As somebody new to the world of startups, I'm wondering why taking a small seed round and then work hard to bootstrap within a few years (with the help of the extra seed cash) isn't a viable option?
It’s a shame there isn’t exit interviews for seed companies once they run out of money or go onto Series A. Because it would hugely benefit the ecosystem.
VCs want you to hit it big or burn out within 5-10 years. Remember they are using investors money, and investors want their money back.
If your plan is to bootstrap (which I think is wise and the path I took with my current startup) , look into angels and Friends and family Rounds. Most family rounds are totally OK with a longer horizon. That said, not all people have the friends and family to do such a raise, in which case what do you do?
Not every company can do that (i.e., Boom, which is building supersonic airplanes) but if you can, you should.
Assuming what I'm saying above is correct, that means that YC is advising founders to take the slow road to profitability? (Nothing wrong with that!)
Just because you don't have to raise money doesn't mean you never do. Sometimes founders who are running a profitable business and don't need investors will nonetheless choose to raise money because someone offers it on very good terms and they believe they can use it to grow faster.
https://earnestcapital.com/what-we-invest-in/ is one such "not vc" VC (?)
"We are not the best fit investors for founders who have a business plan of raising millions more in capital every 12 to 18 months. We’re not opposed to our founders raising more capital later on, but we have a strong preference for opportunities where the Plan A after raising from us is to get to break-even and grow the business through cashflows. Typically founders raising more than $2m will not be a fit for us."