Co-founder here, I was waiting for this comment to be honest.
So in essence, if you consider that bootstrapping is building a business without external funding, you're correct.
But to me, bootstrapping VS "VC road" is much more nuanced than this.
Going the VC road forces you to have crazy growth and raise more round because the VC model only works if they fund unicorn 1 time out of 100(0).
TinySeed works even if they fund 8/7 figures businesses, and this was our goal. We had no money when we began (we went through most of our savings during our first venture), no family to raise an angel round and this solution was perfect for us.
The amount of money we got was nothing near what we could have had raising traditional money, but it allowed us to stay independent and grow at our own pace.
As another bootstrapped founder, I disagree with you.
"Our standard terms are for 10-12% equity."
The moment you give equity in exchange for money no matter whether its tinyseed or whatever, you are not bootstrapping. Your financial risk is lower because you don't have to pay this money back if your company fails. That is not called bootstrapping.
I bootstrapped with my own money AND some smaller loans which I am fully liable to pay off with a personal guarantee. If my business goes down, I am personally liable. That is bootstrapping.
My 2c as a bootstrapping founder (who has not taken outside money): I don't think there is any virtue in funding your business with your own money. Call yourself bootstrapped or funded, what ultimately matters is that the business survives and thrives.
I think some people would not consider it bootstrapped if you have any outside loans. Usually bootstrapped means you funded the growth of the business with it's own revenue only. While small loans wouldn't matter much, to me, if someone gets a small million dollar loan from their daddy to start the business, it's not bootstrapped.
Yes million dollars from daddy is not a real loan so i would call that free money or an investment which can be lost without conseiqences. A real loan from a bank with personal guarantee on one he other hand is very different.
Important for others: Some loans do not extend this way and thus company bankruptcy (US) can protect you, so just opportunity cost. But the terms are generally bad, and why firms like tinyseed exist, esp. once revenue starts growing (though at that point you can potentially get a SAFE at better terms...).
Money is so sensitive! A Google millionaire bootstrapping on surveillance savings or a doctor taking favorable loans for starting a practice is different from say a college grad bootstrapping on no savings. Most SaaS is especially hard as there is typically no real revenue for ~years, compared to say B2B where each customer can easily pay for .5-5 people. So if operational expenses come from revenue, including sales/marketing/r&d, bravo.
I hear you but most small business loans try to push you for personal guarantee. You can fight it but it usually is tough unless you have real physical collateral in the business which is not the case for software companies. I have talked to Bankers who told me that unless the business is brick and mortar with inventory and machinery or real estate, they cannot give loans without personal guarantee even SBA backed loans.
The crew here already bootstrapped to (small) revenue, which means revenue-based loans are possible (https://www.investopedia.com/terms/r/revenuebased-financing....). I haven't been following this space recently, but it seems like there's now a big zoo of traditional lenders + upcoming tiny-vc's. IMO if you've reached something like 10K MRR but not enough of a userbase for crowdfunding, there's a world of options, the angel story may be the most friendly + not yet forcing you on the VC treadmill.
For pre-revenue... that's tougher. For a tech startup, consulting/services, SBIR, (lax) corporate day jobs, etc. all give ways to split between the startup and work without risking your nest egg. For b2b, I now like the model of well-paying design partners that you hustle to land before you take the full leap. But some people are rich, or comfortable with the risk/reward, or all sorts of other things, and go with personal guarantees. Pretty sure that's what I did with our first business credit card. In all cases, bravo to anyone who pushes to sustainable growth, it can be a life changer deal for both the company and the individuals, whatever financial path they pushed through.
> If my business goes down, I am personally liable.
Why? I also own my own business (an LLC somewhere in Europe), but if it goes down, I am not personally liable, at all (unless it's due to gross negligence established by a court case).
His comment included the fact the he took out loans with a "personal guarantee".
When you're a small business starting out with no assets (like factories, equipment, etc) -- which means no collateral, or no business revenue... the banks won't provide so-called "business loans" unless there's a personal guarantee.
Therefore, if the business fails and the company is shut down, the founder is still financially on the hook to pay back the loans. (Barring drastic options like filing personal bankruptcy.)
