7 ms·

Bootstrap finance and the cost of other people's money [pdf]

111 points by sturza 6y ago

znpy 6y ago
On one hand the webpage returns a 404. On the other hand I can see it's running apache: "Apache/2.2.17 (Win32) mod_ssl/2.2.17 OpenSSL/0.9.8o PHP/5.3.4 mod_perl/2.0.4 Perl/v5.10.1" Not sure what I can do with this information.
godsplan1 6y ago
The article is from https://bhide.net/index.php/about/bio/ https://bhide.net/index.php/about/bio/ published in 1992. Link from HBR : https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-ups https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-u...
zupa-hu 6y ago
Why is the comment from godsplan1 downvoted to death?
- DanBC 6y ago
  Their account was banned. dang explains why they were banned in a reply to a previous comment.
  - zupa-hu 6y ago
    I had to figure out what previous comment you mean; for anyone similarly lost, see the account's previous comments, there is only one other. Interesting, I would have expected to show the commenter an [you are banned] error or similar instead of just not showing the comment to others. Edit: Thanks for explaining!
    - sturza 6y ago
      The comment is gone. What was it about?
      - zupa-hu 6y ago
        It is not dead any more, see comment by godsplan1, currently at the bottom. Direct link: https://news.ycombinator.com/item?id=24090311 https://news.ycombinator.com/item?id=24090311 (I also reposted the comment above btw https://news.ycombinator.com/item?id=24090447 https://news.ycombinator.com/item?id=24090447)
      - mkl 6y ago
        Dead comments can be resurrected by people vouching for them. If you think a comment from a banned account is something that should be shown, click on its timestamp and then click "vouch". I usually look at the user's other comments first, to see who I'm vouching for. More info here: https://github.com/minimaxir/hacker-news-undocumented https://github.com/minimaxir/hacker-news-undocumented
      - DanBC 6y ago
        Do you have showdead set to "on" in your profile?
  - deleted 6y ago
    [deleted]
- zupa-hu 6y ago
  Reposting it for anyone who can't see as it is relevant nevertheless. -- > The article is from https://bhide.net/index.php/about/bio/ https://bhide.net/index.php/about/bio/ published in 1992. > Link from HBR : https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-ups https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-u...
- deleted 6y ago
  [deleted]
jalopy 6y ago
Now that venture funding is much more widespread and entrepreneurship more celebrated (and I would argue more sophisticated), I wonder how much this advice applies. Wouldn't a smart competitor wait to see what's working from a bootstrapped pioneer then pass them by with tons of VC cash as rocket fuel?
- castalan 6y ago
  Good question and one that I'd like to hear other comments on. My take is that bootstrapped companies today focus on niche markets. When you don't have to give up 40%+ of the company away by Series D - you can afford to live a great lifestyle tackling a market with smaller TAM than VCs and VC-backed startups look for. There's also probably something to be said for the difficulty of: 1. Running an VC-backed company through explosive growth 2. Maturing the company past explosive growth to profitability / cash flow positive Bootstrappers pursue measured growth with a focus on cash flow + profitability from day 1 so they don't necessarily need to suffer through those same difficulties. Though they fight other battles (i.e. growing in cash constrained environments).
- smoe 6y ago
  I haven't read the article in full yet and only skimmed it. But a lot of the challenges I think still apply and what they seem to suggest is to start off bootstrapped, rush to getting operational, break even as quickly as possible and fail fast if you can't. Then grow from there yourself or by taking on investor money to accelerate it. For problems that not inherently need a lot of up front investment, for me this approach always appeared to be much saner than scaling first, burning trough more and more money and only maybe somewhere down the line find an economics of scale business model that works. Or am i misrepresenting what the article is saying? Also, regarding the getting outpaced by someone with tons of VC rocket fuel if you don't want to take their money yourself. I think there will always be room for more "boutique" products that are appreciated by customers as well as the people making them for their focus on quality and reliability, instead of taking over the world. To be honest, as a customer I have largely abandoned typical start up products, because at least for my use cases and preferences they tend to just not be very good and trustworthy no matter how much cash they have on the bank.
- 6y ago
ceilingcorner 6y ago
FYI this is from 1992.
- sturza 6y ago
  Not providing value anymore?
  - ceilingcorner 6y ago
    No but the data set is from 1989, long before VC really became as widespread as it is today.
    - sturza 6y ago
      I found it interesting on the bootstrapping topic and the: start fast with what you have and embrace uncertainty methodology. But sure, data is 30 years old.
      - ceilingcorner 6y ago
        Sure, I didn’t mean to imply that it is useless or uninteresting. Just a bit outdated.
    - bdcravens 6y ago
      There's more VC, but there's also more companies chasing VC (possibly more skewed towards the demand side than in 1989). In a seller's market, you can make more demands, hence the "cost" of taking VC has probably increased.
ChicagoDave 6y ago
If you live in Chicago, the rules are very simple. Either use your own money, friends and family...or have traction. There is no in-between.
nknealk 6y ago
> "It's often easier to raise $5 million than $1 million... but then you have $4 million that you don't need but spend anyhow" I feel like that quote is more relevant today than ever.

