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Ask HN: Do bootstrapped billion-dollar companies exist?
107 points by mdunn on July 24, 2014 | hide | past | web | favorite | 134 comments
It seems like all companies that are valued at $1BN or more raised money in their early days.

I'm part of one, Atlassian, which was last valued at $3.3 billion and started with $10,000 in credit card debt, taking $60 million in venture funding eight years in.

(For more on valuation and the background, http://www.businessinsider.com/atlassian-helps-employees-poc... )

Doesn't $60 million in venture capital make this NOT an example of a bootstrapped company?

You don't think that surviving for 8 years without raising funding counts as "bootstrapped"?

The important question is: did it get to the billion dollar level before raising funds?

I'm sorry, that's a ridiculous question. This is like asking if any companies have made it to $100M without ever opening a bank account, but doing everything with cash (while keeping a strong paper trail, being totally above-board.) A ridiculous question.

If you never take any money you don't even have a valuation, so what makes you a billion-dollar company anyway? You're just a $0 company that happens to be pulling $10M in profit per year (for example.)

I don't mean the question that started this thread is ridiculous (though it's unusual) - I just mean that the example given is a perfect answer, and your follow-up question is kind of ridic (IMHO.) Or at any rate not "the important question."

Uh, if you're pulling in $10M in profit per year you definitely have a value greater than $0 and that's pretty easy to work out. It's the companies forever making a loss having a positive valuation besides their constant losses that defy logic.

it might be pretty easy to work out but that's not how valuations at a billion dollars work. Only actual transactions in shares would establish this kind of a valuation.

I mean just consider our specific example: at $10M profit, the price per earnings if you purport to be a billion dollar company, is 100. So, no alternative accounting metric would ever give you a billion-dollar valuation (assuming you bootstrapped, which implies high margins and low infrastructure and other costs, so really nothing would give you the billion-dollar valuation.)

I'm not an accountant, but from how I've experienced things, only if the company sells shares and establishes a valuation thereby can value the company at $1 billion in our example.

If the $60 million investment came in with a pre round valuation of less than $1b then the example given does not meet the requirement.

Well, the thing is that $60 million is definitely not a "seed" amount of money - it's a ton of money.

In the context of the real world, your way is quite an odd way to interpret the "requirement" -- no money taken, ever, until the very first money that is sold for a percentage is raised at a valuation of $1 billion. Why? Why not let the first valuation be lower?

Under a more reasonable interpretation, i.e. totally bootstrapped, and eventually reaches $1 billion, the stated company meets the criteria. It's worth triple that now, and $60 million as a first raise eight years in is proof positive that it's a "totally bootstrapped business".

I can see where you're coming form, if the question is interepreted as "can I become a billionaire without selling any equity, by completely owning a billion-dollar totally bootstrapped business", but then it isn't nearly as interesting.

Um.. no. and simply "surviving" for 8 years doesn't say anything. I can register a company today and in 8 years tell you that it "survived" for 8 years.

This is quite pedantic. It's pretty clear that Atlassian survived in the context of employees, offices, and revenues.

Does "bootstrapped" include "investors begging to throw money at it"? or purely self-made?

To me, the strict definition would be "purely self made". But I guess it's reasonable to say that a company that has been around and very successful for 8 years, without external investment , is bootstrapped.

The question asks for billion dollar bootstrapped companies. Almost by definition, if a company is worth a billion dollars, investors will be "begging to throw money at it." :)

Very sad to see you guys leaving Australia. Best of luck!

They're not going anywhere. The recent change to the corporate structure has been for tax purposes. They will continue to grow overseas, but I don't see them closing Sydney any time soon.

Ack. Somewhere the two ideas (moving vs restructuring) got conflated in my head. Now I can't delete that comment. Thanks for the pointer.

Yeah--Sydney's actually our largest office by far. :) (I work in SF.)

Thanks for building a shitty company and product that I'm forced to use. Enterprise! Seriously. Meditate on that word.

We were actually forced by my company to move our "How to use this repo, get it up and running, etc" documentation out of README.md at the root of our github repos, to the Atlassian Wiki because, "this is how we do things now."

Fuck your terrible editor that adds random double spacing, and in general, fights me at every turn.

And the fact that at almost every standup, or planning meeting, we end up fighting some Jira issue that makes it obscenely hard to plan the way we want.

Your software makes it harder for me to get my job done. It is not good. I don't care if HN down votes me to oblivion. Your company has failed to make a good product. If you've read this, I feel better.

The reason HN will downvote you isn't because they agree or disagree on whether or not jira and confluence are crap but it's because you clearly should be pointing the blame at whoever made the call force it on you, which isn't Atlassian.

