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As others have noted, this is addressing a different type of business than PG was talking about. The author is talking about bootstrapped businesses. There are

by graeme 11y ago

As others have noted, this is addressing a different type of business than PG was talking about. The author is talking about bootstrapped businesses. There are many niches where a well run business can earn revenue of $100,000-$500,000 per year, and be ably run by a single person. These niches do require upkeep, but they are not so likely to be invaded by major competitors or large companies. The returns are too small. However, the returns are excellent for a single founder. It is also true that it's easier to scale such a business than it used to be. So there is probably more bootstrapping potential than before, especially as more people move online and there are therefore more niches to fill. But this approach also rules out many types of businesses, and with rare exceptions it rules out larger revenue streams. These are among the trade offs.

eloff 11y ago
A bootstrapped business does not have to be exclusive with larger revenue streams. Guy Kawasaki says that he's seen many more businesses die because they tried growing too fast (e.g. using VC money to scale the company) than because they grew too slow. Joel Spolsky is famously a critic of the SV VC-based model as well. He put his money where his mouth is with Stack Exchange, which only recently raised VC money. He says the obvious, that if take things as far as you can without VC money, then you get better terms when/if you finally do take it. There are a bunch of companies, especially those with strong network effects like social companies, that face a very real risk of growing too slow. There are others, especially hardware companies, where the startup costs are high. So the bootstrapped model is definitely not for everyone! I think it's best to stay small and agile until you've found a strong product-market-fit that can the company can be scaled up into. You may or may not need VC money during that stage. When your biggest problem is you lack the resources to scale up as fast as your real product demand, then you should be looking for VC money (or a alternative financing like a loan.) Before then it may well do you more harm than good.
- graeme 11y ago
  Oh, to be clear I meant a solo bootstrapped business. I think that's what the original article was talking about. Certainly a bootstrapped business with employees can grow quite large. (You can go higher solo too of course, it's just not common)
  - eloff 11y ago
    PlentyOfFish was the biggest example I can think of, but companies like that are very rare. It's also strange. If you have a successful company, why wouldn't you try to grow it and hire employees? Maybe if you're more interested in keeping things simple than in making more money.
    - graeme 11y ago
      >Maybe if you're more interested in keeping things simple than in making more money. Yup, that's exactly my own motivation. I've set mine up to run fairly automatically. Obviously it needs oversight and growth. It just doesn't need them right away. So if I want to take a couple weeks off, I can. And I don't have to hold that many details in my head/when working I can hold more longer run details in my head. I value that more than earning a very large amount of money. This is a good article laying out hte mindset behind this. The four freedoms are the main consideration: http://www.jackkinsella.ie/2014/04/24/on-passive-income.html http://www.jackkinsella.ie/2014/04/24/on-passive-income.html You can do quite a lot while keeping all four, but it has some obvious tradeoffs at higher levels of business.
      - eloff 11y ago
        Sure, that's valid reasoning. If your goal is optimizing your personal happiness, you don't need that much money. The extra stress will easily compensate for the extra money and you'll be worse off. But a word of warning, make sure it's not because you're afraid of taking things to the next level. Adding employees (rising costs) and moving into more of a managerial role is something many engineers are afraid of on some level. Additionally, all humans are afriad of change to some degree. Make sure you really understand what motivates you. </armchair psychologist>
        graeme 11y ago
        Heh, not an engineer. And I do use contractors. For me it's really about those four freedoms.

by graeme 11y ago

eloff 11y ago

A bootstrapped business does not have to be exclusive with larger revenue streams. Guy Kawasaki says that he's seen many more businesses die because they tried growing too fast (e.g. using VC money to scale the company) than because they grew too slow. Joel Spolsky is famously a critic of the SV VC-based model as well. He put his money where his mouth is with Stack Exchange, which only recently raised VC money. He says the obvious, that if take things as far as you can without VC money, then you get better terms when/if you finally do take it. There are a bunch of companies, especially those with strong network effects like social companies, that face a very real risk of growing too slow. There are others, especially hardware companies, where the startup costs are high. So the bootstrapped model is definitely not for everyone! I think it's best to stay small and agile until you've found a strong product-market-fit that can the company can be scaled up into. You may or may not need VC money during that stage. When your biggest problem is you lack the resources to scale up as fast as your real product demand, then you should be looking for VC money (or a alternative financing like a loan.) Before then it may well do you more harm than good.

graeme 11y ago
Oh, to be clear I meant a solo bootstrapped business. I think that's what the original article was talking about. Certainly a bootstrapped business with employees can grow quite large. (You can go higher solo too of course, it's just not common)
- eloff 11y ago
  PlentyOfFish was the biggest example I can think of, but companies like that are very rare. It's also strange. If you have a successful company, why wouldn't you try to grow it and hire employees? Maybe if you're more interested in keeping things simple than in making more money.
  - graeme 11y ago
    >Maybe if you're more interested in keeping things simple than in making more money. Yup, that's exactly my own motivation. I've set mine up to run fairly automatically. Obviously it needs oversight and growth. It just doesn't need them right away. So if I want to take a couple weeks off, I can. And I don't have to hold that many details in my head/when working I can hold more longer run details in my head. I value that more than earning a very large amount of money. This is a good article laying out hte mindset behind this. The four freedoms are the main consideration: http://www.jackkinsella.ie/2014/04/24/on-passive-income.html http://www.jackkinsella.ie/2014/04/24/on-passive-income.html You can do quite a lot while keeping all four, but it has some obvious tradeoffs at higher levels of business.
    - eloff 11y ago
      Sure, that's valid reasoning. If your goal is optimizing your personal happiness, you don't need that much money. The extra stress will easily compensate for the extra money and you'll be worse off. But a word of warning, make sure it's not because you're afraid of taking things to the next level. Adding employees (rising costs) and moving into more of a managerial role is something many engineers are afraid of on some level. Additionally, all humans are afriad of change to some degree. Make sure you really understand what motivates you. </armchair psychologist>
      - graeme 11y ago
        Heh, not an engineer. And I do use contractors. For me it's really about those four freedoms.