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I've done both. Bootstrapped a business to >$10m and (now) running a VC-backed firm. The models are different because the markets the two companies operate in
by cm277 4y ago
I've done both. Bootstrapped a business to >$10m and (now) running a VC-backed firm. The models are different because the markets the two companies operate in are different. I see VC money as getting steroids in a competitive sport (not speaking from experience on that one...): it will save time, it will probably affect your health, but if you are indeed competing in sport, and other competitors are doing it, you don't have much choice.
So, I would advise you to look around you: what is your market? is it that highly competitive? can you still be in that market without competing (e.g. a highly fragmented market)? do you want to compete and can you avoid it?
Also keep this in mind: a VC-firm is meant to exit, if not immediately, then eventually. But, a bootstrapped firm also has to exit at some point too: you'll either have to sell it (maybe at a loss), shut it down, or pass it down (death comes for us all). Are you willing to do any of these? that's part of the answer to "do you want to compete?" above...
- caseyf 4y ago> But, a bootstrapped firm also has to exit at some point too: you'll either have to sell it (maybe at a loss), shut it down, or pass it down (death comes for us all). Are you willing to do any of these? highlighting this because I think it's important to think about where you are headed and what your plan is
- cm277 4y agoLet me rephrase this pithy remark in econ terms: a company by definition builds value, hopefully a lot. You as the founder at some point has to extract the value one way or the other (immediately by exiting, over a longer period by divesting/retiring/passing it on) or lose it (shut it down or watch the company wither). There are no other exits. You cannot take the money with you. So the question to the OP is, how much value does she want to build, how quickly, and whether she wants to extract all of it and when? If the answers are "a lot, quickly, yes, soon enough" a VC-backed model is probably the best answer. But you need to know the answers to the bootstrapped option as well.
- petenixey 4y agoI’m not sure this answer is as true as you imagine. You extract money via a sale to then invest it and create a revenue stream. Which you potentially already have in the original business. It’s just it was invested in your business v someone else’s. The question of whether to sell it is a function of how much money you need in a lump sum, how precarious or stable your business is and how much cash it’s throwing off. And of course of diversification. It’s not defacto true that you need to sell it to realise its value though
- jossclimb 4y ago> it will probably affect your health Is it really that bad? I hear mixed views here.
- cm277 4y agoI wasn't joking too much... high growth is bad for a company's 'health', no matter what is driving that growth (VCs or just PMF). By health here, I mean people, processes and product. It helps, a lot, if the team has done high-growth before and understand what the compromises are and where the organizational and technical debt is and how to pay it off, but you're still going to go through hell. Again, this is a choice: are you going to leave demand on the table or not? VCs are probably not going to let you say 'yes' to that, but can/will you anyway? On a personal level, stress is going to be bad for you as well. But both high growth and low growth (below profitability that is) will give you stress, so if you don't want that health impact, look for a salary, not for equity...
- rabidonrails 4y agoNot sure why you're being downvoted for this comment I think this is right.
- its_hertz 4y agoHow can you tell he is downvoted?