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

As others have pointed out, a $10 million exit will tend to require a lot more man hours and dilution for a much lower effective hourly rate

But even if we take your figures, assuming like the original question that you actually need the money, you're choosing between giving away time or giving away equity.

Assuming that delaying a couple of months doesn't diminish the value of your $10 million exit, then giving away even a only couple of percentage points in equity instead is giving away the difference between the ramen money and $200,000 in five years' time; that's the nominal gross return to the investor if you succeed.

Taking it further, if you take a ~$20,000 investment for ~5% of the company to save you ~200 billable hours of contract work at ~$100 per hour, in the event of a $10 million exit the opportunity cost of giving away equity instead of contracting (without any additional funding it's approx $500,000-$20,000 in this example) will have most likely been well in excess of $1000 per hour.

That's why people's chief motivation for joining incubators is seldom the seed money.

Years / 2000? I recall `yearly_salary / 2080 = hourly rate` for 8 hours / 5 days. I think running a start up typically takes more than a 40-hour work week.

I've been doing this for the last three years or so -- I wanted to launch a startup but realized it just wasn't the kind of startup you could bootstrap as a side project (i.e., without significant financing). I had already written almost all of the code needed for an initial launch.

I started my consulting business to provide income that I could divert to the startups I wanted to do, but so far it hasn't provided enough excess to allow that. So, that's the potential downside: if you aren't careful, you can become a consulting company where consulting is your primary activity and there's no time or money left for starting up. I think PG has mentioned this too.

I don't think it's an altogether bad way to run things, though. It eventually comes together in many cases and you don't have to worry about pitches, sneaky or uncouth investors, diminutive equity, etc. Investors can really be dangerous and I think a lot of people take investment without understanding the potential consequences.

I knew a major local investor on a somewhat personal level and I've developed a deep distaste for him. I don't believe that he operates ethically and I want my businesses to stay as far away from him as possible. He is dangerous and sneaky, and I believe many investors are.

Bootstrapping yourself as a consulting company first and using excess income to finance startups is a viable concept and I think more people would be wise to consider it. It provides a lot of good experience in the technical and business side of things, and you have to do what you can to stay afloat.

There are two rules we're using at Steam Clock that are keeping this problem at bay as we bootstrap with consulting:

(1) 50% of our time should be spent on our own products

(2) If we're spending more than 50% on average on client work, we either raise our rates or turn away the least reasonable clients

If you can't pay your bills with the above formula, there are two options:

(1) Promote yourself more, increasing demand and letting you raise your rate

(2) Cut your costs

It's simple, and has worked well for us.

To me, that's not "bootstrapping" -- that's "founders funds." Bootstrapping, to make sense, means that you go cash flow neutral ASAP and then grow the business organically.