not sure what I’m founding yet and have no
pressure, I just work for hours a day on whatever if I don’t have a job
scheduled. Where’s my business co-founder? Email in profile.

~~~
yowlingcat
Genuine question here: have you thought about trying Upwork? You can set your
hourly rate low to start off with and then gradually increase it as you get
more satisfied customers, more reviews, more proof of your capabilities.
You'll have a global customer base, and so long as you get things done in a
timely manner, not that much trouble finding work. It won't be market rate for
a long time (if ever), but based on your past posting history, it might be
something that could be really helpful for you right now. Best of luck!

------
galaxyLogic
I think there's two approaches to this and they probably often overlap.

You may have a great idea and you want to do it because you believe its a
great thing to accomplish.

Or you may think you want to maximize your net income, and do whatever it
takes to do that.

I think the latter is better if that is what you want to do but only if that
is what you want to do.

------
zackmorris
If I could do it all over again and actually succeed this time:

* Get your living expenses down to $1000/mo before you start your startup (this is just a target for the northwestern US, find your own where you live).

* Multiply all projections by 3. People will complain that you are being over-conservative and probably laugh at you or grow concerned. They might point to other companies that succeeded in such and such time. Ignore them just like they ignore survival bias.

* Divide revenue by 5 to 10. A repair business running at 30% profitability needs to gross $3 for every dollar it keeps. A restaurant needs to make 20x at 5% margin. Chargebacks. Refunds. Illness. Accidents. Countless life experiences can make it feel like you are treading water for months/years. Another way to say this is that each dollar you make in your startup is like making $5-10 anywhere else, so treat it with the reverence it deserves.

* Donate plasma. This is a form of prostitution because you are selling yourself for money, but you'll make an extra $300/mo. You'll get a glimpse of the value of human life and dignity inherent to an industrial society that's being denied to us all by the lack of UBI. It will also show you the true value of money because you'll see that retail service jobs pay 1/2 to 1/4 per hour what plasma pays. You'll learn how all money is blood money because someone always exchanges blood, sweat, tears or time for it (unless they are born into it like the people who most likely have it today). And if you aren't ready to put your life on the line in some fashion, you might not be ready to make the big sacrifices that running a startup demands, or even lead others.

* Learn The Secret (The Law of Attraction) and other mindfulness practices. It's not so much that they are real (my experience is that it's all real) but that successful people are likely to attribute their success to things besides luck. It's good to know how to speak the lingo and present a good appearance for networking, since your primary revenue stream will probably come from a human need you might not have expected.

* Find a romantic partner that believes in you. Short of that, work a good job for a while and provide for their needs for some number of months or years before your startup so they're willing to take a risk on you. Or reject this advice completely and be a loner for a few years. Most startups were started by geeks, so it might be advantageous. But if you succeed, don't be a douche. Nobody likes that you succeed. Many secretly hate you for it. Be magnanimous. Pay it forward. If you suffer in solitude or walk around like a self-help guru, you'll probably fail.

* Remember that the thing isn't the thing. Financing to get you to the thing is. Our entire system of western capitalism is at odds with your personal dream of being the next Steve Jobs or Elon Musk. And since all money is blood money, maybe you don't want that anyway. We need new heroes like, I dunno, Captain America. I think that there is vast untapped potential in ideas like cooperatives and communal stewardship of the things we care about. I've tried to adopt ideas like radical inclusion into my life. Maybe something in your belief system will lead you to a worthy cause and the funding to see it through. We all know that banks sure won't.

Well this post stinks but my gut seems satisfied that most of the nonintuitive
stuff has been covered. Happy holidays everyone.

~~~
GordonS
This was an intriguing read, so I'm kind of reluctant to go OT... but is
selling blood and/or plasma really a thing in the US?

For background, I'm from the UK, where people _donate_ blood, plasma and
platelets, and AFAIK, it's illegal to sell such things. I read all kinds of
things about US health care on HN, but this isn't something I've come across
before. If true... I don't know exactly, it just feels very, very strange,
especially for a "western" country.

~~~
pedrosorio
I'm from Europe as well and remember seeing this mentioned in more than one US
movie.

For example, there is a scene in
[https://en.wikipedia.org/wiki/The_Pursuit_of_Happyness](https://en.wikipedia.org/wiki/The_Pursuit_of_Happyness)
where the main character sells blood for money.

You can find several websites that mention this "money making strategy":
[https://www.thepennyhoarder.com/make-money/240-month-
selling...](https://www.thepennyhoarder.com/make-money/240-month-selling-
plasma/)

~~~
DailyHN
Selling blood is somewhat outlawed. I say somewhat because you can still
receive gift cards and movie tickets.

Selling plasma for cash is mostly done by very impoverished people. I used to
live a few blocks from one of these businesses. The people you see hanging
around the place would probably discourage anyone but the neediest from
"donating."