Basically, he personally borrowed money and put it in his LLC to finance it. For tax and other purposes, this is a more complex transaction that is somewhat legally different (the business took out and should repay the loan, avoiding his personally being taxed for the money). However, that's the best way to understand what happened.
I understand that TinySeed is different than the typical doing VC roadshows and having crazy growth, that wasn't my point. I also understand that the amount you received from TinySeed wasn't probably too crazy, it's in their name after all; tiny seed. But that name also contains what they do, they provide seed funding.
Instead of contrasting Bootstrap VS Crazy-VC-Mode, it's more suitable to compare two different things. One is if you're bootstrapped or not, and if you're not, are you doing Tiny-VC-Mode or Crazy-VC-Mode? In this case you chose not to be bootstrapped, and are doing the Tiny-VC-Mode.
It's great that going Tiny-VC-Mode allowed you to grow at your speed and still remain independent, much better than the Crazy-VC-Mode usually allows. But if we start calling that "bootstrapped", then where does the line go for what is bootstrapping a business or not. The meaning would have to change from "Without any outside money" to "With a little bit of outside money, but still independent" which says something else.
Edit: Another way to see it: You still bootstrapped the early stages of the company, up until the point where you accepted outside investments. So according to you post, you joined TinySeed in May 2020, which your graph under "Slowly reaching $10k MRR" (https://d33wubrfki0l68.cloudfront.net/e1ea487c1823d29fb55da4...) show to be right around $5K MRR. So what you bootstrapped was up until "$60000 ARR", but after that you were no longer bootstrapped as TinySeed provided capital to you.
Bootstrapping means you funded the entire thing out of pocket without any outside investment.
There's nothing bad/wrong about how you did it, but it's not bootstrapping. Saying it is makes it confusing for newbies which means they're more likely to be taken advantage of by VCs that realize they can market themselves as a "bootstrapper fund."
Thinking about it in such binary terms is quite limiting and unhelpful though. It's a spectrum. I would consider ScrapingBee closer to a bootstrapped company than a venture-funded company. Heck, by your definition if I took $5k of friends & family money to start a business that grew to $5M ARR,I could not call that "bootstrapped".
This is why Rob Walling (co-founder of TinySeed) likes to use the term "fundstrapped". There are a lot more funding options out there that do not come with the narrow pathway associated with typical venture funding.
Why is it unhelpful? Its okay for things to be binary sometimes. This is one of those cases, where the meaning of something, beyond even tech circles, has always meant starting and building a successful business without raising outside capital.
There's no good reason to change the definition of this. The disparagement is trying to co-opt a term that shouldn't be co-opted. If the headline was how we built a 1M ARR business from seed funding it'd be a very compelling article still. Now the sourness comes from trying to redefine a term that has very concrete meaning without providing strong justification for doing so.
I think at the end of the day people don't associate "bootstrapped" with "strangers' money." Of course the cofounder says the definition is "nuanced," because it would have to be in order for them to claim the descriptor, a descriptor that carries weight as a mark of independence. VC is not independence.
They came from Tinyseed, why wouldn't they use "fundstrapped?" Because it doesn't sound as cool, and they know VCs aren't cool as far as the independence denoted by the term "bootstrapped" goes.
It seems there are some definitions that allow for some external funding. I’m of the view that bootstrapped is no external funding; sounds like fundstrapped is a better term. Maybe seed funded.
To me, it's really important that the tech community define "bootstrapping" as no more and no less than "having a plan to reach profitability with total investment on the order of what a [not-outrageously-wealthy] group of founders might invest," and to frame it as a good thing.
With TinySeed's round at "$120k for the first founder, $60k for the second, and $40k for the third" (https://tinyseed.com/program#program-faq) this is very much along those lines.
If one further gatekeeps the label with "but the founders need to invest this personally or it doesn't count..." that restricts the label to a very small segment of privileged individuals. And in a world where there's a (false) narrative of a "bootstrapped or VC backed" binary, that gatekeeping reinforces the notion that less privileged founders have no choice but to go the VC route or do nothing at all. I would hazard a guess that great ideas and great societal impacts have been lost as a result of this framing.
