8 ms·

Not raising funds to stay small and happy

267 points by antoinefink 9y ago

renegadesensei 9y ago
Totally agree with this. Been bootstrapping my own thing for a while. If it hits $5k MRR I'll be more than satisfied and probably never raise money.
roadbeats 9y ago
I also had these thoughts when I bootstrapped but the problem is not being able to hire a great team that can build something you would not be able to. If you’re all 3 single guys in 20s, enjoy 20s. When you’re married and have kids, then you’ll care about bills rather than lifestyle and retreats.
- charlesdm 9y ago
  Depends how much you're making as a bootstrapper? If $10 or 15k a month isn't able to fund your lifestyle then you'll probably have problems later in life. Also, unless you're based in the Bay area / NYC / London, hiring people generally won't cost you $10k/mo per employee. Also, no one says you can't sell your bootstrapped business. A project generating $30k in profit can generally be sold for $1-1.3m. Reinvest that, and you suddenly have great cash flow from investments in addition to any other income you manage to make from your next project. All in all, a path worth taking in life if you want flexibility and freedom.
  - AJ007 9y ago
    You can definitely make over $1m a year running a bootstrapped business. On the high end of the success scale you can walk away with more money than a successful VC backed co-founder. There are more businesses that are totally inappropriate for VC than should take VC money. The problem is everyone is equating tech businesses with VC. There are plenty of dead tech startups that actually have modest economics and would have worked if VC, and the high expenses of the top tier US talent, had been avoided. Another note, something I’ve learned more recently. Some businesses won’t make more money even if you force more capital in to them. You can end up with a really good company that can be profitable for decades, but destroy it by force feeding it outside capital (VC or other.) It is important to identify this early.
onassar 9y ago
Rarely comment, but definitely identify with this. Given HN's general focus on growth and funding, I think it's great/important for an article/concept like this to be given some reach. I find that there isn't enough critical thought given to why one ought to pursue an aggressive growth strategy. And that generally, staying small is seen as a failure to grow, rather than a conscious effort to grow in line with ones own life. Going from 3 to 100 employees in a (relatively) short period will naturally have a large impact on one's personal life and mental/emotional state. I think it's important to ask, before one ventures into that kind of adventure, whether or not you're okay risking mental/emotional (and arguably physical) stability in place of the adventure, and the potential financial windfall. There's nothing wrong with saying no to that risk. This is a short life we have, and spending it chasing growth to keep up w/ the momentum of the extremes of capitalism doesn't need to be your game ;) [edit] Prefer my last paragraph be written as: There's nothing wrong with saying no to that risk. This is a short life we have, and if you're spending it chasing growth to keep up w/ the momentum of the extremes of capitalism, it doesn't need to be your game ;)
- v_lisivka 9y ago
  Startup is aimed at growth, to become next unicorn. If your business is not aimed at growth, then it is just regular business. YCombinator is incubator for startups, hence their HN site is aimed at startups too.
  - jchw 9y ago
    I can see why YCombinator would be biased toward startups that raise funding, HOWEVER: I've always understood the word 'startup' to simply mean any new business.
    - deleted 9y ago
      [deleted]
  - onassar 9y ago
    Interesting view; I suppose if you look at HN as an extension of YC, then you're right: it would make sense that HN tends to focus/cater more to the growth/funding points of view. For me, HN has become a source of news/ideas related to innovation (with an obvious leaning towards digital/technological innovation). I guess, given how I see this community (and use it for access), it's refreshing to see an article like this :)
Allison565 9y ago
Je gagne plus de 7k $ par mois à temps partiel. Je n'arrêtais pas d'entendre les autres me dire combien d'argent ils pouvaient gagner en ligne, alors j'ai décidé d'y jeter un coup d'œil. Eh bien, tout était vrai et a complètement changé ma vie. C'est ce que je fais, ᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵwww.bosscyber.comᴵᴵᴵᴵᴵᴵᴵᴵ
Izmaki 9y ago
I was expecting more than a few paragraphs claiming that a small company is a good thing in regards to happiness and flexibility at work... oh well.
edshiro 9y ago
