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Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

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31–40 of 123 posts

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#31
> Am I being a weirdo?

Probably, but there is nothing wrong with that! Chase you own happiness, not other people's goals, if you have the luxury of doing so, which it would appear that you have.

Just maybe have a plan B ready to change your mind to if life or your own mind changes later, and you want out to pursue something else.

> Some of my more "Silicon Valley"-type friends think I'm nuts.

I'm similar with my stance on staying in a safe, slightly stagnated, salaried lifestyle, avoiding the word "manager" or similar in my job description, when people tell me I could make a lot more contacting or managing teams on larger projects. I could do those things, but if I can support my hobbies, mental health (more or less…), and other lifestyle (mortgage on small flat being paid off in a few months) and find time for those hobbies, while making enough tinkering with interesting problems in the day job, why should I lose that to chase more later that isn't guaranteed, if I don't want to take that risk?

Though with the same caveat as above: I am currently trying to adjust my skillset a bit (bringing some rotted parts back up to date) so I have wider options for escape plans should I decide I don't like (and can't sufficiently effect from within) the changes that are going on around me.

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#32
Not weird. You just gotta build a shit ton of MOATS around the product. Its not easy but its also not an unreachably hard thing to do.

I'd have MOAT as a top 3 priority, basically constantly asking myself how can I make it as close to a category of one as possible.

Put it this way, opportunity doesn't strike often so when it does its your moral responsibility to grab it and put yourself in a position of strength.

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#33

I can tell from your post that you will absolutely hate ceding control to a VC I would recommend finding a co-founder who has similar ideals but can handle the parts you don’t like doing, and has business experience. You’ll get much further without losing real control

Why do you recommend to bring the person in as a co-founder? I'm not sure if I was OP (a person enjoying solving customer problems without the pressure of going global scale), I'd like to give up so much power to someone I barely know.

Would you recommend against bringing in the business person as an employee, or as a contractor? A CEO for hire? Or maybe someone who can help with all kinds of operational stuff?

It seems like to MRR is pretty good and the project could afford one or two full time employees relatively easily (if you hire outside of the expensive tech hubs such as SV, NYC, Austin, Seattle).

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#34
The key question is asking if a choice aligns with your exit strategy for the business. Do you want to have a small entity for fun, or give up control to a more competitive business management team with differing priorities.

In general, VC money always comes with strings attached, focuses on seeing an ROI within 3 years, and founders are usually pushed out of strategic roles as policy. While self-managed small firms are more vulnerable to competition from clown factories with $54m budgets to throw at risky projects. Thus, a lucrative market position usually degrades with time... regardless of either path chosen.

VC money is often a worse deal than debt-financing growth with a bank.. due to equity value siphons. They are both usually unnecessary if you are already in a profit mode. =)

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#35
If you get outside funding, you lose control. Steve Jobs was kicked out of Apple Computer company which he founded, because it went public and sold stock and all stockholders are then owners for their shares. The board of directors, which represents the shareholders, basically fired Jobs (sidelined him I think, and he quit).

So if Steve Jobs can be fired, anyone can.

However, depending on what you want, it can be fine. Steve Jobs did have billions of dollars when it went public. Nothing wrong with cashing out, if that's what someone wanted to do. Probably without funding, 99% sure he would never have turned Apple into the huge success it is today...the most valuable company in the world.

Nobody can see the future, and maybe your $15,000 MRR goes down to $200 MRR in a year, who knows? Maybe it goes up to $30,000 in a year, who knows? Maybe if you get a VC, it goes up to $10 million MRR. Maybe they sell it to Facebook (or whomever) for $1 billion, and you wind up with $300 million, and Facebook tries to run it a year and shuts it down. Maybe the VCs just tank it after a year because they suck. Maybe with VCs, you will grow great and without them, someone bigger company will swoop in and complete hard and take all your future prospects because they market hard.. Maybe, maybe, maybe. There are a thousand scenarios.

The other thing is that taking off like a rocket ship to the stratosphere is completely different set of skills than what you are doing now, which I don't know if you have the skills to transition from where you are now to what is required to grow like hell. Maybe you might have to hire 240 people a year, 20 people a month, onboard them, fire some, know what kind of benefits to give, manage them, get a CFO because now you're making millions per month and you have to stay on top of that, you have to have meetings all the time with the VCs and other people who have nothing to do with the day-to-day running of the company, publicity, press, all kinds of stuff like that. It goes on-and-on. And to be sure, some people can do that, Zuckerberg as one example. But can you, that's the question.

Personally, personally, I would never use a VC-type thing, because fuck them. There might be a few good VCs, but there's a zillion VCs, and they all are different. Depending on the VC, they can either be hands-off or they can be up your ass every week wanting to know how their investment is going, and everything in between. They might make you go in a different direction than your vision is, just because they think what they think is better than what you think, which 100% it is NOT. Only one out of a hundred investments make money for VCs, so they don't know crap about what will work and what won't. They just play the statistics - 99 bad investments, and one that makes a billion dollars to cover the bad investments. This is how it is.

I think that if a company has a high margin product, then getting VC money is not good. You can bootstrap if you have high margins. If you have low margins product, then you need investers.

Good luck to you.

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#36
An old article by Joel Spolsky talking about this exact decision:

https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

Organic growth vs throwing investor money at every problem.

Juicy quote: "Still can’t decide? There are other things to consider. Think of your personal values."

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#38
if a VC takes 10% for $2M or whatever is appropriate at whatever valuation then as long as it is less than 50% or less than what the founder holds in shares or as long as founder shares have more in voting rights then why should the founder not take the money? They'll still be in control, no?

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#39
If you want to go this round, find someone who can help/coach you. VCs and boards, in particular, need to be adequately managed. This is no rocket science but requires some experience managing stakeholders. It’s a “game” you need to know how to play.

Re: Ask HN: Is it okay to just bootstrap it, even when VCs are knocking?

#40
Have you considered other sources of equity financing other than VC?

As you rightly identified, "VCs I've spoken to want to turn up the heat and take the business to the moon, planet-scale growth or self-destruct". This is the standard mental model within the VC industry - that only 1 in 10 of your portfolio companies need to moon in order for you to return your promised 20% IRR to your end investors. So push all your companies to either moon or implode. Taking VC cash and aiming for the moon is SV dogma hence your SV friends insta-calling you nuts. There's no doubt that this model has been responsible for significant value creation but it's certainly not the only way to create huge value.

Another category of equity investor is: individuals with cash (Angels, Family Offices). There are many within this category that are investing like VCs i.e. moon or bust. But there are also many within this category that are looking for long-term growth i.e. lower IRR with lower risk of failure. By the nature of them investing their own money, they will typically have more skin in the game than a VC and will able to provide more mentorship to you.

We took seed capital from several different sources including VC (including Founders Fund) and angel investors. The angel investors have been BY FAR the most helpful. It's the classic 80/20 - most angels are completely disengaged, a few have had a transformative effect on our company.

One more point, if you do decide to sell shares for money then do it when you are in a strong position so that you can get the most favourable control terms. There are the standard economic terms (valuation) that everyone talks about. But the control terms are just as important - be willing to take a lower valuation from an investor that is willing to have very founder-friendly terms.

And another point, you can always consider debt financing if you have relatively stable cashflows. But at the early stage this usually comes with all sorts of strings attached which is why in the majority of cases a the early stage, founder-friendly equity financing is preferable. But keep an open mind here.

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