The Genius of Starting a Company Without Outside Capital

It can work. As a young engineer I started a primarily-software business in the early 90's and was too independent and unsophisticated to even consider outside investment. Honestly I wouldn't have known where to start - there was no public internet yet. I did however bring in a trustworthy partner with a completely different set of innate skills to complement mine. Both of us worked hard, used credit cards when we needed to but had to make money all along the way, followed the demand to design our products, grew the business and finally sold it when the dot-com era was peaking. Even though we weren't really a dot-com, money was flowing freely then in many areas around it. I was old enough to remember the housing boom/bust of the S&L era and I was betting the dot-com era was unsustainable too. There is always luck involved to some extent and it was a white-knuckled ride but in hindsight the worst case outcome was corporate or personal bankruptcy and we were young and would have had plenty of time to recover. I know others who have similar stories.

There are loads of profitable bootstrapped companies. Not taking outside investment can definitely slow your growth, but you own it 100% and can dictate the direction that you are going in. You also don't get some of the pressure that funded companies sometimes get. I know a number of seriously successful companies that were started without funding or investment - many of them are quietly getting on with making money :)

The software equivalent of this would be the proverbial jackpot. A project a few guys could hack together in a few weeks that generates huge cash-flow relative to invested time, which is trivially scaled, and which needs no future growth so those founders could trivially sustain it. Such ventures are usually fad-centric and unsustainable, from what I've seen.

At some point, they'll likely have to scale out scope and then need to hire people, but would anyone really want to work for a jackpot start-up that doesn't offer any equity, even if the salary is competitive?

I don't think I'd want to work for people who kept all the equity for themselves and are necessarily making off like bandits with business value I generate. I feel this is a recipe for extremely high turnover in the software world.

But hey, that's me. What do I know?

This is nothing about the genius of bootstrapping a company. It is just a play on the profiled company's brand name and their story (which is commendable), but the headline was a bit misleading IMO.

I thought this might be a story about a worker-owned cooperative ... but it looks like it's just a few founders who brought their own money into the business (not uncommon) and who are now looking for outside capital (also not uncommon).

Unsurprisingly, at least to those who follow craft brewing, "contract brewing" is one of the ways to start a brewing business at relatively lower risk (with the other being "brew pubs"). (This is according to various books, such as "Brewing Up a Business" (by Sam Calagione of Dogfish Head Brewery) and "Beer School" (by Steve Hindy and Tom Potter of Brooklyn Brewery), as well as conversations with contract brewers.)

To the "beer geeks", there's seemingly an ongoing debate whether a contract brewery is a "real" brewery. But that's another discussion...

It really depends on the niche. This is pretty much the opposite of pg's essay about startups and growth from a couple of months back. Unless you're already exceedingly wealthy it will be very, very, VERY difficult to sustain the growth needed to succeed solely on scale (aka a "startup"). If you're self-funding then you'll have to succeed on other merits besides growth. This is neither good nor bad, it just means that you're a lot less likely to hit a grand slam.

$35k is not a trivial sum for recent college grads. That can pay rent for two years. Really the hardest part is paying your living expenses.

Makes me Happy to see bootstrapped companies working

Deep down inside, even though the venture-backed guys get all the glamour. Everyone really has envy for the bootstrapped company that had exponential revenue curves and never took outside investment. It's almost impossible to find those types of companies though.

I don't know how "genius" this is, but if you want to spend some money to "look more like a real startup" you are definitely going down the wrong path.