I also identify with the author. Tried the startup game on two occasions and got burned 2 times (one as senior engineer the other as CTO) - somehow both companies managed to sell but not at a price that made my shares worth it. I then swore I would never be an employee again and decided to join an accelerator but crashed out. Now I am freelancing and building a bootstrapped business on the side: much less headaches, I earn a good living, and get to build something I am passionate about while remaining master of my destiny. Not seeking VC money nor VC-esque returns, just a meaningful life where my work is valued and provides enough to live comfortably.
- soneca 9y ago
  May I ask what is your bootstrapped business? I am about to start one myself and I am curious about how and why experienced devs choose their ambitious side projects
  - edshiro 9y ago
    I am building a B2B platform for logistics and taxi companies to store dash cam footage and easily retrieve and annotate them (for accidents, training, etc.). We already have one interested customer, so trying to finish the MVP by January!
    - therealdrag0 9y ago
      If you're only that far how do you "earn a good living"?
- joeblau 9y ago
  I moved to SF back in 2011 and I got burned by a few startups. I remember reading HN back then and someone said the average time to become a millionaire if you were chasing startup exits was 5 years. I probably in the best position now to have a successful exit, but I'm beyond the 5 year mark. I think evaluating the viability of startups is a skill that I've gotten better at as time goes on. I've been at 5-6 failed startups (small old companies) with zero upside on exits. That being said, the time I was the happiest was when I was working for myself for about 18 months on things I was passionate about.
Mountain_Skies 9y ago
I believe it is Bhutan that measures gross national happiness in addition to GDP, realizing growth just for growth's sake doesn't necessarily increase overall happiness. Don't know how well that works for them but good for both the nation and this startup to have it as a goal. My concern in the context of the startup would be that another player would enter the same market segment and use funding to expand aggressively, eating all of my market share in the process. Even if there is plenty of space in the market for both the slow growth and quick growth startups, there is going to be a danger of getting steamrolled by the quick growth company.
- cperciva 9y ago
  Yes, you're thinking of Bhutan. But "gross national happiness" is just a propaganda exercise.
  - collyw 9y ago
    As a Buddhist nation I doubt that is the case. Its seems fairly central to Buddhist philosophy from my understanding of it. Out of interest having been chasing growth for decades I assume we are at the highest GDP measure ever, but do you assume that we are happier than ever? The opioid crisis in the US would suggest otherwise.
ig1 9y ago
Building a small boot-strapped company vs a funded company is in a large part dictated by market and product rather than by individual intention. If you try to build a funded company in a space that can't sustain one you will struggle, likewise if you try to build a small bootstrapped company in a space that can you will similarly struggle. If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level. There are some ways to compete by going after the customers your competitors don't want (if they're price sensitive, too small, wanting unusual customization, services, niche needs, etc.) but you should think about upfront what your strategy is going to be.
- shubhamjain 9y ago
  > If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level. I would disagree. If the customers are comfortable with your product, and they don't feel a big reason to switch, they probably won't. This is more true in the B2B space where customers tend to be less finicky. There are plenty of products that haven't innovated in years, but still enjoy decent sales.
  - ig1 9y ago
    Even a couple of percentage points of churn is a big deal in the long term as you have to keep replacing those customers just to stand still. If you're in a moribund space you can get away with a MVP product for a long time, but if you're in a highly competitive space where your competitors have a significantly better product and a better sales team it has a real impact. The other major factor driving churn in bootstrapped b2bs is they largely sell to SMEs who have a high-rate of insolvency.
    - amenod 9y ago
alvil 9y ago
Funding is just another form of employment (or slavery if you wish).
framestr 9y ago
I can definitely agree with this. I was developing http://framestr.com http://framestr.com (SaaS), and at the time, we had to bring on a 2nd developer and server costs were increasing (we all wanted to avoid raising funds and aim to bootstrap). Rather than raise funds, my partners and I built a small SEO business. We ended up scaling the SEO business to around $200k MRR. Having been through the financing process before for at a previous start-up, I can say that the time invested in the side business was not a whole lot different than time invested in fund raising (+ meetings, reporting to investors after the raise). By hustling, we were able to build a nice life style business, while being able to grow our tech SaaS. At the same time, we had much more flexibility and have been able to build / invest in what we want, and for what we believe is best long-term.
