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The issue is one simple item: "When you take someone's money, their priorities are now your priorities"

If you can bootstrap your business with 30k and make a 20k profit every month, then why do you need 1 million dollars from investors?

When you take the money, it's just a golden handcuff and ties you to that person for the future. If your business lasts longer than 20 years, that may as well be an additional marriage with kids.




Because your competitor can raise those million dollars, and eventually your 20k profit per month becomes 20k loss per month.

You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.


I run a bootstrapped SAAS business and I make far more than $20K a month profit and have done so for years. The key is choose a niche that is large enough to make the level of profit you want, but too small to attract VC funded competitors. The sort of market size you want is in the range of $5 to $20 million per year. Big enough to be worth the hassle, but too small to attract the big guys.


This reasoning feels safe for services, and risky for software:

* Big companies start small. VCs will tell startups to find something their tech can make them the best at and grow into nearby verticals.

* Software goes to zero. Academia, side projects, whatever. Either you keep up, and reach some sort of scale that you have a moat, or your risk goes up.


You do have to keep working on the business and innovating. It is not a route to passive income (well not until you retire), but it a very satisfying way to build a business and lifestyle.

The downside is the parties aren’t as good :(


Unfortunately for Twitter, social networking is not that niche.


Similar story, we should be friends :)

Care to comment on the work/life balance you have?


Well I work hard, but I live a very good life. I enjoy my work (well most of it as I am not too keen on accounting and taxes). I get to work and live in a very nice (if expensive) part of the world so I have nothing to complain about.

I can say it took me a long time to get to where I am now and I had quite a few detours along the way. I wrote up the history of my business a while back if anyone is interested [1]. Bootstrapping is certainly not the way to instant riches :)

1. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...


Interesting post. As a fellow Australian (actually, fellow computer programming molecular bio BSc who went to La Trobe), I completely agree with your assessment on the Australian startup scene.


Lol

Not enough angels but lots of devils..


Thanks for posting that; great work on persevering!


Me too. Hi.

If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.


I see this meme repeated a lot here on HN. Personally I wildly disagree, as I believe sufficient time away from work makes you make the right decisions. Basically I believe that the "work smarter, not harder" meme, while cliché, automatically happens if you invest time in leisure and sleep.

But I don't know! I truly wonder how many businesses have been run into the ground because of a kamikaze attitude to working hours. But I also wonder how many businesses missed gigantic opportunities while the founders were off doing unimportant things like putting their kids to bed. Neither are measurable, as far as I can see.

If anyone has any stats on this, any at all, consider me recommended!


I think you've got this wrong: the big opportunity here is for founders to be able to put their kids to bed. Fuck the money and so-called business opportunities, if you already have enough to do what you want every day.

Stats don't even matter, because at that level of financial independence, it's a personal choice whether you spend time with your family or pursue another business opportunity.


Yep!


I recall when I was in charge of a small billing system for a uk telco. One mothly billing run when I got to 36 hours with out sleep and starting to see things - that I should stop and got bed and come into the office later the next day.


I say one should always go for the sustainable path.


Why this? Burnt-out entrepreneurs are failed entrepreneurs, aren't they?

There's always a limit on how much time you can spend per day, and this limit is far below the time you are awake. Push it too far, and you do not only lose your working power, but also your motivation and your inspiration.


When an entrepreneur is excited about a thing she's building, the truthful answer to "how many hours per day do you work" is typically "zero or twenty-four, depending on what you consider work."

I agree entrepreneurs can get burnt out, but at that point it's become a "job" and is probably time to move on.


you are incorrect in assumption that burnout can happen only once you lose passion for your work. one of endless examples in history - look up medical volunteers during WWI - passionate for saving lives all the time, yet burnout happened to many of those.

there are limits to stress your body can sustain, and your mind can be totally disconnected with it, pushing and pushing.


> you are incorrect in assumption that burnout can happen only once you lose passion for your work

The assumption is not only incorrect, but I believe it is exactly reverse: Losing passing is one of the consequences of a burn-out. It is not a cause, but instead one of the (most visible) symptoms.


To those who downvoted this: Do you care to explain why you don't think that burn-out leads to losing passion?


One can be passionate about multiple things at the same time.


> If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.

If your only business advantage over your competitors is a willingness to sacrifice your life for money, then you'd better either be okay with doing so indefinitely or be making enough money you can call it quits before you're too old to maintain that pace.


I think the more critical you are to the business, and the more pressure and responsibilities you have, the more critical it is to worry about work/life balance. People aren't robots, and we don't have infinite capacity to work, our ability to make rational decisions, understand the market, customers, employees, think critically, etc. is all dependent on having a healthy working brain- and that requires rest and recreation.

For founders, and really anyone heavily invested in early stage startups or companies looking for a lot of growth, responsibilities are 24/7 and the line between work and life get blurry, and it's a lot more difficult to make sure the balance is there, but also a lot more important.


What's your point? Twitter isn't in that niche, obviously.


I would suggest that Twitter is a niche. It is in a brand management and customer engagement niche, and without some giant platform change, I think that trying to profit by increasing the number of eyeballs is always going to be challenging to the bottom line if the business value does not dramatically increase. The noise in twitters ecosystem from all those users, while interesting and good for research data sets, will eventually be a counter business/profit feature. The value proposition for users, in my mind, has been access and audience, but the value should have been focused on authoritative sourcing and customer recovery/engagement as soon as they took outside investment.