Oh and "Enterprise" is the problem. Let's use complicated shit that doesn't really solve anyones use cases particularly well, but manages to fudge along for everyone so seems like a big win for idiotic top down managers.

Actually I downvoted him for pure rudeness, plain and simple.

Your software makes it harder for me to get my job done

If the tool isn't helpful, don't fucking use it. I can draw you a diagram if that would help. If someone is forcing you to use an unsuitable tool, where do you think you should direct your opinion?

Yes, please draw this diagram. Do it in Confluence while you're at it.

Yes, it sucks that I'm forced to use a crappy tool. That happens all the time in the software world. Sure, you can take the HN fantasy path and quit every job you have every time you disagree with something, but you'll never make any real progress that way. I'm still working hard to ship a good product in spite of the fact that some aspects of how I build it will be sub-optimal.

However, if the people that work on shitty products would fight back a little bit more, perhaps those of us forced to use them wouldn't find it so distasteful.

Valve Corporation is valued at a couple billion USD and was bootstrapped using the founders' equity from being early MS employees. It's still privately owned.

Lots of non-technology companies.

Out of tech companies -- Craigslist, Atlassian, 37Signals, possibly MailChimp.

Fringe examples -- Indeed sold for $1B and only took a small amount of later-stage funding [1] from USV. WhatsApp took $8M from Sequoia but apparently didn't spend any of it [2].

[1] http://avc.com/2012/09/indeed/

[2] http://forbesindia.com/article/the-worlds-billionaires/the-$...

WhatsApp actually raised closer to $60M [1]

[1] http://www.crunchbase.com/organization/whatsapp

That story probably isn't true. Why would WhatsApp raise money if they weren't planning to spend any of it?

For help selling the company? I'm sure there are a few VCs that know all the corp dev people and could more than double the final price.

this is definitely not my forte but if VC thinks they could flip the company isn't there a more direct route than buying into a round for the sake of press?

You've got to own some shares to make money in an acquisition. It's not for the press.

wish i could delete my comment, i wasn't thinking

Is 37Signals worth $1B?

i'm not typically a fan of the 37signals blog posts which come off to me as arrogant. this one makes me laugh though; it does a really effective job of poking fun at the broken parts of the VC model.

That article was intended to be a joke. 37signals (now Basecamp) is private and doesn't publicly announce revenue or profits -- though Jason has acknowledged both are in the millions.

it's satirical but is it a joke? valuation is not a pure function of revenue and profit. unless i am missing something this valuation is as real as Twitter's or Facebook's. that's the joke.

GoDaddy was entirely bootstrapped before a large chunk of it was sold to private equity firms in 2011. The founder self-funded it based on a $MM sale of a previous company, though - so they're awfully nice boots to be strapped up by. :)

As a result of being bootstrapped, the 2011 sale single-handedly put its founder, Bob Parsons, on the Forbes billionaires list: http://www.forbes.com/profile/bob-parsons/

I am pretty sure Parson's previous company, Parson's Technology, was boostrapped as well. He used, and apparently nearly lost, the millions he earned on that sale to fund GoDaddy until it was profitable.

GoDaddy is actually not profitable.

In 2013 the company lost $199.88 million and in 2012 they lost $279 million .


(just a minor correction as I am not the biggest fan of GoDaddy)

This is an artifact of a longstanding issue that they've had with GAAP. They sell non-cancelable non-refundable multi-year services (like domain registrations) and receive cash up front for them. GAAP requires that they book that revenue on a pro-rata basis over time.

This means that if it costs them $200 to acquire a new customer and that customer immediately whips out their CC and buys $1k of domains spread over ten years then, at the end of the year, they "lost" $100 on that customer and have to console themselves by drying their tears on $800 in cash.

It also makes their balance sheet look over leveraged due to the $900 in unearned revenue booked as a liability.

Fascinating - thanks for the explanation on this. I'm often surprised at how slow accounting practices are to catch up on business models that we see as commonplace in the tech world.

I'm of two minds on it. On the one hand, revenue recognition rules seem to lag common practices in our industry. They're wacky for domain registrations and absolutely insane for e.g. virtual currencies used to purchase improvements in video games. (If I sell you four dragon eggs for $10 and you spend 1 dragon egg on a Sword of Dragonslaying, do you know how much revenue I can recognize? Make a guess. Answer: I have to estimate your lifetime as a player given my best data of player behavior, subtract the age of your account, and pro-rate $2.50 over the remaining days of your estimated life.)