- cjalmeida 9y ago
  Anecdotally, Boeing built furniture for a while to keep afloat when developing it's commercial aircraft business http://www.u-s-history.com/pages/h1832.html http://www.u-s-history.com/pages/h1832.html
amelius 9y ago
> Not raising funds to stay small and happy But in this winner-takes-all reality, is that possible? If your business concept becomes successful, what prevents a bigger player to copy it, improve upon it, and steal away your customers?
- _0ffh 9y ago
  They might out-advertise you, but it's not at all easy to beat a well oiled team of three talented persons on the technical front. Just throwing money at a problem does not guaranty a superior product.
  - john_moscow 9y ago
    They can just offer an decent clone of your product for free. Given the popularity of the "grow now, monetize later" approach, investors will likely not see a problem with that.
- jasonkester 9y ago
  Because, realistically, those big companies aren't interested in competing for your little $10k/month niche. Even a million dollar a year revenue stream would be seen as a failure for them.
  - TrueSelfDao 9y ago
    The bigger player may consider the idea more valuable in their hands.
    - jasonkester 9y ago
      Your $10k MRR niche won't be "app that lets people hail taxis, and network of contract drivers." It'll be "reception table plan designer for wedding coordinators". Google is not now, nor will they ever be having a meeting where they decide to allocate a few hundred engineers and marketers to crush that space. There are tens of thousands of niches like this that will pay for teams of 1-3 people to live on the beach after a few years of work.
deleted 9y ago
[deleted]
top256 9y ago
It depends what you want and what is your market size. Due to liquidation preference, it makes sense for investors to invest in any good companies they can no matter their size. Now that SaaS is maturing and opportunities are smaller microSaaS will become more commonplace. I built one 10 years ago and I remember people thought I was crazy at that time...
baxtr 9y ago
What’s the ultimate value of growth anyway? If a startup is VC backed, then growth is the pathway for investors to get rich. If growth is a way to have a sustainable competive advantage of that’s a value too. However there are also enough small companies with a sustainable competitive advantage. Depends very much on your positioning etc
c3534l 9y ago
I think about the controlled growth of Amazon. They're the tortoise than won the race. Others grew fast and crashed and burned. They were careful not to overleverage and to make sure they were doing what they could handle.
WhyNotHugo 9y ago
What worries me the most about freelancing, or being a small 3-person shop, is retirement. A 3-person shop might not be sustainable if me (1/3) decides to retire and has to pay someone to keep it afloat. And that is, if I find such a person. I also have to make sure that whatever service I provide, will keep making sense in ~30 years. Saving might work in countries with stable economies, but you still have to set aside quite a bit of money -- and should you outlive your saving, you're in trouble.
- smhg 9y ago
  This. Being in such a situation it keeps me awake sometimes. There are 2 obvious solutions: - keep making sense until your retirement (innovate, adapt, ...) - sell (for a significant amount, at the right time) in case of a saas or shop Neither sounds solid, but they might turn out to be less bad than we think now?
- tluyben2 9y ago
  Why do you want to retire? It is a question out of interest as I do not know many people (many of retirement age or above) that want to retire (anymore). Most who did retire in my circles (including me) found it not very inspiring and went back to (more than full time) work.
adolfadi 9y ago
My Name is, Miss Adol Fadi I live in Hamburg. and i am a happy woman today,So i told my self that any lender that can rescue my family from our poor situation, i will refer any person that is looking for loan to the lender all thanks go to ASYLUM LOAN INVESTMENT. They grant me a Loan, I was in need of a loan of 500,000.00 Euro to start my life all over, as i am a single mother with 2 kids I met Asylum Loan Investment On line Asylum Grant me a Loan of 500,000.00 Euro, ASYLUM Loan & Investments Group is a company into pure loan and debt financing at ROI returns of only 1.8% to pay off your bills or buy a home Or Increase your Business .please contact Asylum Loan @… (a.loan@asylum.com )

