Poll: Would your start-up bootstrap instead of raising money? • Hacker News Board

Re: Poll: Would your start-up bootstrap instead of raising money?

#11

Post by whather » Fri, Sep 09, 2011, 4:32 AM UTC

jsatok wrote: post #7

I'd rather raise money. For me, startups are all or nothing. I believe focus is critically important to an early stage startup. While splitting time between consulting and your startup gives you a broader view of the world, it spreads you thiner, and means you make less progress with your startup. I always remember that 100% of nothing is nothing. If you really believe in an idea - enough to spend time on it - raise…

Agreed that focus is critically important to an early stage startup. However, raising money can sometimes take 3-6 months (longer in some cases) and that can distract the team just as much. I know startups that have died from spending too much time on fundraising and not enough on product.

If you could spend a month on a short-term contracting gig and bring in the equivalent of a small angel round, wouldn't that be a worthwhile option?

Re: Poll: Would your start-up bootstrap instead of raising money?

#12

Post by melvinram » Fri, Sep 09, 2011, 4:43 AM UTC

wavephorm wrote: post #10

Ask yourself how much money your startup could eventually be sold for. $5 Million? $10 Million? Now divide that by the number of years, divided by 2000. For a $10M exit, working on the startup for 5 years, that works out to $1000 per hour. If you really think your startup can be sold for $10M or more within 5 years then you should think twice before taking on any contract work for less than $1000 per hour.

That's just completely faulty logic for so many reasons:

a) Future value is not equal to current value.

b) $10M exit in the future is not set in stone. It'll take longer and be more painful than you think it will be. The chances that you'll have a $10M exit are low. You're doing well if you're pocketing $1M.

c) People won't fund you for free. You're giving up a chunk of your company. At 20% of $10M, that's $2M you're giving up. If you're getting more capital, you can expect to give up more.

d) Having full control and agility is more important than most people realize unless you have some really smart entrepreneurs who are your investors guiding you.

Re: Poll: Would your start-up bootstrap instead of raising money?

#13

Post by robot » Fri, Sep 09, 2011, 4:51 AM UTC

I would try to take contracts closely related to the product. You could add that too.

Re: Poll: Would your start-up bootstrap instead of raising money?

#14

Post by jsatok » Fri, Sep 09, 2011, 4:55 AM UTC

whather wrote: post #11

jsatok wrote: post #7

I'd rather raise money. For me, startups are all or nothing. I believe focus is critically important to an early stage startup. While splitting time between consulting and your startup gives you a broader view of the world, it spreads you thiner, and means you make less progress with your startup. I always remember that 100% of nothing is nothing. If you really believe in an idea - enough to spend time on it - raise…

Agreed that focus is critically important to an early stage startup. However, raising money can sometimes take 3-6 months (longer in some cases) and that can distract the team just as much. I know startups that have died from spending too much time on fundraising and not enough on product. If you could spend a month on a short-term contracting gig and bring in the equivalent of a small angel round, wouldn't that be a…

Raising a small ($25k-100k) friends and family round shouldn't take you more than a couple weeks. I guess it depends on your startup, team and financial situation, but I feel it makes sense to take the dilution, and get going with your startup rather than putting it off while doing consulting.

Re: Poll: Would your start-up bootstrap instead of raising money?

#15

Post by fractalcat » Fri, Sep 09, 2011, 4:56 AM UTC

I have done so, am doing so and will do so again. At the end of the day, I'm a coder. If I can avoid dealing with investors and still make a good product, I will. It's hard, but at the end of the day that feeling of 'we built this from nothing, all on our own' is very much worth it.

Re: Poll: Would your start-up bootstrap instead of raising money?

#16

Post by zer0point » Fri, Sep 09, 2011, 4:58 AM UTC

Yes, absolutely. As a rule of thumb, you should only seek investment as the last resort. Also there's a big difference between business angels and venture capital. Imo too many new startup goes thru the rounds just because "it's what you are suppose to do to become legit".

Re: Poll: Would your start-up bootstrap instead of raising money?

#17

Post by mkramlich » Fri, Sep 09, 2011, 5:03 AM UTC

Needs to be a "Yes and No. I would raise money. From employers and customers. So I retain 100% of equity, take on no debt, and minimize legal bullshit and risk."

Re: Poll: Would your start-up bootstrap instead of raising money?

#18

Post by jsatok » Fri, Sep 09, 2011, 5:06 AM UTC

melvinram wrote: post #12

wavephorm wrote: post #10

Ask yourself how much money your startup could eventually be sold for. $5 Million? $10 Million? Now divide that by the number of years, divided by 2000. For a $10M exit, working on the startup for 5 years, that works out to $1000 per hour. If you really think your startup can be sold for $10M or more within 5 years then you should think twice before taking on any contract work for less than $1000 per hour.

That's just completely faulty logic for so many reasons: a) Future value is not equal to current value. b) $10M exit in the future is not set in stone. It'll take longer and be more painful than you think it will be. The chances that you'll have a $10M exit are low. You're doing well if you're pocketing $1M. c) People won't fund you for free. You're giving up a chunk of your company. At 20% of $10M, that's $2M you're…

Agreed, and chances are that you won't create a $10M company on your own. Include a reasonable ESOP, a chunk for investors, etc., you're at a lot less than $10M.

Also, building a $10M startup isn't exactly guaranteed. When you factor in the future value, expected exit, dilution and the risk, I think it'll work out to a lot less than $1000/hour. But I don't think that's such a bad thing. I'd bet if you talk to most founders, they'd tell you that they didn't start their company with a big number in their head - they started it because of passion, drive and the desire to make a difference. $1000/hour consulting doesn't equal that sort of lifestyle.

Re: Poll: Would your start-up bootstrap instead of raising money?

#19

Post by PakG1 » Fri, Sep 09, 2011, 5:06 AM UTC

But bootstrapping != contracting?

Re: Poll: Would your start-up bootstrap instead of raising money?

#20

Post by whather » Fri, Sep 09, 2011, 5:14 AM UTC

PakG1 wrote: post #19

But bootstrapping != contracting?

I suppose the term bootstrapping in the poll title could mean your startup is self funded from previous savings. But I'm referring to finding a short-term contracting gig to keep your startup afloat rather than raising money.