>, it's really important that the tech community define "bootstrapping" as [...] With TinySeed's round at "$120k for the first founder, $60k for the second, and $40k for the third" (https://tinyseed.com/program#program-faq) this is very much along those lines.
But when YC invested $120k for 7% equity, we typically didn't call all those startups like Dropbox/AirBNB etc "bootstrapped companies". And $180k for 2 founders is more than YC's previous terms.
>If one further gatekeeps the label with
It's unfair to call it "gatekeeping" rather than a case of confusing many readers with a headline that flips the meaning of "bootstrapping".
You're eliding the most important part of the definition IMO: a plan to reach profitability with the initial investment alone. YC never expects its companies to become profitable with their investment alone, nor should it - it's designed for growth companies that will receive multiple rounds of funding over time!
Why is that a problem? Bootstrapping is a privilege, just like raising any VC funding is, yet nobody is fighting to change the term for Venture Capital funded startups.
The meaning of which has been well established, both inside tech circles and outside, to mean starting a business without raising any outside capital.
Why do we want to suddenly stretch the meaning of bootstrap? The compelling story here would have been "how we created a SaaS business with 1M ARR with only seed funding", and I'd still have read it. That is something worth being proud of, why is bootstrap better?
Doesn't make it okay to stretch the meaning of something that is well established. Not all VCs are bad, not all companys funded by VC money turn into crap. Not all VCs use the same model.
It would be best to explain this. Like I mentioned, why not plainly explain that they did all this with just seed money? That's a really amazing accomplishment in and of itself, and nuance is something that can be explained.
Not to mention, trying to stretch the meaning here is trying to glob a positive onto something that didn't earn it by fitting the definition. Again, why try to obfuscate the truth? Be proud of your background if you think you can be proud of it. Nothing wrong with that.
Just don't try and redefine something that already has concrete meaning. That's nearly the same thing, in my mind, as lying.
If you take money in exchange for equity, that is NOT bootstrapping no matter what spin we put on it. If the business fails, founders are not personally liable to return that money that was raised from investors. That is not bootstrapping.
Bootstrapping is your ability to come up with money on your own or through loans etc which you are liable to pay back. If you don't you could lose your home. Investors don't come for your home when you lose their money.
$120k is an big amount of money, especially for people that don't have FAANG salaries. That could be an appartment where I live. A small one, but an appartment. It's also 3 years of earnings for me, or it would be if I didn't spend anything.
> If one further gatekeeps the label with "but the founders need to invest this personally or it doesn't count..." that restricts the label to a very small segment of privileged individuals.
People for which $120k is money that people around them can just invest are a very small segment of priviliged individuals.
Another point: tinyseed also offers mentorship. From the FAQ:
> I don’t need the money, is TinySeed worth it just for the mentorship?
> Short answer: yes.
This message is not to knock on the people behind ScrapingBee. Bootstrapped or not, they have built a very profitable business, that's impressive and deserves praise. I just think calling it "bootstrapped" is not correct.
I appreciate the honesty and the article, but it would have been just as interesting (and more authentic) if you would simply be honest:
“How we got to $1mm ARR with only a tiny seed round”.
Reading an article and immediately recognizing inconsistencies is an instant turn-off for me, and I assume many other readers. I don’t see what you think you’re gaining by being misleading with the headline.
Once again another thread where no one seems to agree on what constitutes venture capital and what a startup is.
By definition - you took a minority investment. Bootstrapping, colloquially, means you have not funded your company with any equity or capital that could be converted to equity.
btw - you got attention by saying you were bootstrapped and since this is just marketing material then kudos to you for the good marketing.
My definition of bootstrapping has more to do with the mindset you have while running the company, rather than whether the company actually has investors.
There’s always someone putting money into getting a new business up and running (bootstrapping is not free). Whether that small amount of money comes from the founder’s pocket, family/friends, or an angel investor - the money to pay your AWS bill and other basic services has to come from somewhere.
So my partner started a business during COVID. We don't have rich family/friends or know any angel investors and so we paid for costs by selling things, using savings and maxing out credit cards.
No outside money. No modification to a cap table (not that it exists).
