15 ms·

The issue is one simple item: "When you take someone's money, their priorities are now your priorities" If you can bootstrap your business with 30k and make a

The issue is one simple item: "When you take someone's money, their priorities are now your priorities" If you can bootstrap your business with 30k and make a 20k profit every month, then why do you need 1 million dollars from investors? When you take the money, it's just a golden handcuff and ties you to that person for the future. If your business lasts longer than 20 years, that may as well be an additional marriage with kids.

aub3bhat 10y ago
Because your competitor can raise those million dollars, and eventually your 20k profit per month becomes 20k loss per month. You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.
- vtlynch 10y ago
  This is simply not true. Perhaps its significantly more true for certain industries - especially Saas and similar software. But even then it is no rule.
- danieltillett 10y ago
  I run a bootstrapped SAAS business and I make far more than $20K a month profit and have done so for years. The key is choose a niche that is large enough to make the level of profit you want, but too small to attract VC funded competitors. The sort of market size you want is in the range of $5 to $20 million per year. Big enough to be worth the hassle, but too small to attract the big guys.
  - meddlepal 10y ago
    This. There is always a niche. Some people just don't want to use the other offerings for XYZ reasons.
  - CardenB 10y ago
    What's your point? Twitter isn't in that niche, obviously.
    - frankydp 10y ago
      I would suggest that Twitter is a niche. It is in a brand management and customer engagement niche, and without some giant platform change, I think that trying to profit by increasing the number of eyeballs is always going to be challenging to the bottom line if the business value does not dramatically increase. The noise in twitters ecosystem from all those users, while interesting and good for research data sets, will eventually be a counter business/profit feature. The value proposition for users, in my mind, has been access and audience, but the value should have been focused on authoritative sourcing and customer recovery/engagement as soon as they took outside investment. Not disagreeing or anything your comment just brought this to mind.
      - aub3bhat 10y ago
        Twitter a billion dollar company, a social network used by presidential candidates and tens of millions of people is a niche?? Do you understand the dictionary meaning of the term "niche" if anything Twitter is opposite of it.
        gaius 10y ago
        The entirety of Twitter is a subset of one feature of Facebook - that's why its referred to as niche.
        optimuspaul 10y ago
        features don't make it niche, user base does and twitters user base is anything but niche, it's potentially the connected whole world.
- fuqted 10y ago
  No imagination necessary, check out Basecamp. I believe they've actually cut their freemium offering recently. Slack hasn't put them out of business yet.
  - Xylakant 10y ago
    Slack and Basecamp are fundamentally different tools. I use both on a daily basis and they are not interchangeable. I also can't remember a freemium model on basecamp either - it's been a paid service ever since. They did change their pricing structure when moving to BC3, so now it's mostly flat and not tiered by team size and resource consumption.
    - fuqted 10y ago
      Read the parents. Twitter and other social media are fundamentally different; most product businesses are going to give a different offering. The guy is saying that competition in the space will steal eat your lunch for you if you don't take investor money, and that's just not true. I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.
- throwaway761hh 10y ago
  I own a business that grew 10% per year for quite some time, making way more than 20k per month in profit for many years. I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.
- edoceo 10y ago
  What if that competitor buys you to grab your market share? Or, who funds the freemium one? Investors who push that company too far too fast, so your paid model could outlast another flash in the pan.
  - aub3bhat 10y ago
    "Markets can stay irrational longer than you can stay solvent"
- trevelyan 10y ago
  This is a bitter comment, but it's so very true. The only thing I disagree with is the assumption that this is just a problem for companies that want to scale or - as someone commented down below - businesses that are "only" worth a few million a year and are presumably too small to attract VC attention.... Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital. Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.
  - k__ 10y ago
    > This is a bitter comment, but it's so very true. Only partly. I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.
- makomk 10y ago
  Then the investors will get tired of subsidising the other company, it will get more and more user-hostile and quite possibly run out of money altogether and shut down, and users will be worse off in the long run.
  - aub3bhat 10y ago
    Oh yeah and eventually Diaspora will overtake Facebook. Oh wait... If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
    - forgetsusername 10y ago
      But before that it made its founders billionaires and several employees millionaires. Without ever earning a penny in profit for its shareholders. What a system!
    - bandrami 10y ago
      If the VC model did not work it would have simply gone out of business. It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.
    - cabinguy 10y ago
      The VC model works best for the VCs. Sure, a few entrepreneurs win too, but the model expects way more failures than homeruns. And that's if you get to the place where you're deemed worthy of their capital. I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.
- thenomad 10y ago
  Nothing lasts forever. Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend. The claim that the model doesn't work is rather easily falsified.
- emodendroket 10y ago
  That's not necessarily true. I don't see how a microblogging service could be bigger than Twitter is.

