

Bootstrapping my new company - dcheong
http://www.davecheong.com/2008/12/22/bootstrapping-mobiusly/
We have a small and agile team, who can innovate quickly and often. We don’t have red-tape to slow us down and we cut through the bureaucracy to get to the underlying problem. We don’t have investors, so we can make decisions quickly. We have low overheads, so we can take risks our competitors dare not.
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webwright
Gah, I get really annoyed by the "money means that you have to hire lots of
people and spend money like a fucking idiot" mentality (popularized by
37Signals). Having money and careful money management are not incompatible
(while we're at it, working more than 30 hours a week doesn't mean you spend
your time inefficiently, either).

When we raised our Series A, we didn't spontaneously start having long
meetings and we didn't start hiring VPs. And we haven't had to appease our
investors ONCE (but we have gotten some exceptional-- and optional-- advice
from them).

I'd also encourage the author to have a better marketing strategy than
"Twitter and blogs". I can't count the number of entrepreneurs (YC companies
and others) who realized that this strategy does not work and then started
learning about SEO, adwords, and (gasp) sales and marketing. There are plenty
of shiny exceptions to this rule, but they are so remarkable exactly because
it's so damn rare.

~~~
tptacek
It's one thing for you to say you've never had to appease investors "once".
It's another for you to imply that this is an irrelevant concern. I have
several counter-anecdotes. I imagine I won't need them, though, and that
you'll just concede that you have good investors --- for the time being ---
and that bumbling or mendacious board members are indeed a real concern.

~~~
webwright
I'm not implying that (or at least, not on purpose). I'm railing against the
implication that funded entrepreneurs are constantly appeasing (presumably
moronic) investors.

Listen, the money isn't free. It comes with a few protections (for them) and
obligations (to them). If you've got good leverage when you set up your terms
and go with a good investor, I don't think it has to be that bad. I know
plenty of people who like their investors. Many people who take money seek
investment for their second effort (even if they're rich and don't need it).

Bumbling board members are a risk in the same way that (as the OP points out)
a pile of money creates the danger that you'll hire too fast and build a
meeting-heavy company. You need to be smart and disciplined. Desperate (or
unlucky) entrepreneurs can end up with crappy investors and undisciplined
entrepreneurs can end up with 12 VPs and day long meetings before they even
have a product.

Clearly, anecdotes abound and there's no hard data... But I think the only one
who was implying that there were any rules was the author.

~~~
dcheong
Thanks for the follow up. I'll stress again, I'm not implying there are any
hard/fast rules as you can see from the comments I've made here. If I have set
the wrong impression, my apologies.

We all know here that being an entrepreneur is more like art than science.
There is no one true way. Something which worked for someone in one instance
may not work for you even if by rationale it makes sense and all the stars are
aligned.

~~~
tptacek
It's also the case that not wanting to kowtow to investors is a valid reason
for bootstrapping. It's why we switched to bootstrapping a few weeks into
talking to VC --- the VC pitches were fucking up our product plan.

------
tom_rath
It worked for me!

Not having to answer to investors saved a ton of hassle (and having all the
equity and control at the end is really spiffy) but (to echo some of the other
comments here) there are a few pitfalls:

\- Don't be a tightwad. In my first year, I would avoid spending wherever
possible and often made do with free tools rather than spend cash to buy a
perfectly good commercial solution. I quickly learned that's almost always
stupid: If you can make a problem disappear for good by buying the solution,
reach into your wallet and pay the cash.

\- You should be marketing before you've even started development. Marketing
isn't just advertising -- it's the social component of design. Where you're
'making something people want', marketing identifies both the 'people' and the
'something' (that is, the market for your product). If you don't have those,
you'll end up with a spiffy 'make' that nobody wants.

Erik Sink provides a great summary of the topic under his "Marketing for
Geeks" articles (at <http://www.ericsink.com/Marketing_for_Geeks.html> ). I'd
call it a 'must read' for any software entrepreneur.

~~~
dcheong
Hi tom_rath - Thanks for the advice.

This is bang on target for me as I've been a real "tightwad" lately. Instead
of focusing on the outcomes, I've been counting the pennies. It's tough when
you're leaking your own money and that's before you've even launched anything!
I think it is just something I need to adjust to - that in order to make
money, one must first spend it.

I've also realised that marketing early is so important. I've been getting
more active on Twitter lately and though I have a decent blog (been on Digg
front page and Lifehacker), I haven't given it the love it deserve all year. I
wish I had ramped these two promotion avenues up 6 months ago. This way I'd
have a ready audience on launch day.

I thought I'd echo your reply for the other budding entrepreneurs out there.
Don't be afraid to spend money! Start creating your story and marketing your
brand early!