On the other hand, most time when tech companies chafe under GAAP restrictions, it is because they're trying "creative accounting" in the abusive rather than the creative senses of the term. Salesforce, for example, is periodically annoyed that they have to account for stock-based compensation to employees. Well, yeah, you can't simultaneously say "Equity grants are why people work for startups" and also say "But on the other hand they're totally free." They also have some other things which are apparently allowed in their GAAP accounting but... are rather aggressive, like $3.5 billion in goodwill on the balance sheet.

Disclaimer: I have in the past held, and currently hold, options positions which express the opinion that CRM is far overvalued and which profit if the market decides to agree with me.

Why is it a liability? I'm thoroughly confused.

So if I promise to pay you money in the future, that is clearly a liability, right? Same if I sell you a chicken today for $25 and promise delivery next year. My assets increase by $25 cash and my liabilities increase by 1 chicken, which I'd probably record at $25.

This makes a lot of sense for chickens. It feels to me like it makes a lot less sense when I'm selling you something with a COGS which is too cheap to meter and where there is essentially no meaningful risk to delivery.

Thanks for explaining. So why would your liability for the chicken be $25, the retail price? Why wouldn't it be what a chicken costs to you?

Accounting isn't always intuitive, but in this case I believe it is: His liability for the chicken is $25, because what he owes you is not "a chicken", but "$25 worth of chicken".

To see this, imagine what happens if he has to break his promise to deliver, perhaps because all his chickens get swept out to sea and there are no substitute chickens available in time. He owes you a refund. How much does he owe you? Having spent our lives doing deals like this, we intuitively know the answer: $25. He has to give back all the money you paid. That's why the liability is $25.

Now, once an actual chicken gets handed over to you, and you agree that it satisfies the chicken contract, things are different. Now the $25 liability changes into a $5 cost-of-goods-sold (assuming that wholesale chickens cost $5) and a $20 increase in equity (aka "profit").

(More or less, I think. I'm not an accountant.)

that makes sense. Thanks.

I think the key point here is that it was profitable for the founder :)

If I understand and remember the finances correctly, debt takes them to about $3b in the hole. Not much of a success story there...

Walmart was bootstrapped, starting with a single five-and-dime store. It went public, but to the best of my knowledge, never took on institutional investment prior to that. Say what you will about the company and its business practices today, but the founder's accomplishment was remarkable.

Sam Walton's biography is one of the best business books I've ever read: http://amazon.com/Sam-Walton-Made-In-America/dp/0553562835

What's really instructive about his story is that he started his first retail store when he was in his mid-late 20s, sold that and earned his first stripes in his early 30s. And it wouldn't be a decade later until he started Walmart in his early 40s.

Walmart was a culmination of several decades of Walton's life that he dedicated to mastering, and dominating, retail.

One of the greatest(meaning influential) deals in the 2nd half of the 20th century, in my opinion, was Walmart's acquisition of Big K


I do not understand. When you write, "earned his stripes," what exactly do you mean?

It's a military reference. Sergeants (I think) have a striped insignia, and it would mean a bump in rank (experience, knowledge, skill).

Edit: Not to say he was in the military, it's a metaphor for how Walton gained experience and 'rank' in retail.

Incidentally, he did serve in the military. :)

That was his first success as an entrpreneur, selling a Ben Franklin franchise store - http://en.wikipedia.org/wiki/Sam_Walton#The_first_stores

Chobani is a hugely profitable, capital-intensive billion-dollar company that was 100% bootstrapped.


I think the most interesting part of this post's comments is how everyone views bootstrapping differently. In Chobani's case, per the article, they didn't take in any outside equity, but they did take in outside investment. It just happened to be structured as debt.

Nothing wrong with that, just found it interesting. Good reminder that there are a number of different ways to grow an amazing company.

Epic, which delivers most of the Electronic Medical Records software for large healthcare organizations in the United States, has never raised any funding. With revenues over $1.7 billion a year, their valuation is certainly greater than $1b.

There's a story on "The Daily WTF" that's almost certainly about Epic Systems. Epic apparently uses an obfuscated 60's-era language called MUMPS.

See http://thedailywtf.com/Articles/A_Case_of_the_MUMPS.aspx

I found another article that says Epic prefers to hire fresh college graduates because they're easier to mold into the "Epic Way."

I used to work at Epic, but it was over six years ago at this point. Their entire stack at the time was MUMPS and VB6. No idea if that's still the case, mind you -- there were some modernization efforts underway when I left. Although from what my friends that work at Epic hospitals tell me about their software, it likely hasn't changed much.

