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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
by 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 agoThis 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 agoI 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 agoThis. There is always a niche. Some people just don't want to use the other offerings for XYZ reasons.
- CardenB 10y agoWhat's your point? Twitter isn't in that niche, obviously.
- frankydp 10y agoI 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 agoTwitter 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 agoThe entirety of Twitter is a subset of one feature of Facebook - that's why its referred to as niche.
- optimuspaul 10y agofeatures don't make it niche, user base does and twitters user base is anything but niche, it's potentially the connected whole world.
- frankydp 10y agoNiche: the situation in which a business's products or services can succeed by being sold to a particular kind or group of people or a specialized market Size is not necessarily a function of the word niche it only implies that the good or service being sold targets a group that is not a majority of all of the market participants. In twitters case 3.4B users on the internet, with only some subgroup that participates on social media and then only a subgroup of that group that wishes to participate with limited post length and then, business wise, just the business niche that have a large customer base within that subgroup of internet/social media/short form. As an example BMW is a niche business, luxury auto, that had 92B in revenue last year.
- deleted 10y ago[deleted]
- lmeyerov 10y agoThis reasoning feels safe for services, and risky for software: * Big companies start small. VCs will tell startups to find something their tech can make them the best at and grow into nearby verticals. * Software goes to zero. Academia, side projects, whatever. Either you keep up, and reach some sort of scale that you have a moat, or your risk goes up.
- danieltillett 10y agoYou do have to keep working on the business and innovating. It is not a route to passive income (well not until you retire), but it a very satisfying way to build a business and lifestyle. The downside is the parties aren’t as good :(
- edoceo 10y agoSimilar story, we should be friends :) Care to comment on the work/life balance you have?
- danieltillett 10y agoWell I work hard, but I live a very good life. I enjoy my work (well most of it as I am not too keen on accounting and taxes). I get to work and live in a very nice (if expensive) part of the world so I have nothing to complain about. I can say it took me a long time to get to where I am now and I had quite a few detours along the way. I wrote up the history of my business a while back if anyone is interested [1]. Bootstrapping is certainly not the way to instant riches :) 1. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in-australia-and-why-it-was-crazy/ https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...
- sundvor 10y agoThanks for posting that; great work on persevering!
- dba7dba 10y agoLol Not enough angels but lots of devils..
- deoxy 10y agoInteresting post. As a fellow Australian (actually, fellow computer programming molecular bio BSc who went to La Trobe), I completely agree with your assessment on the Australian startup scene.
- pud 10y agoMe too. Hi. If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.
- vog 10y agoWhy this? Burnt-out entrepreneurs are failed entrepreneurs, aren't they? There's always a limit on how much time you can spend per day, and this limit is far below the time you are awake. Push it too far, and you do not only lose your working power, but also your motivation and your inspiration.
- wslh 10y agoYou are right but the problem is finding that niche, so it is a business exploratory issue. Also, $ 20k is low if you need to growth your business, even, a little bit (e.g. hire people).
- thr0waway1239 10y agoIts 20K a month in profit, not 20K a year. If you genuinely think it is hard to hire people at that point (not suggesting the GP should), then you have probably not explored all your options.
- wslh 10y ago> If you genuinely think it is hard to hire people at that point... Where? In US, SV, New York, China, Ukraine, Argentina? If you growth it can be difficult to scale without having higher profits or outside investments.
- woah 10y agoUnfortunately for Twitter, social networking is not that niche.
- fuqted 10y agoNo 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 agoSlack 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 agoRead 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 agoI 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 agoWhat 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 agoThis 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 agoThen 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 agoOh 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 agoBut 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 agoIf 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 agoThe 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 agoNothing 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 agoThat's not necessarily true. I don't see how a microblogging service could be bigger than Twitter is.