It's not that building a sustainable business is frowned upon. But if you raise money from investors using a traditional note or equity purchase, then you have created the need for an exit. There are royalty-based options for raising money: you take money in return for an annual royalty payment for a fixed number of years plus repayment. It's similar to debt.

I know, but it’s all an ecosystem. I can refuse VC investment but if one of my competitors doesn’t then they have an order of magnitude more resources than me and they’ll edge me out of the market. So everyone ends up going down that road whether they want to or not.

Right. And even if you outcompete your competitor on product—say they're un-innovative and even slow such that they continually copy all your stuff, doing it with a year lag and less polish—they can still beat you because you're charging $X and they're "free" using the VC money at a huge CAC to outgrow you. That CAC may have no real path to coming down, but it's easy enough to describe highly unlikely ways it might—particularly when the investors and the execs are aligned on finding greater fools.

As unsustainable as their path might be—and it is on a few dimensions𐠒—they have options you don't. The obvious ones are buying customers long enough to last until exit and "re-financing" by showing the same VCs the same (high CAC-powered) numbers and extending the runway.

𐠒 It's unsustainable first financially (if you don't count the exit). It also (in theory) doesn't sustain/grow your team in an expertise or culture sense, the way that coming up with the features yourself trains some creativity and grit and might provide a greater culture win when things launch. And lastly if your customers base is there because it's free, then they'll leave when it's not free (or not cheaper than alternatives). You can definitely find all three of these as sweet summer child ways to care about business today, which I think is the point.

If your product’s value proposition is that fragile, that it can be eroded down to near nothing just via some schemer(s) with more money in the bank account saying ‘free’… then maybe it’s just not that big of an improvement over the status quo?

Silly take. If my product is worth $5 and I sell it for $6, that’s a sustainable business. If a competitor uses VC cash to subsidise their operation and charge $1 they can run me out of business, then they’ll charge $6. Or, hey, $7, why not.

But it has nothing to do with my products value proposition.

No it isn’t a sustainable business, because the competitive landscape, which it has to be sustained in, would now also include this group out to get you for whatever reasons, for some unknown period of time.

That’s exactly my point? VCs distort the market.

“If my product is worth $5 and I sell it for $6…” Is not a sustainable business in that specific competitive landscape.

VCs don’t even need to exist for this to occur.

So I didn’t mention anything regarding VCs and market distortions or lack thereof?

I think there's two ways to read this. One is that maybe a lot of startups are not improving the status quo today. Perhaps this is right. If so, I don't think it would negate the environment described.

If the intent is that solid value props can't be eroded in such an environment, I'm not sure I agree. The issue I think is less about value prop, it's closer to not having a moat. Or one that can't be bought anyway. People are paying for and using the product—so there's some value prop—but then it's being copied and sold for free (at a loss). The competitor may even pay to take customers. I'm not sure that stronger value props are inherently harder to copy or harder to buy users.

For the bootstrapping startup to win, it needs to find a product people want, create it from scratch, then find a non-money-based moat. The startup with the money can copy the idea, create it (benefiting from your blueprint), and then find the moat (with some capacity for it to be money-based).

In any case, I think the need for value prop lessens in this environment. If we're talking purely about getting paid and you have the option to do so via exit rather than only via profit, value prop becomes a means and maybe not even required one.

It generates some customer loyalty, on average, which does impede, somewhat, outright buying of customers or enticing them with lower to free prices.

Of course loyalty is not perfectly sticky, nor can it ever be, but then again enticements can not be perfectly attractive either.