If you can bootstrap your business with 30k and make a 20k profit every month, then why do you need 1 million dollars from investors?
When you take the money, it's just a golden handcuff and ties you to that person for the future. If your business lasts longer than 20 years, that may as well be an additional marriage with kids.
You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.
* Big companies start small. VCs will tell startups to find something their tech can make them the best at and grow into nearby verticals.
* Software goes to zero. Academia, side projects, whatever. Either you keep up, and reach some sort of scale that you have a moat, or your risk goes up.
The downside is the parties aren’t as good :(
Care to comment on the work/life balance you have?
I can say it took me a long time to get to where I am now and I had quite a few detours along the way. I wrote up the history of my business a while back if anyone is interested [1]. Bootstrapping is certainly not the way to instant riches :)
1. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...
Not enough angels but lots of devils..
If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.
But I don't know! I truly wonder how many businesses have been run into the ground because of a kamikaze attitude to working hours. But I also wonder how many businesses missed gigantic opportunities while the founders were off doing unimportant things like putting their kids to bed. Neither are measurable, as far as I can see.
If anyone has any stats on this, any at all, consider me recommended!
Stats don't even matter, because at that level of financial independence, it's a personal choice whether you spend time with your family or pursue another business opportunity.
There's always a limit on how much time you can spend per day, and this limit is far below the time you are awake. Push it too far, and you do not only lose your working power, but also your motivation and your inspiration.
I agree entrepreneurs can get burnt out, but at that point it's become a "job" and is probably time to move on.
there are limits to stress your body can sustain, and your mind can be totally disconnected with it, pushing and pushing.
The assumption is not only incorrect, but I believe it is exactly reverse: Losing passing is one of the consequences of a burn-out. It is not a cause, but instead one of the (most visible) symptoms.
If your only business advantage over your competitors is a willingness to sacrifice your life for money, then you'd better either be okay with doing so indefinitely or be making enough money you can call it quits before you're too old to maintain that pace.
For founders, and really anyone heavily invested in early stage startups or companies looking for a lot of growth, responsibilities are 24/7 and the line between work and life get blurry, and it's a lot more difficult to make sure the balance is there, but also a lot more important.
Not disagreeing or anything your comment just brought this to mind.
or a specialized market
Size is not necessarily a function of the word niche it only implies that the good or service being sold targets a group that is not a majority of all of the market participants. In twitters case 3.4B users on the internet, with only some subgroup that participates on social media and then only a subgroup of that group that wishes to participate with limited post length and then, business wise, just the business niche that have a large customer base within that subgroup of internet/social media/short form.
As an example BMW is a niche business, luxury auto, that had 92B in revenue last year.
Even that One Big New Thing they announced, namely Moments, still operated exclusively in that short messaging pubsub niche entirely (and turned out not to be something their users cared about that much so far).
Now their niche market seems kind of saturated, user numbers mostly peaked, and Facebook also started competing even more in that niche when they introduced searchable #hashtags and ways to follow accounts without becoming mutual friends, while still offering their other core features and "external" services like instagram (in direct competition to twitter) or whatsapp (in direct competition to twitter DMs). Tumblr is still there, which to me always felt mostly like a "twitter" for longer-form messages. I saw people switch from twitter to Slack (and recently Discord) and embrace their not-globally-visible pubsub models in some cases, so there is some competition there too.
So in conclusion: twitter seems to me like a pretty niche service (albeit large niche), and has competitors left and right now. It isn't in "that" niche, but in a niche.
Of course Twitter as a business did not have this choice - they had to go big or go home. For the founders though it might have been better to have built something else.
I doubt it. All of the founders are mega wealthy now both as a result of Twitter and other ventures. Twitter might not have reached the dizzy heights they aspired to, but like it or loathe it Twitter is a household name and the founders are "famous".
Where? In US, SV, New York, China, Ukraine, Argentina? If you growth it can be difficult to scale without having higher profits or outside investments.
Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital.
Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.
Only partly.
I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.
I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.
Slack hasn't put them out of business yet.
I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.
Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend.
The claim that the model doesn't work is rather easily falsified.
Or, who funds the freemium one? Investors who push that company too far too fast, so your paid model could outlast another flash in the pan.
If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.
Without ever earning a penny in profit for its shareholders. What a system!
It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.
In practice, this says that all the bets on hypergrowth were wrong, and the company must adapt: The stock grants that looked competitive before don't look competitive today, so top engineers leave. Staffing plans designed to keep a system operable at 10x of Twitter's current volume stop making sense, so projects change, and people are laid off.