111 points by sturza 6y ago

znpy 6y ago

On one hand the webpage returns a 404. On the other hand I can see it's running apache: "Apache/2.2.17 (Win32) mod_ssl/2.2.17 OpenSSL/0.9.8o PHP/5.3.4 mod_perl/2.0.4 Perl/v5.10.1" Not sure what I can do with this information.

godsplan1 6y ago

The article is from https://bhide.net/index.php/about/bio/ https://bhide.net/index.php/about/bio/ published in 1992. Link from HBR : https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-ups https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-u...

zupa-hu 6y ago

Why is the comment from godsplan1 downvoted to death?

DanBC 6y ago
Their account was banned. dang explains why they were banned in a reply to a previous comment.
- zupa-hu 6y ago
  I had to figure out what previous comment you mean; for anyone similarly lost, see the account's previous comments, there is only one other. Interesting, I would have expected to show the commenter an [you are banned] error or similar instead of just not showing the comment to others. Edit: Thanks for explaining!
  - sturza 6y ago
    The comment is gone. What was it about?
    - zupa-hu 6y ago
      It is not dead any more, see comment by godsplan1, currently at the bottom. Direct link: https://news.ycombinator.com/item?id=24090311 https://news.ycombinator.com/item?id=24090311 (I also reposted the comment above btw https://news.ycombinator.com/item?id=24090447 https://news.ycombinator.com/item?id=24090447)
    - mkl 6y ago
      Dead comments can be resurrected by people vouching for them. If you think a comment from a banned account is something that should be shown, click on its timestamp and then click "vouch". I usually look at the user's other comments first, to see who I'm vouching for. More info here: https://github.com/minimaxir/hacker-news-undocumented https://github.com/minimaxir/hacker-news-undocumented
    - DanBC 6y ago
      Do you have showdead set to "on" in your profile?
- deleted 6y ago
  [deleted]
zupa-hu 6y ago
Reposting it for anyone who can't see as it is relevant nevertheless. -- > The article is from https://bhide.net/index.php/about/bio/ https://bhide.net/index.php/about/bio/ published in 1992. > Link from HBR : https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-ups https://hbr.org/1992/11/bootstrap-finance-the-art-of-start-u...
deleted 6y ago
[deleted]

jalopy 6y ago

Now that venture funding is much more widespread and entrepreneurship more celebrated (and I would argue more sophisticated), I wonder how much this advice applies. Wouldn't a smart competitor wait to see what's working from a bootstrapped pioneer then pass them by with tons of VC cash as rocket fuel?

castalan 6y ago
Good question and one that I'd like to hear other comments on. My take is that bootstrapped companies today focus on niche markets. When you don't have to give up 40%+ of the company away by Series D - you can afford to live a great lifestyle tackling a market with smaller TAM than VCs and VC-backed startups look for. There's also probably something to be said for the difficulty of: 1. Running an VC-backed company through explosive growth 2. Maturing the company past explosive growth to profitability / cash flow positive Bootstrappers pursue measured growth with a focus on cash flow + profitability from day 1 so they don't necessarily need to suffer through those same difficulties. Though they fight other battles (i.e. growing in cash constrained environments).
smoe 6y ago
I haven't read the article in full yet and only skimmed it. But a lot of the challenges I think still apply and what they seem to suggest is to start off bootstrapped, rush to getting operational, break even as quickly as possible and fail fast if you can't. Then grow from there yourself or by taking on investor money to accelerate it. For problems that not inherently need a lot of up front investment, for me this approach always appeared to be much saner than scaling first, burning trough more and more money and only maybe somewhere down the line find an economics of scale business model that works. Or am i misrepresenting what the article is saying? Also, regarding the getting outpaced by someone with tons of VC rocket fuel if you don't want to take their money yourself. I think there will always be room for more "boutique" products that are appreciated by customers as well as the people making them for their focus on quality and reliability, instead of taking over the world. To be honest, as a customer I have largely abandoned typical start up products, because at least for my use cases and preferences they tend to just not be very good and trustworthy no matter how much cash they have on the bank.
6y ago

ceilingcorner 6y ago

FYI this is from 1992.

sturza 6y ago
Not providing value anymore?
- ceilingcorner 6y ago
  No but the data set is from 1989, long before VC really became as widespread as it is today.
  - sturza 6y ago
    I found it interesting on the bootstrapping topic and the: start fast with what you have and embrace uncertainty methodology. But sure, data is 30 years old.
    - ceilingcorner 6y ago
      Sure, I didn’t mean to imply that it is useless or uninteresting. Just a bit outdated.
  - bdcravens 6y ago
    There's more VC, but there's also more companies chasing VC (possibly more skewed towards the demand side than in 1989). In a seller's market, you can make more demands, hence the "cost" of taking VC has probably increased.

ChicagoDave 6y ago

If you live in Chicago, the rules are very simple. Either use your own money, friends and family...or have traction. There is no in-between.

nknealk 6y ago

> "It's often easier to raise $5 million than $1 million... but then you have $4 million that you don't need but spend anyhow" I feel like that quote is more relevant today than ever.