267 points by antoinefink 9y ago

Totally agree with this. Been bootstrapping my own thing for a while. If it hits $5k MRR I'll be more than satisfied and probably never raise money.

roadbeats 9y ago

I also had these thoughts when I bootstrapped but the problem is not being able to hire a great team that can build something you would not be able to. If you’re all 3 single guys in 20s, enjoy 20s. When you’re married and have kids, then you’ll care about bills rather than lifestyle and retreats.

charlesdm 9y ago
Depends how much you're making as a bootstrapper? If $10 or 15k a month isn't able to fund your lifestyle then you'll probably have problems later in life. Also, unless you're based in the Bay area / NYC / London, hiring people generally won't cost you $10k/mo per employee. Also, no one says you can't sell your bootstrapped business. A project generating $30k in profit can generally be sold for $1-1.3m. Reinvest that, and you suddenly have great cash flow from investments in addition to any other income you manage to make from your next project. All in all, a path worth taking in life if you want flexibility and freedom.
- AJ007 9y ago
  You can definitely make over $1m a year running a bootstrapped business. On the high end of the success scale you can walk away with more money than a successful VC backed co-founder. There are more businesses that are totally inappropriate for VC than should take VC money. The problem is everyone is equating tech businesses with VC. There are plenty of dead tech startups that actually have modest economics and would have worked if VC, and the high expenses of the top tier US talent, had been avoided. Another note, something I’ve learned more recently. Some businesses won’t make more money even if you force more capital in to them. You can end up with a really good company that can be profitable for decades, but destroy it by force feeding it outside capital (VC or other.) It is important to identify this early.

onassar 9y ago

Rarely comment, but definitely identify with this. Given HN's general focus on growth and funding, I think it's great/important for an article/concept like this to be given some reach. I find that there isn't enough critical thought given to why one ought to pursue an aggressive growth strategy. And that generally, staying small is seen as a failure to grow, rather than a conscious effort to grow in line with ones own life. Going from 3 to 100 employees in a (relatively) short period will naturally have a large impact on one's personal life and mental/emotional state. I think it's important to ask, before one ventures into that kind of adventure, whether or not you're okay risking mental/emotional (and arguably physical) stability in place of the adventure, and the potential financial windfall. There's nothing wrong with saying no to that risk. This is a short life we have, and spending it chasing growth to keep up w/ the momentum of the extremes of capitalism doesn't need to be your game ;) [edit] Prefer my last paragraph be written as: There's nothing wrong with saying no to that risk. This is a short life we have, and if you're spending it chasing growth to keep up w/ the momentum of the extremes of capitalism, it doesn't need to be your game ;)

v_lisivka 9y ago
Startup is aimed at growth, to become next unicorn. If your business is not aimed at growth, then it is just regular business. YCombinator is incubator for startups, hence their HN site is aimed at startups too.
- jchw 9y ago
  I can see why YCombinator would be biased toward startups that raise funding, HOWEVER: I've always understood the word 'startup' to simply mean any new business.
  - deleted 9y ago
    [deleted]
- onassar 9y ago
  Interesting view; I suppose if you look at HN as an extension of YC, then you're right: it would make sense that HN tends to focus/cater more to the growth/funding points of view. For me, HN has become a source of news/ideas related to innovation (with an obvious leaning towards digital/technological innovation). I guess, given how I see this community (and use it for access), it's refreshing to see an article like this :)

Allison565 9y ago

Je gagne plus de 7k $ par mois à temps partiel. Je n'arrêtais pas d'entendre les autres me dire combien d'argent ils pouvaient gagner en ligne, alors j'ai décidé d'y jeter un coup d'œil. Eh bien, tout était vrai et a complètement changé ma vie. C'est ce que je fais, ᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵᴵwww.bosscyber.comᴵᴵᴵᴵᴵᴵᴵᴵ

Izmaki 9y ago

I was expecting more than a few paragraphs claiming that a small company is a good thing in regards to happiness and flexibility at work... oh well.

