
Why Bootstrapping Is Just As Over-Rated As Raising Venture Capital - aaronbrethorst
http://techcrunch.com/2012/01/07/why-bootstrapping-over-rated/
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asanwal
What a terribly muddled and bipolar article full of unsupported
generalizations and platitudes.

Author writes -- "Moreover, not raising money from professional investors
is—in all honesty—a potential red flag. It’s rare for an entrepreneur to run a
business and spend millions of dollars without having any outside help."

Is there any data to prove this is a red flag? And rare? Nope. Speaking from
experience, our bootstrapped firm has closed many enterprise clients without
having raised VC. VC may help and be requisite in certain areas, but it
certainly is not necessary.

Author writes - "Ultimately, while you may score extra points for building a
large business despite being bootstrapped, you don’t actually score many
points for running a small business if you have avoided venture capital..."

What does "winning points" have to do with anything? I suspect he's referring
to some sort of ego gratification, but I'm not sure. If you run a business in
which you feel you are adding value to customers/the world, growing at the
rate you want, are in control, working with people you like and are
financially where you want to be, I'm not sure what "points" have to do with
anything.

Author writes -- "When it’s said and done, you can own 100% of a lemonade
stand or 1% of Coca-Cola."

This is a false dichotomy, i.e., bootstrapped companies are "lemonade stands"
and VC backed companies are Coca-Cola. VC backing is no guarantee of success.

Ultimately, there is nothing wrong or overrated about either path. Whichever
is the right way to get you to where you want is what you should do.

Disclosure: I run a bootstrapped firm. One of our firm's primary customer
groups is VCs.

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derefr
> What does "winning points" have to do with anything?

I'm guessing these "points" are on the axis of your company's reputation or
visibility among VCs/investors/other groups of rich people who attend parties
together—and also that the author believes that that reputation plays a role
in who large corporates like Google decide to buy, and how much they're
willing to pay.

Of course, one of the signs of a VC-focused mindset is that it doesn't occur
to the author that one might run a company not to seek a buy-out, but rather
to actually get some black figures on the balance sheet and pocket them.

~~~
asanwal
Good point/inference. Probably a topic for a whole other conversation --
should one build a company with the goal of being acquired? But that's another
can of worms entirely :)

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richcollins
_Moreover, not raising money from professional investors is—in all honesty—a
potential red flag. It’s rare for an entrepreneur to run a business and spend
millions of dollars without having any outside help. When that is the case,
it’s a normal reaction to wonder: why? Why hasn’t outside money been raised?
It’s unfair, but saying that it’s never come up would be a lie._

I'm sure github wouldn't have any trouble raising money if they wanted it.

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delinka
Is this article arguing that startups should seek VC simply for the sake of
seeking VC? I'm exceedingly paranoid about giving up control of my business--
I want my customers and employees treated a certain way, I want my service to
be presented and available on my terms (which goes back to how I treat my
customers.)

If I can bootstrap, keep customers happy, keep employees paid (and content),
keep my company and my money ... then why do I need VC?

Edit: I re-read it with a different ... attitude. Perhaps the author oversells
the disadvantages of bootstrapping. Ownership is enough of an advantage for me
personally. Dealing with the disadvantages keeps me nimble and, believe it or
not, innovative.

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danmaz74
Venture capitalists are in the game only for the money (and rightly so). If
you are building something you're really passionate about, and not just to
fill a market hole and exit as soon as possible, with as much money as
possible (eg craigslist), having to deal with a VC could be a problem and
bootstrapping could be your only real option.

~~~
_delirium
Yeah, one way of thinking about it is what success looks like. There are
(simplifying) three main kind of startup success: 1) IPO; 2) acquisition; or
3) profitable long-term company. If your view of success is #1 or #2 (i.e. an
"exit") within 5 years, then you're more aligned with VC views of success than
if your view is #3.

Also, between #1 and #2, the second is vastly more likely, so in most cases
"exit" will mean losing control of your company.

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j45
This is one of the funniest articles I may have ever read.

Here's the thing. You have to figure out how to make money no matter what.

Whether you take money up front to fritter about finding a business model, or
fritter about without any money, which do you think will work.. quicker?

It's like this article was written to keep the VC kool-aid flowing.

The world's biggest companies were bootstrapped. Apple, Microsoft, and more.
There's nothing inherently wrong with bootstrapping. Except maybe that VC's
aren't getting in on the action of the next bootstrapped Apple or Microsoft as
early. It's as real of a filter as anything to see if your idea flies, or not.

"Throwing money at problems is usually a short term fix. By lacking capital,
you’re forced to tackle issues head-on and generate real solutions."

Sounds like it's coming from someone who's never solved these problems.
Boostrapping makes you solve those problems, um, even more so.

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mef
The author claims to have bootstrapped WatchMojo.com, but CrunchBase says they
took Seed and Series A.

~~~
ryanwaggoner
That was what I thought too, but if you look up the name of the investment
firm, it looks like it's his own holding company.

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erichocean
The question is only interesting when discussing a startup that could do
either one.

A number of businesses can only be done with VC (they require too much upfront
capital), and many can't be done with VC (angel, perhaps, but not VC) because
the opportunity is too small.

My take is that if you can do either, if you intend to be acquired, you should
take VC; if not, bootstrap away! (And reconsider your business – it's no fun
to compete in markets where your competition is VC-backed and you're
bootstrapping yourself.)

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venturebros
The whole raising money for a web app/website never made any sense to me.

To start... $10 bucks for a domain and $50 bucks at the most for hosting.

Ok, so your app takes off meaning more money for bandwidth and possibly need
some extra hands for support. Great figure out a way to make money off of the
traffic. If you can't figure out a way to make money off of the traffic you
will end up taking from VCs forever and how exactly is that a good thing?

