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.
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.
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.
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.
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.
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. :)
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.
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.
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.
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.
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").
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.
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.
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.
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.)
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.
"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"
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.
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.
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).
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?
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
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.