Ask HN: Will Bootstrapping See a Resurgence?
6 comments
Bootstrap was always around, and will always be around. It's just that they don't make headlines as much.
If it can't become a unicorn, it has to be bootstrapped. It's how the VC game works. There's exceptions, notably 500 Startups have said that they're happy with "my little ponies" ($10m or so) but there's very few who play in this space. Most VCs would consider it a failure and force the startup to either unicorn or die.
I'd say anything that can't hit a valuation of $1B or $10m is in very fertile grounds to be bootstrapped. They're too small to be VC backed and won't face all the suppression fire they'd get when competing with VCs. They're still acquirable; Android was angel backed and not VC backed then acquired for a ridiculously cheap price of $50m. That's enough money for most people to be happy with (including the angel investor).
If it can't become a unicorn, it has to be bootstrapped. It's how the VC game works. There's exceptions, notably 500 Startups have said that they're happy with "my little ponies" ($10m or so) but there's very few who play in this space. Most VCs would consider it a failure and force the startup to either unicorn or die.
I'd say anything that can't hit a valuation of $1B or $10m is in very fertile grounds to be bootstrapped. They're too small to be VC backed and won't face all the suppression fire they'd get when competing with VCs. They're still acquirable; Android was angel backed and not VC backed then acquired for a ridiculously cheap price of $50m. That's enough money for most people to be happy with (including the angel investor).
I think it is inevitable we will "bootstrapping" become more popular. Investors are sitting on a ton of dry powder and the future is uncertain. Great businesses will have no problem getting the capital they need but new business without a proven business model or first time founders will definitely have a hard time raising capital.
Additionally, a lot of money is being pooled into AI companies so if you are starting a non-AI business it could be wise to bootstrap for a while until you get some sort of traction or PMF.
We are also seeing the rise of Solopreneurs who are not taking on capital and building cash flowing businesses from day one through leveraging their skillset and expertise.
As the economy starts to pick back up and interest rates mellow out we will probably get back to the "good ol' days" of free flow capital until something else disrupts the system.
Additionally, a lot of money is being pooled into AI companies so if you are starting a non-AI business it could be wise to bootstrap for a while until you get some sort of traction or PMF.
We are also seeing the rise of Solopreneurs who are not taking on capital and building cash flowing businesses from day one through leveraging their skillset and expertise.
As the economy starts to pick back up and interest rates mellow out we will probably get back to the "good ol' days" of free flow capital until something else disrupts the system.
i bootstrapped a hw business and looking back i regret it. i thought i could raise at a better valuation later, and trusted this logic after reading about it on hackernews years ago. however what i found is that the investors i pitched once i had customers, were no longer interested because they thought the traction was too small, and they did not take into account the miniscule capital it took to get there and the impressive effort delivered. so once you have revenue that will be used as a reference. if that revenue is not astronomically large then chances are you can no longer raise and you are stuck without funding to market and sell or hire. to date i have been unable to find a solution to this problem. acquiring customers is not free. curious to hear other similar stories and potential hacks to this problem.
I suspect your best bet is to reframe your solution if the technology or market need can present a gap on a chart, as a whole new startup
e.g.
"b20000s app/standanrd $industry app": 60% success b40000: Shiny and Fancy. With AIMLGPT machines. And all. 80% success"
Basically you are probably lacking urgency and humans tend to rest a lot of assumptions on some urgency, especially for business.
At least don't start by introducing the existing business. At best say you've spent x years as a CEO/CTO etc, and pull your experience in to answer questions, as well as clarify the situation if needed.
e.g.
"b20000s app/standanrd $industry app": 60% success b40000: Shiny and Fancy. With AIMLGPT machines. And all. 80% success"
Basically you are probably lacking urgency and humans tend to rest a lot of assumptions on some urgency, especially for business.
At least don't start by introducing the existing business. At best say you've spent x years as a CEO/CTO etc, and pull your experience in to answer questions, as well as clarify the situation if needed.
I have never raised money (at least not so far) but as far as I have understood, investors don't care about the fact that you were able to acquire traction using miniscule capital. They care that you grew fast and there is a billion dollar market.
If your argument is that you grew slow bootstrapped but can replicate that 10x or 100x just by VC money, investors don't take that as a sign of strength or possible future success.
You can bootstrap but you need to show high traction to raise money from investors. Bootstrap or not.
If your argument is that you grew slow bootstrapped but can replicate that 10x or 100x just by VC money, investors don't take that as a sign of strength or possible future success.
You can bootstrap but you need to show high traction to raise money from investors. Bootstrap or not.
>> acquiring customers is not free
No it is not and you are right. In the fossil days of startups (1985 - 1995) you bootstrapped or literally built the first solution for a customer who is desperate for the solution. Oracle was launched like that. Larry was a contractor who built software for the CIA. One day Larry writes an RDBMS as defined by Stonebreaker. CIA wants information not software systems. Larry asks "can I go sell this to others, I know you paid for it all". They are like - for sure! Go for it!
After that it's pure conjecture. I think he secretly teamed up with Chuck Norris to form a late 80's Japanese Aesthetics and Cultural Appreciation group. After that he pipped Oprah to the post by giving away cars to people but I think for entireley the wrong reasons.
WebTV was launched on a $5000 cheque from a colleague. Sold 18 months later or something silly for $400m to Microsoft. Oh I will never forget the smile on Steve Perlman's face that day, lol.
