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Is bootstrapping becoming sexy again for web2.0? (sramanamitra.com)
12 points by rokhayakebe on April 9, 2007 | hide | past | favorite | 10 comments

Does YC only invest in ventures planning on liquidity events, or are they open to ventures that only plan on becoming profitable and paying dividends?

Definitely a valid question. My guess is that they'd be fine with you building a company for the long term -- you could always buy out their shares at some point.

But I think most YC founders will be saying "yes" to offers that are in the millions. As pg says "That first million is just worth so much more than the subsequent ones"

When you walk away with a few million dollars in your pocket there's not much stopping you from creating a new startup, if you have the drive.

I think there's a failure to acurately calculate opportunity cost going on here.

At startup school they talked about (presumably VC backed) startups being a %15 chance of success. IF you have a %15 chance of building a company worth $20M in 2 years, and you'll get $2M of that-- then the opportunty value is 0.15X2M or $300,000.

On the other hand, if you bootstrap, and you build the same business, your chances of being a success go up to %60 (No flatline VC sitting on your board forcing bad decisions) but maybe you spend a bit less on marketing and grow more organically (really, I'm being generous here- I think the same business would grow just as fast bootstrapped.) so you end up being worth $10M in two years. Your share of that is $5M, for an opportunity value of $3,000,000.

In other words, you're likely to return ten times the money by forgoing venture capital.

While in both cases you could end up with nothing, weighting the payoff with the likihood of success lets you evaluate two very different opportunities.

If you take the choice tht has a %15 chance of success, odds are you won't get that first million... where as in the alternative, odds are you will.

The biggest problem most founders have in the beginning is just being able to devote undivided attention to it. If you have to work a full-time job and do your startup on the side for the first 1-2 years that's a huge disadvantage and it massively deceases your chances of success.

If you have something good and don't need a lot of money there's no reason you have to put yourself at the mercy of VCs -- you can maintain control.

You can't judge this kind of thing in a vacuum. What kind of scenario are you thinking of?

YC is three months of funding. IF you make $25 an hour, you can work a three month contract and save up enough to fund yourself for three months to try and get a prototype done. You can totally focus on the project for those three months. If you can only get a 6 month contract, then do it, and you'll have 6 months to work on your idea.

Also, you're assuming that doing your startup on the side "massively decreases your chance of success". I think this is in error-- success is goverened by determination more than anything else, and someone who builds something on the side is clearly determined.

Personally, its more fun to focus on your project completely, and so, its probably psychologically better to work for 3 or 6 months, and then take a 3 or 6 month "break".

YC is clear in its approach. It says helping idea materialize and also says that its not a charity type org.

Open source tools, low cost on bandwidth and storage space have all triggered low cost and overhead involved in starting something. When you have a passion for what you are doing and costs are way too low, then any wise person would run it on his own. Now a days everyone knows that going to a VC or scouting for funds would lead to power struggle inside the company with the result being the founder getting kicked out.

To be precise: is bootystrapping bringing sexy back?

Are you currently looking into VC or are you bootstrapping your startup and growing it organically?


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