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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

#141

Post by titanomachy »

holoduke wrote: post #132
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…

No way that 7, 15x is realistic. From my previous 2 startups none were sold for more than 4x. And these were healthy growing +10m businesses. I am not sure where you got those numbers from. I am curious.

Why sell a healthy growing $10m business for 4x earnings? Did you have debt to service, or just wanted to do something different, or some other reason?

Re: My sixth year as a bootstrapped founder

#142

Post by mtlynch »

JonChesterfield wrote: post #123

Their tinypilot kvm works. It's in the category of boring infrastructure - I leave it plugged into whatever machine is currently in need of attention and ` https://tinypilot/ ` connects to it. Little box hanging off the PoE switch, much less bother than plugging a keyboard and monitor in. Especially so when I'm away from the office. Recommended. Saved me a lot of hassle. Thanks for the product! I'd like to be able to…

Thanks for the kind words!

Yeah, power cycling is one of our top requests and a feature I'd like to have personally.

If we just plugged into the ATX pins on the motherboard, that would be technically pretty straightforward, but it increases the work and expertise that end-users have to have. I've looked into something like a smart plug, but then users need to configure their BIOS to always power on when power is available.

Definitely on my list of considerations for Voyager 3.

Re: My sixth year as a bootstrapped founder

#143

Post by gnicholas »

csa wrote: post #140
awhitby wrote: post #94

Earlier quoted context omitted.

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 t…

> right now the business has a profit, and therefore a valuation, closer to zero You’re thinking of this like an engineer rather than a business person. 1. When selling a business like this, the $236k would be called SDI or SDE (seller discretionary income/earnings). 2. The buyer determines what, if any, of that SDE will need to go to paying someone to do what the seller does. These duties could be assumed by the buy…

GP does not suggest a valuation of zero. GP says that the profit and valuation is closer to zero. It is not crystal clear if this means "closer to zero than it is to $236k" or "closer to zero than $236k is" (i.e., less than $236k). The second is undoubtedly true.

The first may also be true, but would depend on the cost at which the labor can be outsourced reliably, and what oversight would need to be done of these outsourced activities.

Re: My sixth year as a bootstrapped founder

#144

Post by gnicholas »

avinoth wrote: post #115
awhitby wrote: post #94

Earlier quoted context omitted.

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 t…

Valuing a profit-generating business that's making $1m in revenue as zero is reductive. Valuation of business isn't necessarily determined by profits (perhaps for commodity businesses), It's just one of the metric. This is a business that has strong operations, product, assets, and IP, honestly quite surprised with this take. Also, a nit fwiw, you automatically assumed the entire profit of the business is the market…

We don't know that it is profit-generating, since the author doesn't take a salary. As for the assumption that the profit would be soaked up by the market salary for the founder, the fact that he's a former Google engineer or whatever is a pretty decent indication that this is true.

I would agree that most people would take some job flexibility/autonomy in lieu of part of their bigco salary, but my guess is that this particular Xoogler would be making well more than $236k (including stock) if he had stayed at Google.

EDIT: that doesn't mean he should have stayed at Google, just that his market salary would very likely soak up all of the profits this year. If he can keep up the growth (and ramp down his hours), then it would be clearer that the enterprise could throw of cash even after paying for all the labor.

Re: My sixth year as a bootstrapped founder

#145

Post by mtlynch »

theusus wrote: post #18

How did you manage stress/depression during the time? I am thinking of going down the same path. Which tools do you use for sales and marketing?

Thanks for reading!

>How did you manage stress/depression during the time?

I don't think I ever reached the point of depression, but I definitely had bouts of severe stress and anxiety about the business.

