Five Years a (Bootstrapped) Founder | Hacker News Reader

Five Years a (Bootstrapped) Founder

outseta.com

92 pointsrmason30 comments

Bootstrapping is tough, especially when you finally build a product and get a paying customer only to read about founders raising $mn without an MVP. Comparison with FAANG jobs are meaningless to some degree because the value of freedom and creating a business is so much greater than the value of a comp package. Also, corporate BS. As a founder you only have to deal with your own BS!

Could you clarify what you’re saying? Are you saying bootstrapping is better or vc funding is better?

Bootstrapping is better unless your start up is capital intensive.

"better" is subjective. Bootstrapped gives you more control over the business but it also makes it harder to expand once you have product market fit (exceptions are always there). Bootstrapped means you most likely have yourself or may be another co-founder who have to share the burden of all the challenges and downsides. Bootstrapped means you probably cannot pay the best money to top talent and unless you are in an upcoming/hot space, you will have trouble attracting the best talent. VC funding brings tons of its own challenges. Right off the bat, you now have a pressure to deliver a fast paced/hockey stick growth or your investors won't make money. Making money for investors becomes a higher or at least same priority as making revenue for the company in general. You now have to answer to people you would rather not in many cases. Not to mention the public scrutiny it brings. However, the plus of VC backed is that you have money to attract top talent and can offer a lot of incentives that are harder as a bootstrapped company.

I think everyone should do their 1st company bootstrapped (I am biased obviously). This will force you to be frugal with spending habits while trying to optimize revenue with least waste. It will also make you come up with creative ways to survive/grow and find product market fit. The downside is that you may run out of money or never reach enough traction as you may not be able to build a great team quick enough in cases.

I would say it depends on your goal. If you want to grow super fast and build a billion dollar company, you definitely want to go the VC route. If you want to start something that replaces your job and then may be grow a bit more with a small team, bootstrapped is the way to go. Sometimes a bootstrapped business can become VC backed and vice versa.

I think attracting top talent is a point worth exploring. Surely with all venture back start ups , having money to attract talent doesnt mean you will attract talent. ...competitors have money too. Furthermore, what is top talent? From a top school? Possibly, but not definitely. Also has anyone shown that top talent is a necessary and sufficient condition for success. Personally I think the measures of assessing talent are moderate predictors of success. Scarcity of resource drives up talent costs not effectiveness of talent (i.e. the talentedness of candidates)

Adding to this, there are plenty of well funded start ups stuffed full of talent that have failed. Talent is one ingredient, but if the product is good enough you probably dont need to pay for top talent,you only think you do.

How do founders deal with the psychological stress of knowing they could be sued or patent trolled at any point in time?

This is the only reason I don't start my own company, and if I did then I would try to have VC money lying around for lawyers. It's really messed up!

Public liability insurance? ;)

You will end up either paying high premiums or handing your money to patent trolls. Neither option sounds optimal as a bootstrapped founder.

Most start ups run out of money before they are sued. Patent trolls tend to go after firms that have money to pay them off. As such, patent trolls are not a concern for most founders.

That is one option then-- lay low until you have enough money to pay them.

But what about psychotic people who are suing you for reasons of harassment? i would be really mad if the reason my business failed was legal stuff and not product market fit

A psychotic person who has the money to pay an attorney to draft a law suit....that is more unlikely that building a unicorn and it's a whole lot more productive to focus on that rather than bad actors out to harras you.

But I'm making 300k a year with no liability to myself at a big FAANG where seemingly everyone just sits around collecting money.

I would like to have a chance at making 10M running my own gig but the threat of being personally sued into oblivion is a big factor in why I haven't even entertained pursuing a public, for profit side project.

Are patent trolls really such a persistent global problem that they're a nearly guaranteed issue for startup founders? How is this even possible unless someone is quite literally using stolen IP for their business?

