Bootstrapping

We’re trying to build this company without taking any external financing.

Why Not?

Well for one, it makes it very hard to pay the bills in the early going. I think more importantly than that, though, is that great investors can bring along a lot of other benefits (e.g. media connections, recruiting capabilities), and, since they have a financial motivation, are likely to leverage their resources as much as possible to help you.

Why?

I think it comes down two things:

  1. Control
  2. The belief that we can bootstrap a large and successful company

The control is partly about not having a boss. One of the main reasons I have stuck it out as an entrepreneur despite not having any financial rewards to show for it (I’ve probably made about $25k per year over the last 5 years building companies), is that I can no longer handle the thought of having a boss. The only boss I am comfortable proving myself to is the open market. I don’t want to have to convince a boss of my ideas before being allowed to validate them, and I want my rewards to be intrinsically tied to the success I have in the market, not the success I have within a company. After years of bootstrapping and struggling with the ups and downs of building a company I think this fact has been the most potent when it came to pushing forward.

Control is also about freedom to do crazy things. Maybe we want to experiment with a 4 day week or half days or we want to start a new product that has nothing to do with out other products (we are already doing this), or we just want to challenge the conventional thinking about how things are done, how you hire, how you treat your employees, how much focus is on revenue, etc. A great investor would probably allow us to do that, but at some point even the best investors want a return on their money and an acquisition or a public offering would make it much more difficult or even impossible to maintain that level of control. Looking out 20 years we want to be capable of doing crazy things and introducing investors in to the mix will make that extremely challenging.

We also believe that we can bootstrap a successful company and grow it to what ever size we feel is best. There’s a saying about you should raise money if you want to be rich or bootstrap if you want to be king. We feel that is a false dichotomy. The environment for building an Internet company makes it very possible to build a company that generates significant revenue without a huge cost structure. If we can achieve that then we will have the flexibility of building a larger company with a larger cost structure through the revenues of our initial products. We will essentially finance ourselves through our products instead of outside investors. Obviously this requires quite a lot to fall in to place, but it is possible.

How’s It Going?

I had forgotten how hard it was. We’re struggling to make ends meet, struggling to make any money, struggling to get the word out about what we’re doing. It’s very tempting to find an investor that brings a lot to the table. We could certainly use the financial help both for ourselves and to build out the team, we could use the advice and expertise that a great investor could provide, and we could use connections of almost any sort as we try to get the word out, build the team, look for partnerships, etc.

But we’re doing well. We feel reasonably happy with the progress we’re seeing. It could always be better and a lot of things are not working nearly as well as we had hoped they would, but some things are doing better than we thought. I’ve been through these ups and downs once before while building my last company up to a profitable position, so I recognize a lot of the challenges we’re facing now and their temporary nature, but it’s still hard to maintain optimism. We’re fortunate enough to have access to other revenue streams, such as consulting, so we’re not too anxious about running out of money, it would just be nice to get things going a little faster.

For the indefinite future we will continue to bootstrap.

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