edshiro 9y ago

I also identify with the author. Tried the startup game on two occasions and got burned 2 times (one as senior engineer the other as CTO) - somehow both companies managed to sell but not at a price that made my shares worth it. I then swore I would never be an employee again and decided to join an accelerator but crashed out. Now I am freelancing and building a bootstrapped business on the side: much less headaches, I earn a good living, and get to build something I am passionate about while remaining master of my destiny. Not seeking VC money nor VC-esque returns, just a meaningful life where my work is valued and provides enough to live comfortably.

soneca 9y ago
May I ask what is your bootstrapped business? I am about to start one myself and I am curious about how and why experienced devs choose their ambitious side projects
- edshiro 9y ago
  I am building a B2B platform for logistics and taxi companies to store dash cam footage and easily retrieve and annotate them (for accidents, training, etc.). We already have one interested customer, so trying to finish the MVP by January!
  - therealdrag0 9y ago
    If you're only that far how do you "earn a good living"?
joeblau 9y ago
I moved to SF back in 2011 and I got burned by a few startups. I remember reading HN back then and someone said the average time to become a millionaire if you were chasing startup exits was 5 years. I probably in the best position now to have a successful exit, but I'm beyond the 5 year mark. I think evaluating the viability of startups is a skill that I've gotten better at as time goes on. I've been at 5-6 failed startups (small old companies) with zero upside on exits. That being said, the time I was the happiest was when I was working for myself for about 18 months on things I was passionate about.

Mountain_Skies 9y ago

I believe it is Bhutan that measures gross national happiness in addition to GDP, realizing growth just for growth's sake doesn't necessarily increase overall happiness. Don't know how well that works for them but good for both the nation and this startup to have it as a goal. My concern in the context of the startup would be that another player would enter the same market segment and use funding to expand aggressively, eating all of my market share in the process. Even if there is plenty of space in the market for both the slow growth and quick growth startups, there is going to be a danger of getting steamrolled by the quick growth company.

cperciva 9y ago
Yes, you're thinking of Bhutan. But "gross national happiness" is just a propaganda exercise.
- collyw 9y ago
  As a Buddhist nation I doubt that is the case. Its seems fairly central to Buddhist philosophy from my understanding of it. Out of interest having been chasing growth for decades I assume we are at the highest GDP measure ever, but do you assume that we are happier than ever? The opioid crisis in the US would suggest otherwise.

ig1 9y ago

Building a small boot-strapped company vs a funded company is in a large part dictated by market and product rather than by individual intention. If you try to build a funded company in a space that can't sustain one you will struggle, likewise if you try to build a small bootstrapped company in a space that can you will similarly struggle. If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level. There are some ways to compete by going after the customers your competitors don't want (if they're price sensitive, too small, wanting unusual customization, services, niche needs, etc.) but you should think about upfront what your strategy is going to be.

shubhamjain 9y ago
> If your direct competitors have a much better product then you (because they have more dev/product/ux resources than you), a professional sales org, marketing machine, etc. then it's very hard to compete. Your acquisition costs and churn will be high which will severely hurt your ability to grow to a sustainable level. I would disagree. If the customers are comfortable with your product, and they don't feel a big reason to switch, they probably won't. This is more true in the B2B space where customers tend to be less finicky. There are plenty of products that haven't innovated in years, but still enjoy decent sales.
- ig1 9y ago
  Even a couple of percentage points of churn is a big deal in the long term as you have to keep replacing those customers just to stand still. If you're in a moribund space you can get away with a MVP product for a long time, but if you're in a highly competitive space where your competitors have a significantly better product and a better sales team it has a real impact. The other major factor driving churn in bootstrapped b2bs is they largely sell to SMEs who have a high-rate of insolvency.
  - amenod 9y ago

alvil 9y ago

Funding is just another form of employment (or slavery if you wish).

framestr 9y ago

I can definitely agree with this. I was developing http://framestr.com http://framestr.com (SaaS), and at the time, we had to bring on a 2nd developer and server costs were increasing (we all wanted to avoid raising funds and aim to bootstrap). Rather than raise funds, my partners and I built a small SEO business. We ended up scaling the SEO business to around $200k MRR. Having been through the financing process before for at a previous start-up, I can say that the time invested in the side business was not a whole lot different than time invested in fund raising (+ meetings, reporting to investors after the raise). By hustling, we were able to build a nice life style business, while being able to grow our tech SaaS. At the same time, we had much more flexibility and have been able to build / invest in what we want, and for what we believe is best long-term.