Not disagreeing or anything your comment just brought this to mind.


Twitter a billion dollar company, a social network used by presidential candidates and tens of millions of people is a niche?? Do you understand the dictionary meaning of the term "niche" if anything Twitter is opposite of it.


The entirety of Twitter is a subset of one feature of Facebook - that's why its referred to as niche.


features don't make it niche, user base does and twitters user base is anything but niche, it's potentially the connected whole world.


Niche: the situation in which a business's products or services can succeed by being sold to a particular kind or group of people

or a specialized market

Size is not necessarily a function of the word niche it only implies that the good or service being sold targets a group that is not a majority of all of the market participants. In twitters case 3.4B users on the internet, with only some subgroup that participates on social media and then only a subgroup of that group that wishes to participate with limited post length and then, business wise, just the business niche that have a large customer base within that subgroup of internet/social media/short form.

As an example BMW is a niche business, luxury auto, that had 92B in revenue last year.


totally agree. Twitter may have a limited set of features which may make it seem "niche", but it's market is basically everyone.


Twitter's niche is media types, for sure.


Twitter is a niche in my humble opinion. They are basically a short messaging pubsub service for humans, and even artificially limited themselves to that niche, by not increasing message size limits in any obvious way, by not implementing other "social" features people actually use like better photo sharing, galleries and gallery sharing, games, etc. They didn't try to become a full-fledged social network and thus competitor to Facebook (and what Google+ was supposed to be) with messaging and a ton of other stuff.

Even that One Big New Thing they announced, namely Moments, still operated exclusively in that short messaging pubsub niche entirely (and turned out not to be something their users cared about that much so far).

Now their niche market seems kind of saturated, user numbers mostly peaked, and Facebook also started competing even more in that niche when they introduced searchable #hashtags and ways to follow accounts without becoming mutual friends, while still offering their other core features and "external" services like instagram (in direct competition to twitter) or whatsapp (in direct competition to twitter DMs). Tumblr is still there, which to me always felt mostly like a "twitter" for longer-form messages. I saw people switch from twitter to Slack (and recently Discord) and embrace their not-globally-visible pubsub models in some cases, so there is some competition there too.

So in conclusion: twitter seems to me like a pretty niche service (albeit large niche), and has competitors left and right now. It isn't in "that" niche, but in a niche.


I was just responding to the parent post who suggested that you can’t bootstrap because some better funded company will come along and put you out of business. You can if you choose the right niche.

Of course Twitter as a business did not have this choice - they had to go big or go home. For the founders though it might have been better to have built something else.


> For the founders though it might have been better to have built something else.

I doubt it. All of the founders are mega wealthy now both as a result of Twitter and other ventures. Twitter might not have reached the dizzy heights they aspired to, but like it or loathe it Twitter is a household name and the founders are "famous".


You are right but the problem is finding that niche, so it is a business exploratory issue. Also, $ 20k is low if you need to growth your business, even, a little bit (e.g. hire people).


Its 20K a month in profit, not 20K a year. If you genuinely think it is hard to hire people at that point (not suggesting the GP should), then you have probably not explored all your options.


> If you genuinely think it is hard to hire people at that point...

Where? In US, SV, New York, China, Ukraine, Argentina? If you growth it can be difficult to scale without having higher profits or outside investments.


This. There is always a niche. Some people just don't want to use the other offerings for XYZ reasons.


This is a bitter comment, but it's so very true. The only thing I disagree with is the assumption that this is just a problem for companies that want to scale or - as someone commented down below - businesses that are "only" worth a few million a year and are presumably too small to attract VC attention....

Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital.

Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.


> This is a bitter comment, but it's so very true.

Only partly.

I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.


I own a business that grew 10% per year for quite some time, making way more than 20k per month in profit for many years.

I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.


No imagination necessary, check out Basecamp. I believe they've actually cut their freemium offering recently.

Slack hasn't put them out of business yet.


Slack and Basecamp are fundamentally different tools. I use both on a daily basis and they are not interchangeable. I also can't remember a freemium model on basecamp either - it's been a paid service ever since. They did change their pricing structure when moving to BC3, so now it's mostly flat and not tiered by team size and resource consumption.


Read the parents. Twitter and other social media are fundamentally different; most product businesses are going to give a different offering. The guy is saying that competition in the space will steal eat your lunch for you if you don't take investor money, and that's just not true.

I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.


This is simply not true. Perhaps its significantly more true for certain industries - especially Saas and similar software. But even then it is no rule.


Nothing lasts forever.

Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend.

The claim that the model doesn't work is rather easily falsified.


What if that competitor buys you to grab your market share?

Or, who funds the freemium one? Investors who push that company too far too fast, so your paid model could outlast another flash in the pan.


"Markets can stay irrational longer than you can stay solvent"


Then the investors will get tired of subsidising the other company, it will get more and more user-hostile and quite possibly run out of money altogether and shut down, and users will be worse off in the long run.


Oh yeah and eventually Diaspora will overtake Facebook. Oh wait...

If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.


The VC model works best for the VCs. Sure, a few entrepreneurs win too, but the model expects way more failures than homeruns. And that's if you get to the place where you're deemed worthy of their capital.

I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.


But before that it made its founders billionaires and several employees millionaires.

Without ever earning a penny in profit for its shareholders. What a system!


If the VC model did not work it would have simply gone out of business.

It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.


That's not necessarily true. I don't see how a microblogging service could be bigger than Twitter is.




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