At least in the United States, patent trolls are professional lawyers who can serve paperwork for nearly free, have done this thousands of times, and in many cases are good friends with the judge.

In the US, anyone can sue anyone, and it costs money to fight even frivolous claims. It is one of the major reasons that if you were to look at the professions of 99% of home owners in upper middle class areas, they are laborers at large corporations.

As a bootstrapped founder, the whole post resonated a lot. In fact, I felt like I was him in many situations that he was describing (e.g. something breaking on a Friday with angry customers while your wife is pissed at you for not helping her with stuff).

Agreed. I felt this in my soul:

> Lying in bed that night, I couldn't sleep. I was exasperated—seemingly everybody was mad at me…

And typically, in the midst of it, I’d add myself to that list of “everybody.”

I shamefully remember sneaking out at night after she'd fall asleep to work on an issue in secret.

Thanks for sharing that story!

I’ve been using outseta (free) for the last couple of months as I build a product using it and it has been pretty straightforward, and has really pushed me from my inefficient “build-it-yourself” to “just buy it and save months of development work!”

I find really interesting how you found out that most of what you do is customer support instead of marketing, since for me marketing is the thing I don’t know how to do, and honestly the thing that terrifies me… :)

Good luck in the rest of the journey!

The opportunity cost is a big deal, and will gnaw at you the longer you're bootstrapping (+ consulting, which is typical) without making up the difference with sale of the company or an even bigger salary.

This is true for all startup founders even if not bootstrapping because startup founders are generally advised to take tiny salaries in exchange for long term equity. Even if not bootstrapping, they are bootstrapping by supplementing their personal life with savings or trading off on quality of life (no travel vacations etc).

As tech salaries have ballooned in the last few years, the opportunity cost has gone out of whack -- if you go read message boards of what people are making at FAANGs, the odds are stacked against the startup founder / bootstrapper living on ramen for 5 years because the FAANG salary makes millionaires with 100% probability.

For any 5 year startup to make up for that it most likely needs to exit at 30M or greater which puts the founder in top 2% territory.

I wonder what percentage of "bootstrapping" ends up being a fear of diving into the world of venture capital rather than a rational choice that makes the most sense for a growing organization.

There's a simplicity to bootstrapping, for sure, but how many bootstrapped startups could, objectively, grow faster and meet their goals more easily with outside funding?

Yes you are probably right, there is a fear of the VC world. I certainly feel it. Being over 50, no one really wants to invest. Possibly because I am looking building products that could sustain a profitable businesses rather than 1000x moonshots. Since the economics of VC funds require that every investment could return the fund, investing in an early stage profitable business suggests no dramatic upside. It is also a full time job, raising money, and in currently have one role that is the equivalent of 3 jobs...so it feels more sensible to build the business than raise money. But I am a fool for thinking that.

There’s a lot of FUD in what you’ve written here, but that’s fine. I don’t mean to try and push anything on you, but I just think you’d be pleasantly surprised if you could find someone who could help you navigate these waters.

Outside of SV in particular there are funds who buck just about every trend you can think of.

I agree, but so far we have found no one willing to help in this way.

It’s up to you to make the judgement call - it’s not that hard to predict what VCs would want your product to become if they get involved, and it’s up to you to decide if that’s the direction you want to take for your vision. If what you want to do is incongruous with what you think the typical investor would want you to do to get their ROI, then bootstrapping might be valuable. Or you know you could be more deliberate in your search for investors (just be sure they are not saying something today with other intentions for tomorrow).

> Giving everybody equity on the same terms as the founders

Do most employees want the sort of high-risk, high-reward equity that founders have? I would think employees wouldn’t want to have so much risk, especially because they don’t control the company.

Really enjoyed reading. This also resonated with me as a bootstrapped founder.

Definitely, an MVP of a broader vision might get a "who cares" reaction. However, how much time/money will it take to get to the broader vision? There's no simple answer.

Great read, thanks for sharing. Particularly reading about founder stress is cathartic.

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