aub3bhat 10y ago

Because your competitor can raise those million dollars, and eventually your 20k profit per month becomes 20k loss per month. You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.

vtlynch 10y ago
This is simply not true. Perhaps its significantly more true for certain industries - especially Saas and similar software. But even then it is no rule.
danieltillett 10y ago
I run a bootstrapped SAAS business and I make far more than $20K a month profit and have done so for years. The key is choose a niche that is large enough to make the level of profit you want, but too small to attract VC funded competitors. The sort of market size you want is in the range of $5 to $20 million per year. Big enough to be worth the hassle, but too small to attract the big guys.
- meddlepal 10y ago
  This. There is always a niche. Some people just don't want to use the other offerings for XYZ reasons.
- CardenB 10y ago
  What's your point? Twitter isn't in that niche, obviously.
  - frankydp 10y ago
    I would suggest that Twitter is a niche. It is in a brand management and customer engagement niche, and without some giant platform change, I think that trying to profit by increasing the number of eyeballs is always going to be challenging to the bottom line if the business value does not dramatically increase. The noise in twitters ecosystem from all those users, while interesting and good for research data sets, will eventually be a counter business/profit feature. The value proposition for users, in my mind, has been access and audience, but the value should have been focused on authoritative sourcing and customer recovery/engagement as soon as they took outside investment. Not disagreeing or anything your comment just brought this to mind.
    - aub3bhat 10y ago
      Twitter a billion dollar company, a social network used by presidential candidates and tens of millions of people is a niche?? Do you understand the dictionary meaning of the term "niche" if anything Twitter is opposite of it.
      - gaius 10y ago
        The entirety of Twitter is a subset of one feature of Facebook - that's why its referred to as niche.
        optimuspaul 10y ago
        features don't make it niche, user base does and twitters user base is anything but niche, it's potentially the connected whole world.
fuqted 10y ago
No imagination necessary, check out Basecamp. I believe they've actually cut their freemium offering recently. Slack hasn't put them out of business yet.
- Xylakant 10y ago
  Slack and Basecamp are fundamentally different tools. I use both on a daily basis and they are not interchangeable. I also can't remember a freemium model on basecamp either - it's been a paid service ever since. They did change their pricing structure when moving to BC3, so now it's mostly flat and not tiered by team size and resource consumption.
  - fuqted 10y ago
    Read the parents. Twitter and other social media are fundamentally different; most product businesses are going to give a different offering. The guy is saying that competition in the space will steal eat your lunch for you if you don't take investor money, and that's just not true. I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.
throwaway761hh 10y ago
I own a business that grew 10% per year for quite some time, making way more than 20k per month in profit for many years. I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.
edoceo 10y ago
What if that competitor buys you to grab your market share? Or, who funds the freemium one? Investors who push that company too far too fast, so your paid model could outlast another flash in the pan.
- aub3bhat 10y ago
  "Markets can stay irrational longer than you can stay solvent"
trevelyan 10y ago
This is a bitter comment, but it's so very true. The only thing I disagree with is the assumption that this is just a problem for companies that want to scale or - as someone commented down below - businesses that are "only" worth a few million a year and are presumably too small to attract VC attention.... Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital. Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.
- k__ 10y ago
  > This is a bitter comment, but it's so very true. Only partly. I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.
makomk 10y ago
Then the investors will get tired of subsidising the other company, it will get more and more user-hostile and quite possibly run out of money altogether and shut down, and users will be worse off in the long run.
- aub3bhat 10y ago
  Oh yeah and eventually Diaspora will overtake Facebook. Oh wait... If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
  - forgetsusername 10y ago
    But before that it made its founders billionaires and several employees millionaires. Without ever earning a penny in profit for its shareholders. What a system!
  - bandrami 10y ago
    If the VC model did not work it would have simply gone out of business. It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.
  - cabinguy 10y ago
    The VC model works best for the VCs. Sure, a few entrepreneurs win too, but the model expects way more failures than homeruns. And that's if you get to the place where you're deemed worthy of their capital. I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.
thenomad 10y ago
Nothing lasts forever. Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend. The claim that the model doesn't work is rather easily falsified.
emodendroket 10y ago
That's not necessarily true. I don't see how a microblogging service could be bigger than Twitter is.