~~~
DenisM
There should be no such thing as a "launch day". You should start with one
user before you wrote a line of code, then write a mockup and show it to the
user. Keep adding code, features and users as you go.

Watch this for details:
[http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2056...](http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2056#)

~~~
dcheong
Good point. I'd like to add though that while there are merits to launching
early and often, you only get one shot at delivering the right first
impression. This is especially true if you've lined up the "press" to talk
about your app, only for it to receive "bad press" because it's not ready or
crash under the heavy load.

I think it was Paul Buchheit who said "launch your product if it's better than
anything else out there". To me, it means launch when it's ready but not
before.

------
ardell
Congratulations, bootstrapping is both exciting and honorable.

But also remember, some of the best things about bootstrapping are also its
biggest challenges. For instance, if you are paying employees in equity
instead of salary realize that the long-term benefits of a successful startup
may be precluded by more immediate revenue streams.

Additionally, we as bootstrappers tend to be less likely to ask for or buy
help when it would truly help our business. We prefer to do things our way but
many times we re-invent the wheel in the name of entrepreneurial spirit. Not a
bad thing, but worth remembering.

Good luck to you! I've had a great time and learned a ton so far by
bootstrapping.

~~~
dcheong
Hi ardell,

Thanks for the well wishes. :)

I shall remember your advice - I'm sure I'll need them in the years to come!
It's pretty exciting and scary at the same time. However, I think that's why
so many of us (esp at HN) become Entrepreneurs. The lessons to learn and the
fun to be had are truly intoxicating.

Keep the commments coming. Would love to hear from everyone here what your
personal experiences have been like so far.

------
koraybalci
First of all congratulations and good luck..

Having read your article and responses here, I feel like this discussion
resembles (opengl vs directx) || (c/c++ vs java) || (python vs perl) kind
flame wars. And no, there is not a single way for enterpreneurship imho. There
are at least two major ways, bootstrapping or having funded. Both have pros
and cons. If you are clever and well prepared, you can be successfull either
way or unseccessfull whatever you do. There is no recipe, you choose your own
way according to your own circumstances and work it out..

good luck again..

~~~
dcheong
Hi koraybalci - thanks for commenting!

I agree with you totally and echo your sentiments. There is no one absolute
right way. There is a bunch of relative right ways - some more appropriate
than others. Given enough vigor, perseverance, sweat, tears, luck and timing,
the right team can make most things work.

The thing which quantifies how "successful" they are is the equity they walk
away with. It doesn't have to be 100% (because 100% of nothing is worthless),
but you sure hope it isn't so diluted to no longer be worthwhile.

I subscribe to delaying external financing as long as possible to build up the
business and maximise the mileage of the equity (ie trading 10% when you have
nothing costs more than 10% when you have a healthy/profitable business).

------
tptacek
Best of luck. Remember, when things get terrifying (and I assure you they
will) --- you can always consult! Our consulting practice, which I love being
a part of, now funds a full-time product team. I'm on hiatus from consulting
for a bit with the Dir/Marketing role. There are ways to make it work, no
matter what.

~~~
dcheong
Thank you! You're totally right that if all things fail, we can simply go back
to what we did before (ie contracting), slow the business down but at least
continue trading.

I hope though it doesn't get "terrifying" ... (play scary music). Heh.

~~~
DenisM
Remember that consulting is when you get paid by the hour, whereas software is
where you get paid long after you have written the code. The former should
never be the goal, only the means to reach the latter.

~~~
tptacek
Contracting is when you get paid by the hour. Consulting means a lot of
different things.

Running a company and building and grooming a team is more than just launching
a product and hoping. Products come and go. Protect your company --- even if
it means (gasp!) consulting for a bit --- and you'll get as many shots as you
want at doing products. Pin your hopes to one longshot product, and you'll end
up a wage slave.

------
ericb
Is there somewhere that your company's products, genre, or otherwise is
explained?

~~~
dcheong
We've setup our website, at <http://mobiusly.com> which briefly describes who
we are, what we do, our company credo and commitment to the Company/Customer
Pact.

You'd have to wait till Jan 2009 for our product launch. I'll try over the
xmas break to prepare a blog entry describing it, but that might depend on how
much beer I end up consuming.