cjalmeida 9y ago
Anecdotally, Boeing built furniture for a while to keep afloat when developing it's commercial aircraft business http://www.u-s-history.com/pages/h1832.html http://www.u-s-history.com/pages/h1832.html

amelius 9y ago

> Not raising funds to stay small and happy But in this winner-takes-all reality, is that possible? If your business concept becomes successful, what prevents a bigger player to copy it, improve upon it, and steal away your customers?

_0ffh 9y ago
They might out-advertise you, but it's not at all easy to beat a well oiled team of three talented persons on the technical front. Just throwing money at a problem does not guaranty a superior product.
- john_moscow 9y ago
  They can just offer an decent clone of your product for free. Given the popularity of the "grow now, monetize later" approach, investors will likely not see a problem with that.
jasonkester 9y ago
Because, realistically, those big companies aren't interested in competing for your little $10k/month niche. Even a million dollar a year revenue stream would be seen as a failure for them.
- TrueSelfDao 9y ago
  The bigger player may consider the idea more valuable in their hands.
  - jasonkester 9y ago
    Your $10k MRR niche won't be "app that lets people hail taxis, and network of contract drivers." It'll be "reception table plan designer for wedding coordinators". Google is not now, nor will they ever be having a meeting where they decide to allocate a few hundred engineers and marketers to crush that space. There are tens of thousands of niches like this that will pay for teams of 1-3 people to live on the beach after a few years of work.

deleted 9y ago

[deleted]

top256 9y ago

It depends what you want and what is your market size. Due to liquidation preference, it makes sense for investors to invest in any good companies they can no matter their size. Now that SaaS is maturing and opportunities are smaller microSaaS will become more commonplace. I built one 10 years ago and I remember people thought I was crazy at that time...

baxtr 9y ago

What’s the ultimate value of growth anyway? If a startup is VC backed, then growth is the pathway for investors to get rich. If growth is a way to have a sustainable competive advantage of that’s a value too. However there are also enough small companies with a sustainable competitive advantage. Depends very much on your positioning etc

c3534l 9y ago

I think about the controlled growth of Amazon. They're the tortoise than won the race. Others grew fast and crashed and burned. They were careful not to overleverage and to make sure they were doing what they could handle.

WhyNotHugo 9y ago

What worries me the most about freelancing, or being a small 3-person shop, is retirement. A 3-person shop might not be sustainable if me (1/3) decides to retire and has to pay someone to keep it afloat. And that is, if I find such a person. I also have to make sure that whatever service I provide, will keep making sense in ~30 years. Saving might work in countries with stable economies, but you still have to set aside quite a bit of money -- and should you outlive your saving, you're in trouble.

smhg 9y ago
This. Being in such a situation it keeps me awake sometimes. There are 2 obvious solutions: - keep making sense until your retirement (innovate, adapt, ...) - sell (for a significant amount, at the right time) in case of a saas or shop Neither sounds solid, but they might turn out to be less bad than we think now?
tluyben2 9y ago
Why do you want to retire? It is a question out of interest as I do not know many people (many of retirement age or above) that want to retire (anymore). Most who did retire in my circles (including me) found it not very inspiring and went back to (more than full time) work.

adolfadi 9y ago

My Name is, Miss Adol Fadi I live in Hamburg. and i am a happy woman today,So i told my self that any lender that can rescue my family from our poor situation, i will refer any person that is looking for loan to the lender all thanks go to ASYLUM LOAN INVESTMENT. They grant me a Loan, I was in need of a loan of 500,000.00 Euro to start my life all over, as i am a single mother with 2 kids I met Asylum Loan Investment On line Asylum Grant me a Loan of 500,000.00 Euro, ASYLUM Loan & Investments Group is a company into pure loan and debt financing at ROI returns of only 1.8% to pay off your bills or buy a home Or Increase your Business .please contact Asylum Loan @… (a.loan@asylum.com )