And I almost certainly got hired there because I actually knew MUMPS from a previous job. Of the developers they hired during my cycle, every one of them was on an H1-B or fresh out of Carnegie Mellon or MIT; meanwhile I was a kid with a sub-3 GPA from a liberal arts school with a Political Science degree.

(If you do some light searching, you can find another famous story on TDWTF that I wrote about MUMPS.)

> I was a kid with a sub-3 GPA from a liberal arts school with a Political Science degree.

Funny, they rejected me from even interviewing with a 3.01 GPA and a Computer Science degree because my GPA wasn't high enough. It worked out well, though, and I'm glad I never had to live in Madison.

They're still on VB6 and MUMPS. They've just recently started doing C# stuff.

Raised $70k: http://www.forbes.com/sites/zinamoukheiber/2012/04/18/epic-s...

Regardless, still a great story.

Shutterstock didn't take any funding for I believe 8 years (and when they did it was at a huge valuation) and then this year they IPO'd for >$1B. Jon Oringer, the CEO of Shutterstock, is a big fan of bootstrapping.


Also, Oracle was completely self-funded/financed for many many years. Or at least that's what the book says.

No idea why you were downvoted... SAS is a pretty good example.

GitHub's valuation 2 years ago was $750mm. I'd be shocked if they hadn't cracked the $1bb marker yet.


GitHub raised $100M from Andreessen.

Github was bootstrapped for 4 years before taking funding. Eventually everyone does when they need to grow rapidly.

Ubiquiti. The founder wrote a retrospective on it: http://www.rjpblog.com/2012/06/11/post-3-bootstrapping-strat...

Another non-technology company, longtime in the making is Arthrex - http://www.businessobserverfl.com/print/ENTREPRENEUR-OF-THE-...

"Schmieding takes a shot at those who choose the easy route to entrepreneurial success, writing: “The era of personal sacrifice and risk taking has been replaced today with venture capital and IPOs that use other people’s money as collateral"

Microsoft raised just $1M.

Ok, it's off-topic as this was in 1981, but the valuation is way north of $1bn...

> the valuation is way north of $1bn...

That is an understatement ... MSFT's current market cap is $366 bilion and the all-time high market cap was $616 billion in December 1999.

And, also relevant is that MS was founded in 1975

Esri is completely bootstrapped, not in a tech hub, and doing north of $1B / year in revs.


Pure conjecture, but is it reasonable to think that bootstrapped companies might be more likely to be bought out than ones backed by major VC bucks?

I suspect a disproportionate number of bootstrapped companies that fall into the might-become-$1BN category get an offer they can't turn down at some point before they arrive.

Agreed.. bootstrapped companies mean a much higher % of the business is owned by founders (if not all of it) resulting in lower acquisition prices needed for it to still be huge outcome for the founders.

It was started in 1837, so I am not sure you will care, but I strongly suspect John Deere was bootstrapped. They are worth more than $7 billion.



Plenty of Fish? I think I read they were making hundreds of millions at one point, per year, with a handful of employees. That would put their valuation north of a billion most likely.

I believe Mark Shuttleworth owned 100% of his company Thawte when he sold it for $575M to Verisign in 2000. In today's dollars it would be near 1B.

Bloomberg was started by Mike with his own money from his Salomon Brothers departure.

Well I'm reaching back pretty far but I believe Standard Oil was mostly debt financed in the early days: http://en.wikipedia.org/wiki/Standard_oil . The company grew with the oil industry. In a growing market, slower growth allows less aggressive financing.

Craigslist I believe was bootstrapped and while it's still private I believe it's valuation is north of $1 billion.

I don't know that they're quite at $1BN dollars yet, but Qualtrics in Provo, Utah bootstrapped for a very long time and achieved pretty impressive success before accepting (not needing) external funding. Their CEO has gone quite a few articles and interviews about it, so it's a good use case to learn from.

I think part of the problem is in how you value companies. Basically, you can only "value" a company when someone makes an investment. So if a (sophisticated?) person or VC invests in it, or if it goes public, we would consider that an estimate of value.

If no one invests in it, and you are clipping coupons, how would you know you have a billion dollar company? You could have $100 million a year in earnings and some growth, and have a pretty good idea, but you don't know. Conceivably, whatsapp could have bootstrapped their way to $1 Billion before they accepted VC money, but even they may not know.

Actually, if you have multiple owners you really want to have your company appraised on a regular basis (every 6 months if you're beyond a little startup). Reason being, if you should happen to encounter an event that triggers a buyout right of one of your members/shareholders/partners, you want a contractually accepted valuation to control the cost of the buyout. Well planned valuation procedures can really help avoid costly litigation over the value of an ownership interest.