Some things that helped me were:

- Having a supportive partner

- Forming a meetup group and talking to other founders who have had similar struggles

- Committing to a work schedule where I'm working or not working and avoiding looking at work things during non-work hours

- Separating my work email to a whole separate account and disabling push notifications so that work doesn't intrude into my non-work hours

- Using a GTD-style to-do list so I'm not carrying around a mental task list

- Starting my day by sketching out my schedule in 30-minute blocks so I have a good idea of what's achievable that day

- Scheduling time to exercise 3-5 times/week

- Reading Dale Carnegie's "How to Stop Worrying and Start Living." Carnegie books are all kind of hokey-sounding, but I find some of his lessons really effective.

Re: My sixth year as a bootstrapped founder

#146

Post by RowanH »

holoduke wrote: post #132
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…

No way that 7, 15x is realistic. From my previous 2 startups none were sold for more than 4x. And these were healthy growing +10m businesses. I am not sure where you got those numbers from. I am curious.

It really depends on a bunch of factors, if you've capped out your total addressable market, and/or there's no fat to cut out of the business (i.e. potential is limited) lots of competitors etc, then a low valuation is reasonable.

But if you're growing, have big upside, and can be a rollup or been operating quite inefficiently 4x would be ridiculously low.

Re: My sixth year as a bootstrapped founder

#149

Post by gridspy »

boplicity wrote: post #62
abfan1127 wrote: post #10

Earlier quoted context omitted.

in what sense is it getting worse? While there may be local minima, I'd argue that its the best its ever been. News has always been pessimistic because negative emotions are easier to trigger to drive attention which pays the bills.

We've already passed the 1.5 Degree Celsius limit on global warming. That alone has catastrophic consequences. Yet, the production of fossil fuels remains near record levels, and producers are aiming to scale up, as opposed to scale down. Political discourse on this topic often amounts to "but my expenses are already too high." For many people, this is still an abstract and slow moving problem. Yet, it is a very real…

We've been over-polluting with CO2 for over a 100 years[1]. I prefer to focus on how now we're slowly gaining the will and the way to address that.

- Solar and wind power

- New Nuclear options

- Grid Storage

- Electric vehicles

It would be nice if we'd done a hard left turn on the economy and somehow never got here but that was probably never realistic.

[1] https://xkcd.com/2889/

Re: My sixth year as a bootstrapped founder

#150

Post by robocat »

Aerbil313 wrote: post #60
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…

> …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. Muslim here. I think this is completely immoral and I don’t want to ever participate in stock market if/when I found a company. I want my business to be valued with the actual value it provides to people (the amount the…

> immoral and I don’t want to ever participate in stock market

I feel that is a common opinion amongst people that haven't started a business. It is too easy to judge others.

If you are selling a product/service you can't avoid becoming part of the capitalist system and you are supporting "immoral" companies through your suppliers (e.g. paying Google for advertising, paying Amazon for fulfilment).

It is difficult to start a business and keep true to your ideals. And people that do walk the line between creating a business and keeping their morals is uncommon enough that they tend to be remembered for it e.g. Bob's Red Mill: https://news.ycombinator.com/item?id=39366542

It is much easier to be tritely moralistic if you don't start a business. I often really admire people with idealistic values - and morality is critical in business. I don't admire people if they go to negative extremes: https://en.m.wikipedia.org/wiki/Splitting_(psychology)

Almost by definition starting a business means taking on risks. Mixing risks and money is "gambling" and it is an inherent property of businesses. Deciding what is good gambling and what is bad gambling is a very old problem. Buying insurance is reducing risk (less gambling) but insurance is gambling by definition. Unfortunately you have chosen the moralistic word "gambling" to talk about the normal issue of managing risk.

Perhaps you just don't like the rich? One can have shares and own a business without being/becoming rich - you don't need to directly involve wealthy people.

One can bootstrap a company without taking rich-peoples investments - see article. Unfortunately we get hoodwinked by the success stories from the VC investment sector. We hear less about the losers in the VC game or other ways to play the game of business.

Edit: a business is just a complicated machine. If you believe selling a product is moral, then you must believe that selling a business is also moral.

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