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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

#101

Post by chinchilla2020 »

robertlagrant wrote: post #76
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.

> This sounds to me like typical toxic silicon valley startup mindset. I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

Not true at all. The local corner store, laundromat, and plumbing company are usually not something that can be sold easily. If they do, it takes years to find a buyer and they are getting a low sale price.

Tech startups had high multipliers in the past 10 years thanks to dumb money, low interest rates, and lot of hope. Most of those things are drying up and many tech startups that had decent valuations are now worthless.

Re: My sixth year as a bootstrapped founder

#102

Post by BiteCode_dev »

robertlagrant wrote: post #76
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.

> This sounds to me like typical toxic silicon valley startup mindset. I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

Ferrero, Mars, Ikea, Ikea and Valve prove that you can get very big and stay private.

Not everyone wants to IPO, or sell to big player.

You may want it to stay in the family, or protect the original culture. Maybe you found someone in your team that will be a great CEO.

Maybe you like that life.

You don't even need to big huge, look at 37 signal.

Re: My sixth year as a bootstrapped founder

#103

Post by creer »

robertlagrant wrote: post #76
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.

> This sounds to me like typical toxic silicon valley startup mindset. I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

Further to this, even if you don't intend to sell the company, it's only really worth something besides the salary or dividends you draw for yourself if it is generally in a condition where it could potentially sell.

If it's legally dodgy; if accounting is a total mess; if it relies entirely on personal connections or favors; if tax returns or licensing are a mess; if there is no documentation; if there is no consideration for bus encounters; etc; etc - then it would take major work before it could be sold and it is worth little until that work is done. (Besides the current payouts to the owner which only exist as long as the owner works on it.) That's because if the owner quits or is incapacitated, the company just about doesn't exist anymore.

Re: My sixth year as a bootstrapped founder

#104

Post by yieldcrv »

ttcbj wrote: post #82

Congrats! Not sure how many employees you have, but as you get into the $200-$500k owner discretionary earnings level, definitely take a look at small business retirement plans. If it is just you, or just you and a family member, you can use something like a Solo401k to defer up to $69k in earnings to retirement accounts. The “personal” side of that (like $22k) can be Roth.

I think its prudent for anyone to form a solo401k plan, you can have them attached to yourself as a sole proprietor and separately attached to a company you form

I dont have the type of income to contribute to it EVERY year, but even if you use an employer’s 401k you can roll it over into yours as soon as you leave or are eligible

solo 401ks remove all the guess work and limitations of your other employer’s random plans. you can invest in anything, not just random vanguard mutual funds, you can borrow against them instantly instead of however long the bureaucratic machinations take, you dont have to ask anybody - people that dont know the answers that they should know

and most importantly, the annual contributions are just the first step, it grows tax free and should vastly exceed your contributions. once it independently has a big enough net worth it can be an investor in private equity and hedge funds’ feeders and be ready for some large moonshot bets or losses.

but remember, if you equate retirement accounts with the least risk possible, generic advice gets generic results. its more important that it grows tax free.

not advice, just what I do.

Re: My sixth year as a bootstrapped founder

#105

Post by gnicholas »

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 are not sold - instead they provide regular income to their owners.

This is true. Most people don't want to buy and run a restaurant, bodega, hardware store, etc.

SaaS companies, on the other hand, are much more attractive to buy. They can be run remotely, often do not require many employees, and can be managed by a team that manages other companies simultaneously.

The author's company falls into a middle ground. Hardware manufacturing has certain idiosyncrasies that make it less turnkey than SaaS. But nonetheless, many of the functions (shipping out units) can be carried out by staff who are trained but not necessarily highly technical. And it sounds like the advertising has been pretty dialed in and automated (though would need to be tweaked in future years, undoubtedly).

There are some types of businesses that are hard to sell. Law firms, for example, can only be owned by lawyers! But companies like this one (and SaaS companies run by many HNers) are much more attractive for buyers.

But even if it's not ever sold, the notion of valuation is still useful because it quantifies the value of the future cash flows and the anticipated time-cost of running the business.

Re: My sixth year as a bootstrapped founder

#106

Post by chenxi9649 »

koonsolo wrote: post #64
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…

Sure, but the valuation doesn't buy you any food. In the end you need cashflow.

depends on what "in the end" means haha

Re: My sixth year as a bootstrapped founder

#107

Post by creer »

chinchilla2020 wrote: post #101
robertlagrant wrote: post #76

Earlier quoted context omitted.

> This sounds to me like typical toxic silicon valley startup mindset. I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

Not true at all. The local corner store, laundromat, and plumbing company are usually not something that can be sold easily. If they do, it takes years to find a buyer and they are getting a low sale price. Tech startups had high multipliers in the past 10 years thanks to dumb money, low interest rates, and lot of hope. Most of those things are drying up and many tech startups that had decent valuations are now worth…

> If they do, it takes years to find a buyer and they are getting a low sale price.

Is this true of standard businesses like laundromat or plumbing?

Or is it a matter of such businesses rarely being in a condition that makes a sale easy? If these are in a good condition accounting-wise for example, they should integrate readily and for a basic multiple of sales into one of the neighbors?

What I have seen is unrealistic prices - and that's another matter.

Re: My sixth year as a bootstrapped founder

#108

Post by PH95VuimJjqBqy »

mekoka wrote: post #96
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.

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?

In real estate there's this idea that if you plan on dying in your home then the value of it is unimportant.

That idea also applies here.

Re: My sixth year as a bootstrapped founder

#109

Post by PH95VuimJjqBqy »

robertlagrant wrote: post #76
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.

> This sounds to me like typical toxic silicon valley startup mindset. I think this is naive cynicism, as it were. Lots of companies are started by people who eventually want to sell them, be it after 5 years or 50. Being biased against Silicon Valley won't give you a good handle on this stuff.

then do the calculations in 5 or 50 years.

Re: My sixth year as a bootstrapped founder

#110

Post by pka »

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…

Glicol seems very cool! Looks a bit like Faust (https://faust.grame.fr), an FP sound programming language I came across recently.
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