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My sixth year as a bootstrapped founder

mtlynch.io

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Re: My sixth year as a bootstrapped founder

#91

Post by CodeWriter23 »

chaosprint wrote: post #81

This is a really informative and inspiring article. It has been 6 months (not 6 years) since I quit my full-time job as a Rust developer to start my own business. As time goes by, I can feel the pressure of mortgage and car loans, and I can also feel the care and pressure of my family. My original plan was to make a new IDE for Glicol ( https://glicol.org ), and to develop relevant hardware with firmware written in r…

A deceased friend and I tried something like glicol in the mid-80's. We hacked a different crystal oscillator on a Zilog SCC board design donated by our employer to make a MIDI interface. My friend coded 'lxm', Language for the eXpression of Music. My job was to 'mxl', Musically eXpressed Language - to capture from the Juno 106 we were developing with. We weren't able to market it at that time. For your project, maybe find a US-based partner, there are plenty of Magnet and Charter Schools that can independently develop curriculum for non-core subjects. A possible way in is to find ones with a PTO (not PTA), the parents can drive this sort of thing. PTOs are independent corporations that serve one or a few schools whereast PTA is a top-down org and they are not the place to try to drive innovation IMO.

The way I think about investors, they are an extremely high interest loan. I have a money partner in my startup, I negotiated his equity down to 70% from the 80% he wanted. So if this product hits (already have a regular customer) and makes a million, he'll get $700K for investing less than $100K. I'll get $300K for investing probably about $300K worth of my own time and hand half of that to the IRS. Balance that with keeping 100% of $0 = $0.

Re: My sixth year as a bootstrapped founder

#92

Post by spencerflem »

mym1990 wrote: post #85
DanHulton wrote: post #73

Earlier quoted context omitted.

Friend, you're not going to get anywhere in life by being a disciple of Whataboutism, I promise you that.

You are not my friend, so let's not pretend. My response had nothing about whataboutism, and I am skeptical that you even know what that means based on your reply. I am directly saying that you are speaking from a high moral chair, while likely not actually doing anything to help the world. Its okay, I do the same thing, the difference between you and me is that I am not pretending to be Gandhi. Oh here is a definiti…

I think you two agree more than it seems.

You are allowed to be sad about the world without helping it get better, which the parent never implied they were. They're just agreeing with you that things are bad, assuming they work in tech they're probably just as conflicted about it as you or I am, so the attack felt kinda out of left field and unrelated to the original debate, which is whether things are getting worse in general.

Re: My sixth year as a bootstrapped founder

#93

Post by tgtweak »

bad_good_guy wrote: post #72
tgtweak wrote: post #51

I think people (and the founder) are focusing on yearly profits as their remuneration and comparing it to a salary... but the reality is you're creating a company that should be valued (and eventually sell) for 7-15X Earnings - and you really should be looking at that increase in value vs your increase in profits. In reality your net worth went up by over $1.5 million in the last year, in addition to earning 236k - t…

Why should a company be assumed to be eventually sold? What the heck is that kind of perspective. The vast majority of small/medium companies are not sold - instead they provide regular income to their owners. This sounds to me like typical toxic silicon valley startup mindset.

You don't need to sell it - you can lend against it or sell part of it.

I don't think it's a toxic mindset but a financially literate mindset.

Re: My sixth year as a bootstrapped founder

#94

Post by awhitby »

tgtweak wrote: post #51

I think people (and the founder) are focusing on yearly profits as their remuneration and comparing it to a salary... but the reality is you're creating a company that should be valued (and eventually sell) for 7-15X Earnings - and you really should be looking at that increase in value vs your increase in profits. In reality your net worth went up by over $1.5 million in the last year, in addition to earning 236k - t…

You're missing something. From the post:

> I don’t draw a salary, so the total amount I earned from TinyPilot in 2023 was $236k.

and

> Result: I worked 35-40 hours per week, a reduction from previous years, and traveled more than any previous year.

This is a person who is effectively full-time CEO of this business and whose market salary is likely at least $236k. If they sold the business, the new owners would have to pay someone else to put in those 35 hours.

Maybe the new owner could employ a less-skilled manager and pay them less, or maybe there's still lots of potential growth or room to cut costs, but that's all quite speculative: right now the business has a profit, and therefore a valuation, closer to zero.

