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The 2013 Startup

nickchirls.com

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Re: The 2013 Startup

#21

Post by nchirls »

yesimahuman wrote: post #20
pshin45 wrote: post #17

Anyone else get the sense that this article is, intentionally or not, a huge ringing endorsement of the YC model? I.e. much more focus on providing super early-stage startups with guidance, emotional support, and the world's best network while providing the bare minimum of capital up front (avg $17,000) to keep founders lean and mean. My only gripe with YC is that despite how successful they've been and how many copy…

I don't look at it that way. It seems YC is interested in pushing early seed stage companies to raise a big next round and become a "large, venture-backed company" (from our interview rejection earlier this spring). This "2013 startup" is something different: focus on customers and revenue instead of just raw users, and go from there. At least that's my interpretation of the concept.

I'd agree with this. YC is a wonderful program for both startups and entrepreneurs, PG is a godsend for these groups, especially in past years when seed funding was harder to come by. However, a lot of the hype now around YC often pushes entrepreneurs to raise way larger seed rounds than they need or know what to do with. This is of course not always the case, and I can think of several YC companies off the top of my head that did not go this route (even when there was investor demand for it), but on balance, YC seems to encourage founders to raise way more capital than these companies need in the early stages. Again, I think entrepreneurs are now waking up to some of the negative consequences that can result.

Re: The 2013 Startup

#22

Post by mindcrime »

lackiem wrote: post #12

We have been doing this for years and have bootstrapped all of our B2B startups (SaaS products). We have had VC's contact us and turn them away because it is not a good fit. We haven't fallen within the "ramen sense" profitability in a very long time and are comfortably profitable with employees. We simply keep re-investing profits from successful products into new products and over the years have been able to acquir…

We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round".

On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the feedback letter was something like "concerned about the commitment of the founders as they have only invested ~$5,000 to date". Um, hello... we hadn't needed more cash up to that point. It's just the two of us sitting in our homes, or coffee shops, writing code on our laptops. All the expenses we have had so far were basically: 4 Slicehost slices for various purposes (a demo server, our wiki, SugarCRM, website, etc.), a paid Github account for code, and a little bit of printing and random stuff.

So, somehow, the fact that we've run lean and been very capital efficient so far, is seen as a negative. I don't know whether to laugh or cry.

[1]: http://www.ncidea.org/content/grant+program/956

Re: The 2013 Startup

#23

Post by spo81rty »

I bootstrapped my first company the whole way and sitting here today wouldn't have changed it. It forced us to be smarter and work harder. We also had more time to figure it all out with little pressure.

Now the second time around (Stackify) it is nice to be self funded. But its easy to spend money on things that aren't always necessary. Definitely not optimizing the cash as much.

As an angel investor I prefer smaller companies who slowly figure it out and get some traction before raising money. So many people raise money to experiment if it will even work.

Re: The 2013 Startup

#24

Post by thisisrobv »

yesimahuman wrote: post #9

This is my company Drifty ( http://drifty.co/ ). We make make HTML5 dev tools Codiqa and Jetstrap. In 2012 my best friend and I bootstrapped the company while working full time (we just charged for our products). We made enough to go full time later that year and we employ one person and are hiring more. We are actually in TechStars right now (score one for great value-add seed investors), but we are saying "no" to e…

Great to see you and other companies head in this direction. If you have revenue early enough it's a game changer. Glad TechStars is supporting you in this decision.

Re: The 2013 Startup

#25

Post by mdda »

mindcrime wrote: post #22
lackiem wrote: post #12

We have been doing this for years and have bootstrapped all of our B2B startups (SaaS products). We have had VC's contact us and turn them away because it is not a good fit. We haven't fallen within the "ramen sense" profitability in a very long time and are comfortably profitable with employees. We simply keep re-investing profits from successful products into new products and over the years have been able to acquir…

We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round". On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the fee…

Perhaps you should modify the way you're accounting for your cashflow : Show that all the P&L gets dividended out, and that you then put it all back in the business. That way will show far more than $5,000 commitment on your parts. (They don't have to be literal dividends, just internal allocations to the partners, and an internal reinvestment).

Re: The 2013 Startup

#26

Post by mdda »

LyndsySimon wrote: post #8

My limited experience says this is right on. One of my best friends has been working on a startup for about two years now, focused on a B2B vertical where he has experience. It's gone well, and he's gained a handful of customers who are all very loyal to his product. He's turned down outside investment the whole time, because he didn't have a growth strategy that required capital. He saw investment as a liability, ta…

Another viewpoint : The investors that had previously wanted to invest are used to being the ones with the upper hand. Now he has a lot more negotiating power, and that doesn't suit them at all. And that should be a lesson for people that raise money early too.

Re: The 2013 Startup

#27

Post by lackiem »

mdda wrote: post #25
mindcrime wrote: post #22

Earlier quoted context omitted.

We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round". On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the fee…

Perhaps you should modify the way you're accounting for your cashflow : Show that all the P&L gets dividended out, and that you then put it all back in the business. That way will show far more than $5,000 commitment on your parts. (They don't have to be literal dividends, just internal allocations to the partners, and an internal reinvestment).

Yes! Great advice!

Re: The 2013 Startup

#28

Post by lackiem »

mindcrime wrote: post #22
lackiem wrote: post #12

We have been doing this for years and have bootstrapped all of our B2B startups (SaaS products). We have had VC's contact us and turn them away because it is not a good fit. We haven't fallen within the "ramen sense" profitability in a very long time and are comfortably profitable with employees. We simply keep re-investing profits from successful products into new products and over the years have been able to acquir…

We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round". On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the fee…

Don't let that discourage you. $5k is the average we invest on a new product launch (not including our time of course). We do however re-invest most of the sales right back into it for the first year. This approach has allowed us to grow multiple products to a very nice monthly profit within the first year. We always focus on releasing things our customers and target users will pay for though otherwise we would never be able to keep funding it.
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