Appraisers can value your company above a billion dollars without you ever taking on an outside investor. If someone does go to invest, they're going to hire their own appraiser (or entire firm of economists) to determine how much your company is worth prior to investing.

Appraisals aren't free, but they have significant long term benefits. Their estimate of your company value tends to be as accurate as any potential investor's estimate (competing biases on other sides of the ideal valuation).

That makes sense, and I agree with you. I will point out that those appraisals are usually kept private so we still have to base our valuations on announced deals. (In the original context of trying to value a bootstrapped company).

Mojang could be a future billion-dollar company. I dont think it was ever funded?

It would be interesting to know whether companies that are bootstrapped are statistically more likely to succeed than VC-backed companies. Do founders who risk their own capital have fundamentally different approaches to business than founders who are spending other peoples' money (VC funds)? Do they do more market research before starting their companies? Do they recruit different kinds of employees? Do the founders have more business experience? Does anyone know if any research has been done on this?

I think McKinsey & Co might be bootstrapped. They made $7.8B in 2013, but it was founded almost 100 years ago. They reached $1B in 1991, which was 65 years after it was founded.

Quizlet isn't quite worth a billion yet (I think they're somewhere between $100 - $500 million) But they haven't taken a penny of investment money.


In a talk given by Bill Gates, he mentioned that Microsoft only took on an investment once and it wasn't because company needed money but because Bill Gates wanted to bring on an investor to be on Microsoft's board of directors and that was the only way to do so. Supposedly that investor has been on the Microsoft board for decades.

Obviously because they technically did raise funding, might not satisfy the question

Yes, AirWatch was bootstrapped and was founded in 2004. They raised a huge round 200 m in 2013 I believe. IT was sold to Vmware for 1.6 B dollars.

Lots auf Germany's hidden champions are bootstrapped after World War II. Most famous example aldi, they own trader joes in the us.

Virgin Group was born out of Richard Branson's Virgin Record stores. The stores started as a mail-order business, advertising in his own magazine, which he started at 16. The name Virgin is a reference to his and his business partners' inexperience in business when they opened their first record store.

That's not what his autobiography says... Says when he was running the 'Student' magazine and had the opportunity to move on they needed a name and were brain storming. Someone piped up with "what about Virgin, because there aren't many of those left around here?".

But majority of their long-term success has been attributed to their ability to borrow money from larger banks like City. The growth of Virgin Records could not have happened without their battles with the banks.

Does Facebook count in this? I mean they did start with Eduardo Saverin's $10k as bootstrap money no?

I think ESRI was also bootstrapped.

In Asia we have quite a few if relying on your family is still bootstrapping.

Digi-Key Corporation. Founded by Ronald Stordahl in 1972. http://en.wikipedia.org/wiki/Digi-Key

Wizards of the Coast was bootstrapped without nearly any cash, in the unusual way that artists had been payed in shares. It was sold to Hasbro for US$325 million in 1999.

37Signals (Yes, yes, I know it's called Basecamp now) would be valued north of $1b. Though they did take an investment of $1m from Jeff Bezos at one point.

Out of curiosity, how do you arrive at this valuation?

Why would it be valued north of $1b?

I'm not 100% sure, but I think IKEA was bootstrapped for pretty long time. But I can't find any reference about this:(

To my knowledge it's still privately held.

Tax dodge.

This is true. Also Tetra Pak.

Infibeam - www.infibeam.com is an India based ecomm company and was totally bootstrapped. They're worth > $5B

I don't know if this counts, but Veeva Systems IPOd at north of $4 billion on a grand total of $4m in funding

Zara started as a pop and mom shop.

I'm not sure if you would call starting in NIH raising money, but how about SAS Institute?

Yes. Epic Systems was/is purely bootstrapped. Never took a dime of external money.

I heard that EMC never raised VC

Wouldn't LucasFilm count?

Dell, Apple, Cisco, Oracle, & Intel. Weren't those all bootstrapped?

According to a New Yorker article currently on HN, Intel's founders took VC investment as soon as they decided to quit Fairchild and start their own company.

Multi-millionaire Mike Markkula provided essential business expertise and funding of $250,000 during the incorporation of Apple.

Can't believe no one has mentioned Hewlett-Packard or Apple Computer...

Braintree was bootstrapped until pretty late

Desire 2 Learn, a Kitchener, Canada based startup raised 80 million in 2012 and was founded in 1999. Their exact valuation may be below 1BN, but not small.

Isn't apple and Microsoft?

I believe Mu Sigma qualifies.

Bloomberg was bootstrapped.

How about ALDI?

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