Re: My sixth year as a bootstrapped founder

#95

Post by cjbgkagh »

r00fus wrote: post #89
bad_good_guy wrote: post #72

Earlier quoted context omitted.

Why should a company be assumed to be eventually sold? What the heck is that kind of perspective. The vast majority of small/medium companies are not sold - instead they provide regular income to their owners. This sounds to me like typical toxic silicon valley startup mindset.

So the entire point of a "valuation" is to determine the sale price, right?

Sale price is just one possible valuation. Replacement cost is another. Net present value is yet another.

Re: My sixth year as a bootstrapped founder

#96

Post by mekoka »

bad_good_guy wrote: post #72
tgtweak wrote: post #51

I think people (and the founder) are focusing on yearly profits as their remuneration and comparing it to a salary... but the reality is you're creating a company that should be valued (and eventually sell) for 7-15X Earnings - and you really should be looking at that increase in value vs your increase in profits. In reality your net worth went up by over $1.5 million in the last year, in addition to earning 236k - t…

Why should a company be assumed to be eventually sold? What the heck is that kind of perspective. The vast majority of small/medium companies are not sold - instead they provide regular income to their owners. This sounds to me like typical toxic silicon valley startup mindset.

Your question can be rephrased as why should a company be valuated?

Do you not see a point in valuating a company?

Because if you do see a point, how else will you do it without assessing how much someone else would be willing to pay to acquire it, i.e. how much would it sell for?

Re: My sixth year as a bootstrapped founder

#97

Post by HeyLaughingBoy »

bad_good_guy wrote: post #72
tgtweak wrote: post #51

I think people (and the founder) are focusing on yearly profits as their remuneration and comparing it to a salary... but the reality is you're creating a company that should be valued (and eventually sell) for 7-15X Earnings - and you really should be looking at that increase in value vs your increase in profits. In reality your net worth went up by over $1.5 million in the last year, in addition to earning 236k - t…

Why should a company be assumed to be eventually sold? What the heck is that kind of perspective. The vast majority of small/medium companies are not sold - instead they provide regular income to their owners. This sounds to me like typical toxic silicon valley startup mindset.

The vast majority of small/medium companies aren't saleable either. However, building them to be sold, even if you have no intention of selling, makes them more valuable.

Re: My sixth year as a bootstrapped founder

#98

Post by pdq »

General question when running a single member LLC: how do you determine how much to take as salary versus business profit, and how does that affect your taxes?

I'm guessing tax liability is mostly a wash, as if you are taxed as an S-Corp, you pass through the profit into personal income and pay income tax on that.

Re: My sixth year as a bootstrapped founder

#99

Post by dmezzetti »

Really nice story with great details.

I've been building NeuML (https://neuml.com) for the last few years. It all depends on the situation but if you need to replace salary, then of course cash flow is important. It can't just be about the future value, you have to live.

With that being said, I like to look at it as similar to renting vs buying a house. In both cases, there is cash flow except with buying you are also building equity.

For those interested in more about NeuML, I published this year-in-review last month: https://medium.com/neuml/neuml-2023-year-in-review-560457b97...

Re: My sixth year as a bootstrapped founder

#100

Post by chaosprint »

CodeWriter23 wrote: post #91
chaosprint wrote: post #81

This is a really informative and inspiring article. It has been 6 months (not 6 years) since I quit my full-time job as a Rust developer to start my own business. As time goes by, I can feel the pressure of mortgage and car loans, and I can also feel the care and pressure of my family. My original plan was to make a new IDE for Glicol ( https://glicol.org ), and to develop relevant hardware with firmware written in r…

A deceased friend and I tried something like glicol in the mid-80's. We hacked a different crystal oscillator on a Zilog SCC board design donated by our employer to make a MIDI interface. My friend coded 'lxm', Language for the eXpression of Music. My job was to 'mxl', Musically eXpressed Language - to capture from the Juno 106 we were developing with. We weren't able to market it at that time. For your project, mayb…

Thank you for the information.

I agree with you about VC and you are obviously more experienced as well. At that time, I just thought, try VC. Later I could understand the track they wanted me to take, and I also had other options such as bootstrapping.

But if it has to be some exponential growth and I am forced to change the attitude of exploration, that is not my original intention. I'd rather do some other business and keep open source software going.

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