If tomorrow you decided to go and raise $100k from an angel (or if you received a $100k small business grant) to pay off your credit card debt and replenish some of your savings, I wouldn't immediately kick you out of the "bootstrapped founder" community.
I see your point though. There is "pure 100% bootstrapped" and "mostly bootstrapped, but not completely". IMO it's a spectrum. Just like the term "startup" - it's a spectrum, no binary definition.
I fail to see the benefit of subscribing to a viewpoint that is so black and white, and why definition that allows for no exception is necessary.
If we are taking things to the extreme, I could argue that Visa/Mastercard is your investor considering you maxed out your credit cards, you’re spending someone else’s money by doing that. And just like convertible notes or debt financing, you’ll have to pay it back. Convertible notes typically provide the option for the investor to demand cash repayment after a certain amount of time has elapsed, same as your credit card company.
These silly semantics are why I think it’s more practical to define bootstrapping as an operational philosophy/mindset rather than a strict binary financial definition.
> I fail to see the benefit of subscribing to a viewpoint that is so black and white, and why definition that allows for no exception is necessary.
Maybe look at it in a different situation. Imagine someone punched you in the face and when you confront them about it they saying that you're holding to silly semantics about what it means or does not mean to get punched in the face.
The common use for "bootstrapping" is using personal capital and then funding the business with its own proceeds.
If you'd say "How we grew our business without traditional VCs" that'd be an excellent title. What you describe in your comment here sounds like an interesting alternative approach.
But the way it's introduced looks like an article about how a 25 year old bought their own house, and step 5 is "my parents took the mortgage and I pay them rent."
Precisely. If TinySeed has provided funds, it's no longer "VC'ed yourself", it's "VC'ed yourself + tiny seed from TinySeed".
> Taking money from TinySeed is very different than taking money from VC.
No one is arguing that TinySeed is just like any other VC. But instead that by accepting VC, you could no longer claim the business to be bootstrapped.
$250k from immediate family, if said fuzzy conditions don't confer any ownership or repayment? I'd say just barely yes (it's basically a gift to you at that point, which is then your money)
$250k from a third cousin in return for equity? No.
Being bootstrapped isn't an ungameable category, but it is a fairly unambiguous one IMO.
It's kind of disingenuous to try to make this same comparison across different people.
What if you borrow money from family in order to start your business? Are you no longer "bootstrapping"?
What is Bezos decides he's bored, and wants to start something new. Really looking forward to seeing the "most successful bootstrapper of 2030" be Jeff Bezos with his self-funded $5B "startup".
I mean I understand the concepts you’re talking about, but maybe you need other terminology? Bootstrapping doesn’t make as much etymological sense if it also covers ”got some outside funding, but not too much”.
You're assuming that the only categories that exist are "bootstrapped" and "took VC money". That isn't the case. Raising money from friend, or taking a loan from a bank would be neither boostrapped nor VC-funded.
>But to me, bootstrapping VS "VC road" is much more nuanced than this.
I went to the "TinySeed.com" website landing page and I do see that they prominently advertise "The First Accelerator Designed for SaaS Bootstrappers".
And then their FAQ page has these example financial terms:
>TinySeed invests $120k for the first founder, $60k for the second, and $40k for the third. Our standard terms are for 10-12% equity. -- from
https://tinyseed.com/program#program-faq
Well, if founders accept those terms, they are no longer "bootstrapping" as people generally understand that word. Yes, you may have been bootstrapping right up to the point _before_ taking TinySeed $180k but after that outside capital infusion, "bootstrapping" literally no longer applies. It doesn't seem like any nuance is necessary. It's quite a binary status.
I guess we can debate the existence of the “True Bootstrapper”, but that’s not a very interesting conversation.
The term “bootstrapping” predates the existence of funding sources like TinySeed, and is now outdated. It was never terribly precise anyway, e.g. if someone saves up an “initial investment” amount of money before starting, are they bootstrapping? What about having a spouse who pays the bills while starting?
The digital age has also introduced a whole new range of funding options that didn’t exist very long ago, crowdfunding for example.