So this has nothing to do with liability to promises (they've already IPO'd), but with the pain of becoming a less promising company. Twitter is too important to disappear in the near term; all you have to do is look at how big they are for journalists and presidential candidates to figure that out. There is, however, an opportunity for someone to make a competing product that fits the same needs and is easier to monetize.
That presumes that you think new management could successfully grow the company. Twitter's growth might be done.
However, if the majority of your shareholders are members of the public looking to earn a return, they're your boss. You might be CEO, but if your priorities aren't their priorities, they'll replace you. Even if you own the majority voting control in the company, there's a certain amount of good-faith effort you need to put into growing the profits of the company. In most jurisdictions, a public for-profit company is organized with the belief that the company exists to create as much profit as it reasonably can and shouldn't be operating in a way that avoids that. That doesn't mean doing scummy things or things that might realize short-term profits at the expense of the brand, but sometimes it becomes clear that a company is no longer operating with its (potentially minority) shareholders in mind.
There's actually a type of corporation that specifically notes that maximizing profit isn't the goal of the enterprise (https://en.wikipedia.org/wiki/Benefit_corporation). Twitter could have been formed as a B-Corporation and told its investors that it might make profit, but that profit wasn't its only goal.
But the thing is that Twitter isn't just making too little money. It's losing money. It would be like a coffeeshop that sold coffee for 10¢ a cup with 50,000 customers/mo and rent of $8,000/mo. They'd bring in $5,000 from their customers and be $3,000 in the hole at the end of the month. Now, there are a few ways to change that situation. 1) Get more money per customer. Twitter could sell more or better ads or you could give them money. That's hard. 2) Get more users. If Twitter earns $X/user/month in revenue and they're able to get double the number of users, that's double the revenue. If costs don't go up linearly with users, their situation will get better. If the coffeeshop gets 100,000 customers/mo, they'd be making $2,000/mo. 3) Twitter can lower costs. They can fire excess employees working on marginal projects; they can get rid of app features that might be computationally expensive to deliver.
The issue with many startups isn't always growth or investors, but even keeping one's head above water.
Now, even if Twitter can keep its head above water, is that enough? If Twitter became a non-profit and just advertised itself as a public service to the world, would that be enough to keep users around? So many companies are gunning to take down Twitter. Would Twitter survive if it slimmed down its staff and just kept Twitter alive? Would users migrate to other services that offered new, cool things?
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
The thing is that it's hard to bootstrap services with huge network effects like Facebook or Twitter and keep a small staff. It's often a winner-take-all (or most) market. Remember Pownce? Probably not. There were lots of microblogging companies and Twitter destroyed them all. To do that, they needed to staff-up as you handle scaling issues and add features. Once you're big, you want to keep focusing on growth since layoffs are demoralizing and if you stop growing, what's to stop a new company from coming along and knocking you off?
It's easy to think that Twitter could be run with less of an eye for growth or profit, but given that it's losing money right now and that can't continue forever, it at least needs to get to a head-above-water place. The most promising ways of getting there are things like getting more users, cutting costs like staff, and figuring out how to get more revenue per current user. In fact, one could argue that the layoffs are part of Twitter not prizing growth above all else. They're trading growth (that could be driven by those employees) for cost (the salaries of those employees). Twitter is going the route of the less-growth, slimmed-down company looking to just keep chugging along. But even then, Twitter needs to get its head above water and this is kinda part of that (unfortunately).
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
WhatsApp comes to mind as an example of complex engineering (storing and delivering messages for millions) and they pulled it off with a small team at first. And more: once the core product is established/engineered, do you need as many people to maintain it?
It's not a complex engineering problem at all. Maybe it could be if it were done in the year 2000. It is not nowadays.
[Granted, there is still work to be done to make a decent product, they had great people and they executed very well.]
Just think about the infrastructure for example. There was no SoftLayer/AWS to save your ass. You had to handle servers/hardware on your own. That alone could use a (small) company.
(Story covers lawsuit against Twitter for misleading shareholders on user growth numbers).
[1] http://www.bloomberg.com/news/articles/2016-09-17/twitter-su...
Their main responsibility at this point is to satisfy the shareholders, and given their limited growth is not an easy feat.
In many ways VC funding is the worst and shouldn't be applied to most companies.
I'm not sure either are a good outcome from a bad idea.
I'll also put my other question in this post seeing as I have tripped the HN rentier alerts by using words that may upset our parasitic rentier VC gods, leading to the weasel "you're submitting too fast" after one post.
What is patio-11 ?