I’ve bootstrapped products and businesses for over a decade. Then, in 2014 I decided to give the VC route a try for Baremetrics (after bootstrapping it for ~6 months).
We raised a relatively small $800k round at a $10M cap via a SAFE (originally started w/ $500k but ended up adding $300k a bit later to the same note). But a couple of years in to that, I do have some thoughts/observations.
This is all just so very silly
Bootstrap vs VC people like pit those things together like one is better than the other. People that are overly dogmatic about VC money being evil almost universally have never raised any money, so they literally don’t know what they’re talking about.
It’s the childish Mac vs PC argument all over and you look silly arguing it. Either can be used in really dumb ways and it all comes down to your end goals.
Just because a business could get huge doesn’t mean you should raise money or that you even need VC money to do it. And just because you have VC money doesn’t mean you’ll get huge.
While there are certainly insanely terrible VCs who treat entrepreneurs like little puppets, the large majority are NOT this way. Most VCs I’ve talked/worked with are generally just really helpful and empathetic to the struggles entrepreneurs face. The most helpful VCs have been entrepreneurs themselves, and in those scenarios their insight is really valuable.
This idea that VCs “control” entrepreneurs is just…weird. You don’t get in to “board seat voting rights” space until you’ve raised huge amounts of money. And even then, they rarely have “vote out the CEO” setups. Yes that happens, but it’s fraction-of-a-% stuff.
VC money doesn’t stop you from building what you want. You’re still the boss. Simple as that. Certainly there are some expectations when you’re venture-backed, but at the end of the day, the entrepreneur-investor relationship just isn’t nearly as dramatic as the press and the less-informed would like you to believe.
Single biggest source of stress
All that being said, something I’ve learned after a couple of years with VC money is I do not like running a company at a loss. I completely underestimated how uncomfortable it would be. Biggest single source of stress by a long shot.
As a founder, I’m an eternal optimist. You almost have to be when building something out of nothing. You overestimate growth because “of course it’ll grow and be awesome and people will love this thing!”
If you didn’t think that, you wouldn’t waste your time & effort. The only road block is you can’t build all the things fast enough, right? RIGHT?!?
And that’s the point where taking VC money can be dangerous. For hiring. When you use the money for payroll, you’re putting yourself in a very dangerous spot. It’s a recurring expense that you can’t just stop.
If you use the money for customer acquisition, it’s a firehose you can slow down if money gets tight. But when it’s your team’s jobs that are on the line, it’s much harder to adjust.
We’ve got decent revenue for our team size, but it’s still not enough to cover our expenses. And so I find myself so completely stressed out by that. It’s almost the only thing I can think about…ways to get profitable quickly.
Of course, that’s not inherently a bad thing. It’s just not something I like being forced to spend all my energy on. And just because a certain thing could make us profitable, doesn’t mean it’s the right thing to do.
I like to avoid “house is on fire” events and, for better or worse, I’m the one who started the fire.
So, bootstrap or VC…it’s ultimately just money. Different tools for the job. Just be wise with how you spend it and watch your finances like a hawk.
No matter how much you raise at your company you’ll end up spending it in 12–24 months. — Justin Kan
I’ve always considered myself a “product” guy (any design, engineering or marketing skills are necessary tools to make the product). But when you’re the founder, like it or not, you’re head of finances as well and need to learn really quickly the ins/outs of that.
Cashflow is king and once you’ve got full control of that, everything else falls in to place!