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Red Hat was initially financed by opening 8 different credit cards and accruing $50,000 in credit cart debt before they began bring profitable. I never knew this before but really drives home how hard/risky it was to bootstrap your own business back then.



Loads of people do that now. I bet many restaurants/food trucks etc got started with credit card debt.


why the "back then" modifier? it's still hard/risky now.


1993-1994 was before the first flush of "dotcom 1.0" era VC money, which showed up in the 1996-2000 era before the big crash.


Existence of VC money is irrelevant to 'bootstrapping'. Taking VC money is sort of the opposite of bootstrapping.


Existence of easy seed and pre-series-A funding nowadays means people don't even try to bootstrap with 50k in personal 20% APR debt. Similarly in 1998, 1999, a lot of wild dreamers with harebrained ideas got VC money pretty easily after a few PowerPoints and some bullshitting.


Google also used a bunch of credit cards initially from what I understand.

I'd rather have 20% APR, than give away 20% equity. Why? Because when the debt is paid to the credit card company they go away. The VCs will always want more and more, pushing your company faster than it should go.


Depends on risk profile.

30 with 3 kids and no savings? Yes please, give away some of my profits so VCs can derisk the startup.

20 and living with parents? Bootstrap away, if I fail I will be fine.


IIRC the google guys had VC crawling down there back and had to tell them to back off.


Based on personal experience, I doubt $50k in credit card debt was what was planned for and probably came out of necessity to finish the thing.

Fund-raising takes a lot of mental space on its own which comes at a high premium when you're focused on finishing a product.

Even with $50k at 20%, we're talking about $833 a month in interest, that's not that much to someone who would usually make $100k+ at a job if they fail.

Opportunity cost is the real liability.


20% of $50K is $10K/year which is like 15% of the take-home pay on a $100K salary, and all you did was pay interest. That's not something to sneeze at.


Interestingly, the kernel of IBM (Bundy Manufacturing) started in 1889 with $150K. https://history-computer.com/People/BundyBio.html

I wonder how common that funding level was in the late 19th Century.


To put things into perspective $150k 1889 would now be worth about $4.1mil [0]

[0] http://www.in2013dollars.com/1889-dollars-in-2018?amount=150...


Most of the major success stories you're familiar with from that era, involved entrepreneurs that had rolling levels of success. They built up reputations first, which enabled them to raise large amounts of capital as needed to fund ever larger ventures. Elon Musk's latest successes are of that mold (which makes sense, when you consider that his latest businesses share more in common with old industrial ventures than dotcoms; Zip2 and PayPal gave venture capitalists and other partners the confidence to back him on Tesla and SpaceX).

Rockefeller did that for example before creating Standard Oil. He built up a sterling reputation first working as a bookkeeper, then as a partner at a trading firm. He got to know the owners of capital in doing so. At times during the early years he required extraordinary sums of capital, his reputation enabled him to raise it in an evening by riding around town and meeting personally with bankers. He did that once to buy out a large shareholder who had become conflictory; and other times to acquire businesses quickly.

Henry Ford went through multiple iterations of messing around with commercializing his creations (including the Henry Ford Company), before finally founding The Ford Motor Company. After his very early experiments with vehicles, his later efforts all required the support of financiers and lots of capital. Over time he had demonstrated a knack for pulling complex engineering efforts together and attracting talented people.

Edison always had capital backers for each of his major commercialization efforts. He operated his own lab (at times funded by outside capital) and then typically made arrangements for each set of inventions with financiers to take them from prototype to commercialization and distribution. Nikola Tesla had some similar backing arrangements at times, although his history in business was even more haphazard.

Before George Westinghouse founded Westinghouse Electric (which is what made him particularly famous in the era), he started with The Westinghouse Air Brake Company, which he founded at 23 years old. And even before that, he started by creating useful industrial inventions, receiving the first patent for a rotary steam engine at 19 and a bunch of smaller railroad-related inventions, before striking commercial gold with the air brake.


Interesting. Has anyone ever written a book about founders across the ages? I remember that the US was always a bit Patent crazy and wonder how that translated into getting capital. Bundy invented the time clock but seems to have been a successful marketeer for his earlier clocks.

The Wright Brothers blew a lot of energy defending their patents and not competing in the market.

The balance between hard skills, showmanship and ruthlessness would be an interesting study.




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