>I guess we can debate the existence of the “True Bootstrapper”, but that’s not a very interesting conversation.
I'm a language descriptivist not prescriptivist so I don't care to debate it but just pointing out that the founders are using "bootstrapped" in a confusing way that contradicts how others understand it. (Which then causes meta discussion of founders trying to educate readers on the nuances of what "bootstrap" means.)
Compare the financial equity cap table terms to YC. When YC terms were $120k for 7% equity, people (generally) didn't call all those annual YC batch applicants "bootstrap companies". E.g. we (generally) did not say "DropBox is a bootstrapped company", "AirBNB is a bootstrapped company". But TinySeed funding means it's a bootstrapped company?!?
Doesn't that seem inconsistent?
Taking outside funding from professional investors for equity stakes typically wasn't seen as bootstrapping.
My point is that it's a whole heck of a lot easier if you shed the "bootstrap" label when the financial status changes. It's not a flaw or being evil to lose that label. Why is it so psychologically necessary to keep it?
@Daolf - congrats on the building, definitely NOT easy to do.
What growth metrics did Tiny look at? Did the investment come at a time when the business was needing to "survive, sustain, or grow"? [every business has all of those phases]
I assume you mean during the application process. So they asked just the basic stuff, MRR, growth, churn. We were at $1k5 MRR when we applied and $3k when we got it. I think what worked for us during the process was that Kevin had been running a small Java web scraping blog + book at that time.
> Did the investment come at a time when the business was needing to "survive, sustain, or grow"?
We were slowly switching from survival to sustain mode. They allowed to make the transition and go full grow mode.
> They allowed to make the transition and go full grow mode.
The point of bootstrapping is making the compromise where you trade a lower growth rate for the benefit of retaining 100% ownership of your business. Your statement is a VC funding model, even if the money is called seed and you are not trying to become a unicorn.
Your giving away equity for money is simply not bootstrapping. Calling your business bootstrapped is lying in my opinion. What I think doesn’t matter, but being deceitful is silently judged by others where their opinions do matter to you, and the consequences of that are usually invisible.
Not sure why you needed the TinySeed money. It looks like you were only a few months away from $10k/mo, which seems near the boundary for sustainable income. Was there some investment you were able to make with the TinySeed money that pushed you over the line?
Maybe I missed this in your post, but did you utilize search advertising? That seems to be the most common and effective tool for short term growth
So to be honest, we ran the math and never actually spent TinySeed money.
We could have mathematically made without it.
But three things to consider here:
- TS money multiplied our runway by 10 and really reduced the amount stress we've experienced. Especially with COVID, during which we experienced our first negative growth month
- We were able to finally pay ourselves above minimum wage (1,500$)
- The mentoring and advices which came out of the program, really made the whole difference.
Where we live, the startup ecosystem is basically 0, we don't know a lot of startup funders or experienced entrepreneur. It changes everything when you can ask a precise question about business and get a response from an expert in the next 6 hours.
We had call with mentors and other member of the community, basically a one hour free consulting with an expert, about SEO, copywriting, recruiting, sales, growth, and marketing and THIS does move the needle a lot.
Certainly it must be a lot easier to bootstrap a company if you sell equity to investors to enable working on it full time, but are you still really bootstrapping your app at that point? Even if you only sell as little equity as you need to to pay the bills until the app is able to pay for itself?
>
HNer here, I was waiting for this comment to be honest.
So in essence, if you consider that being a billionaire is having a billion dollars, you're correct.
But to me, being a billionaire VS "a regular dude" is much more nuanced than this.
Being a billionaire is a state of mind.....yadda yadda
So in essence, if you consider that bootstrapping is building a business without external funding, you're correct.
But to me, bootstrapping VS "VC road" is much more nuanced than this.
Going the VC road forces you to have crazy growth and raise more round because the VC model only works if they fund unicorn 1 time out of 100(0).
TinySeed works even if they fund 8/7 figures businesses, and this was our goal. We had no money when we began (we went through most of our savings during our first venture), no family to raise an angel round and this solution was perfect for us.
The amount of money we got was nothing near what we could have had raising traditional money, but it allowed us to stay independent and grow at our own pace.