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I'm always amazed by stories of startups that generate almost no profit and yet burn millions of VC dollars. Yes, I know that VC count on that 1 out of 100 inve

I'm always amazed by stories of startups that generate almost no profit and yet burn millions of VC dollars. Yes, I know that VC count on that 1 out of 100 invested in companies to generate profit larger than all the other combined, but still it's a bit ridiculous and in my opinion not healthy for the industry. It's a different story if you've a bootstrapped, profitable company and want to boost the growth - you can negotiate better terms with the VC, because a) you've paying customers and have a proven business model and b) you don't need the VC money to survive, unlike a fresh company without any profits.

jiggy2011 12y ago
Some types of companies are harder to bootstrap in a way that is profitable from day 1, also the risk for a small bootstrapped company is they just prove the market for a VC backed juggernaut to come in and eat them alive.
- pkorzeniewski 12y ago
  Yes, some types of companies need time to provide value, but in my opinion the vast majority of VC funded companies could easily be bootstrapped. I don't deny that the vision of receiving a fat check and being able to rent a beautiful office, buy the best equipment and hire a big team is tempting, but it's something for something - the main goal of VCs is to grow like crazy, without a sentiment. A bootstrapped company will grow slowly, but steadily, and I don't believe a VC backed competitor is a real threat in the long term. Sure, they can offer a similar product for free, but not forever - once the VC money is gone, they will need to get profitable. Fast. Without the VC money such company can dissapear the next month. Not to mention the interference of VCs how to run your company, which is of course expected - after all it's their money that keeps your company alive.
  - jiggy2011 12y ago
    Sure, but by the time they have folded you're already out of business!
    - deleted 12y ago
      [deleted]

jiggy2011 12y ago

Some types of companies are harder to bootstrap in a way that is profitable from day 1, also the risk for a small bootstrapped company is they just prove the market for a VC backed juggernaut to come in and eat them alive.

pkorzeniewski 12y ago
Yes, some types of companies need time to provide value, but in my opinion the vast majority of VC funded companies could easily be bootstrapped. I don't deny that the vision of receiving a fat check and being able to rent a beautiful office, buy the best equipment and hire a big team is tempting, but it's something for something - the main goal of VCs is to grow like crazy, without a sentiment. A bootstrapped company will grow slowly, but steadily, and I don't believe a VC backed competitor is a real threat in the long term. Sure, they can offer a similar product for free, but not forever - once the VC money is gone, they will need to get profitable. Fast. Without the VC money such company can dissapear the next month. Not to mention the interference of VCs how to run your company, which is of course expected - after all it's their money that keeps your company alive.
- jiggy2011 12y ago
  Sure, but by the time they have folded you're already out of business!
  - deleted 12y ago
    [deleted]