But before I get lost in a Raymond Reddington anecdote -> Reframe the low revenue as "We could have had ten times that number of customer if you had funded the inefficiency in the market place and let us own it." It's kind of what Elon Musk did when ALL of his investors wanted to bury him and what they saw as a fast rising embrassment of what was Tesla. At that meeting he pretty much said "fuck it, I'l fund it and take all the upside myself." Next thing you know...no one wants to be that investor who said no.
No it is not and you are right. In the fossil days of startups (1985 - 1995) you bootstrapped or literally built the first solution for a customer who is desperate for the solution. Oracle was launched like that. Larry was a contractor who built software for the CIA. One day Larry writes an RDBMS as defined by Stonebreaker. CIA wants information not software systems. Larry asks "can I go sell this to others, I know you paid for it all". They are like - for sure! Go for it!
After that it's pure conjecture. I think he secretly teamed up with Chuck Norris to form a late 80's Japanese Aesthetics and Cultural Appreciation group. After that he pipped Oprah to the post by giving away cars to people but I think for entireley the wrong reasons.
WebTV was launched on a $5000 cheque from a colleague. Sold 18 months later or something silly for $400m to Microsoft. Oh I will never forget the smile on Steve Perlman's face that day, lol.
But before I get lost in a Raymond Reddington anecdote -> Reframe the low revenue as "We could have had ten times that number of customer if you had funded the inefficiency in the market place and let us own it." It's kind of what Elon Musk did when ALL of his investors wanted to bury him and what they saw as a fast rising embrassment of what was Tesla. At that meeting he pretty much said "fuck it, I'l fund it and take all the upside myself." Next thing you know...no one wants to be that investor who said no.
Yes. Yes. Yes. And I want to say that the next big thing amongst sane new entrepreneurs will be "Grant-strapping". Check out Rupak Doshi at TurboSBIR and AFWERX. Use Google and Linkedin. $250k cheques, equity free. No more incubators taking their cut for doing eff all.
There are SO many companies that have great products that are shut down because they are "zombies". Bullshit. They were sustainable, they had people earning money to grow their families, paying taxes to make the outside world happen.
They made one mistake. They just did not grow to the required venture size to be slaughtered by VC's and served to their friends.
Bury the tech. Bury the service. Drag down progress. I was in a startup that got offered $40m. The Investors said no, they wanted $400 Million. 3 months later. about 90 jobs lost and all that work vaporized. Customers absolutely bemused.
So bootstrapping is in. Will be big again. If folk are interested I have a ton of reading, material and resources I can share. It really is a mind over matter thing. And once you get to the stage to clearly say why you need investor money ( like if you want to do photonic pooling research and need lab equipment etc).
And actually makes more sense.
Bootstrapping forces discipline that the VC's dont want younger leaders to have. They want them to burn through cash and ask for more at a lousier evaluation so they can get more bang for their buck. And yes I witnessed that at first hand after that startup. As a programmer I should recognize patterns. Fail.
VC's are not evil people, they just do their job. Oddly they make your mom's pension funds work in many cases :-)
They should not make out that they are likeable though.
There are SO many companies that have great products that are shut down because they are "zombies". Bullshit. They were sustainable, they had people earning money to grow their families, paying taxes to make the outside world happen.
They made one mistake. They just did not grow to the required venture size to be slaughtered by VC's and served to their friends.
Bury the tech. Bury the service. Drag down progress. I was in a startup that got offered $40m. The Investors said no, they wanted $400 Million. 3 months later. about 90 jobs lost and all that work vaporized. Customers absolutely bemused.
So bootstrapping is in. Will be big again. If folk are interested I have a ton of reading, material and resources I can share. It really is a mind over matter thing. And once you get to the stage to clearly say why you need investor money ( like if you want to do photonic pooling research and need lab equipment etc).
And actually makes more sense.
Bootstrapping forces discipline that the VC's dont want younger leaders to have. They want them to burn through cash and ask for more at a lousier evaluation so they can get more bang for their buck. And yes I witnessed that at first hand after that startup. As a programmer I should recognize patterns. Fail.
VC's are not evil people, they just do their job. Oddly they make your mom's pension funds work in many cases :-)
They should not make out that they are likeable though.
Boot strapping is definitely my preferred route for many reasons including what you mentioned. I'm interested in learning more about how to use an existing userbase to create more products, pricing, and product / market fit. I'm almost done reading Monetizing Innovation and can't wait to try some of the things I've learned in the book. What else do you recommend reading?
I think one of the under-discussed consequences of generative AI will be that a single person / small team will be able to scale much more easily than before. It's very likely that a contemporary startup team of 3 people is equivalent to 10 or 20 people from a decade ago. Considering that a substantial portion of funding is typically aimed at hiring talent, this will definitely make bootstrapping more popular.
The issue is that if LLMs are powerful enough to generate a product, then at certain point, companies are just going to buy hardware to run LLMs instead of paying the "middlemen" companies who used said LLMs to make a product to sell.
Unlikely. Most businesses already do something that is possible to do by customers without the middleman. Convenience and efficiency are usually more important.
Also, re-reading your comment, I don’t really mean using LLMs to generate a product. I mean to amplify the skillset of the business. “Bicycle for the mind” and so forth.
Also, re-reading your comment, I don’t really mean using LLMs to generate a product. I mean to amplify the skillset of the business. “Bicycle for the mind” and so forth.
Interest rates are up so bootstrap is back.
So what are the second order effects we're going to see? Will bootstrapping businesses surge a bit? Something else?