How long can you survive on bootstrapping?

Hi everyone. I'm looking for some advice from fellow startup founders/alums about taking the leap from releasing your prototype into the wild to scaling your userbase and product. I'm a single founder of a Boston-based mobile app startup – the product is released, we continue to iterate and build further enhancements, our userbase is excited and giving constructive feedback, etc. We've reached the point where we are receiving interest from companies to buy the app or discuss licensing deals, but interest from local angels is basically non-existent at this point. I quote from one VC: "idea is a feature, not a company".

Here's the problem: I'm completely broke. For this startup, I chose the bootstrapping route. I plunged most of my savings and used credit cards to work with an offshore team and received investment from friends and family to make it past the prototype stage. My development team is willing to take an equity stake to improve the product, but server costs are expensive. Our userbase increased 20x when I dropped the app to free 1 week ago. I cannot afford to pump in $30-40 a day to pay for server costs.

The acquisition talks are positive (it would be a very small exit), but I'd really like to work on building out a company here. Is there any option other than an angel round to make it to the next stage? Would licensing the app to other companies be a detriment in future financing rounds, if we ever make it to that point?

Actually, you should have named this 'how long can I survive on bootstrapping'. It seems as though your answer is 'not much longer' at your current trajectory.

So you need to change something.

It sounds like you couldn't afford to release a free version, with all the costs involved. So don't. Stop releasing the free version. Think of a price you would be comfortable charging for it.

Now double that price. Chances are you undervalued what people might be willing to pay for your application. You have a growing user base, but most unfortunately if it grows too much you'll just be out of business that much sooner.

Sure, it wouldn't hurt to keep talking about acquisition. The beauty of that is in most cases these talks take forever, so you have plenty of time, and can always back out or tell them you'd like a few more months. The downside to this is they might just wait until you run out of money, and then whatever small amount they were offering you will become surprisingly smaller. When they have a meeting about whether to acquire your product or not one of their strategies is going to be 'let's wait and see what happens in the next couple months'. It's only to their advantage.

And at least give us the link so we can let you know if we would pay for it! Your company is failing, this is not the time to be discreet.

Thanks for your reply, Jacques. This was helpful.

We released on GAE and we're also using Amazon SQS. At our peak load, we were getting over 1.5-2k users streaming in during the initial price drop. CPU Time was our biggest drain: we've combined instant messaging with a local and global search option which eats up resources fairly quickly. I was very surprised at GAE server costs given a userbase that is The VC approach was for seed-stage capital (~100k) - I found a few "programs"/funds targeting early stage companies. Basically, I'm looking for a business angel that could assume a mentorship role and provide some "smart capital" at this point to scale.

Thanks for your well thought out comments, cmos. And I apologize for not including the link in the original posting!

http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewSoftwa...

+1 to dropping the free version.

It sounds like going the free route was a mistake. Bootstrapped startups have to charge something to somebody, and you-pay-me-for-my-product is a time tested way of doing it.

As for the rest, you need to tamp down your costs. $30/day is extremely high for a bootstrapped, no-revenue startup. Find a way to cut this down. Based on your comments about GAE and SQS, see about moving to a standalone VPS (Slicehost or whatever) and running your own ActiveMQ server, probably on the same machine. It's hard for me to imagine a web app w/ less than 10k users needing more than a single big VPS.