There ultimately is little freedom from bosses. Either your VC's are, or paying customers are.

I hear this line often, and I think it switches terms. I'm a bootstrapper. When I say I don't have a boss, I don't mean I don't have responsibilities. I have a ton of responsibilities – maybe more so than those with jobs. I can't easily take a 100% off vacation, for example.

But I don't have a boss. I can arrange things how I want. I could even blow off customer support entirely, if I felt like it. I'd make a bit less money, probably, but I'd still be fine.

And I've occasionaly "fired" whole categories of customers when I felt like stopping a certain activity. Couldn't do that to a boss.

Quitting is (to the extent the metaphor works at all) firing your employer, not your boss; these can sometimes be the same, but often your boss is, like you, an employee of your employer, not someone with whom you engage in a direct exchange that you can terminate.

If a line supervisor isn't given permission to terminate his subordinates' employment (because, e.g., that's reserved for a higher-level manager), but can quit, it would be wrong to say he can fire his employees. Likewise, it is wrong to say you can fire your boss unless you can terminate the boss's employment.

If the goal of your company is to grow as fast as possible, then the VC rocket ship approach seems like a no-brainer.

Many startup factories forget that the goal of a startup is to quit existing and become a business.

Depending on the type of product and market you're in funding can help.

For the first, or second time entrepreneur, there is a far more valuable lesson to learn than getting external validation in the form of investment: Learning to add value, and learning to build something of value at a small scale, as well as the associated business skills, before doing it at presumably a larger scale.

The VC rocketship can create as many distractions from finding something people want. I'm not against it, but glad I hesitated taking investment in my 20's, I'm a much more well rounded entrepreneur for it, and now as the opportunities are coming up, investment is around that much more, and secondary to finding the right fit with team, market, and product.

As you can tell, I think growth capital interests me more than getting funding to get a market. I think both are fine, I just find I respond better to grinding, hustling and being resourceful.

This is armchair quarterbacking, of course, I'm not an entrepreneur and do not pretend to be one. Patio11 has a lot of interesting and relevant things to say, but I would hate to live in a world where entrepreneurs only undertook ventures that could be bootstrapped for a reason that I'll frankly admit is selfish: throughout my career I've worked on very fascinating problems in either VC funded startups or companies that have began their life as such; I can't see a scenario where I would have been able to do this (or similar kind of work) in a bootstrapped product company. That's not to say there aren't other interesting problems that could be solved in a bootstrapped company, but my own area of focus -- distributed systems -- is almost by definition something that requires both infrastructure and up-front development (and, in general, is only something that should be used if there's a scalability or reliability problem to start with.)

You can't — obviously. And folk like Amy Hoy @patio11 freely admit that.

The key word there though is "requires". I've encountered lots of companies that have spent silly amounts of money, often their investors money, because they've missed opportunities to validate their business model in cheaper ways. Either because they don't know how or they don't want to. Folk who are so focussed on the vision that their aiming for that they fail to look down as they walk over a cliff.

To stereotype slightly I'd say that folk with a dev background are more likely to go that route than not — since the business / marketing / user research end of the skill spectrum that can help with that stuff is less familiar to them.

Nothing against VC funding, and it's absolutely necessary for some companies. It's just that the majority of folk that I see trying for it are doing so before it is actually required. Either because they're missing ways they can continue more economically because they lack the skills, or they hope that the (lack of) positive feedback that they're getting so far will be solved by money.

As an armchair quarterback I'm a bit surprised about what you've said about "folks with a dev background" (if I didn't focus on distributed systems, I'd likely focus on development tools/services -- and there are tons of bootstrapped companies in that area), but I'll take your word for it.

What I meant, and expressed poorly, was that dev-ish folk tend to not have some of practices in their toolbox that you can use to validate cheaply (e.g. by knowing how to assess markets well, or knowing how to interview potential customers in a non-directive way, or indeed the ability to talk to customers at all, etc).

We also have a tendency to want to build things because, y'know, that's what we do ;-) We also tend to want to build things really, really well for that awesome future place where we have millions of users. So we over-engineer for where we are now, and the learning we need now.

Because of both of these issues I think folk with a dev background find themselves in a position where VC is the only route forward — when if they'd taken a different approach earlier on they could have continued bootstrapping and avoided VC money until later / forever.

Does that make sense?

It's a plan that probably works for enterprise middleware, but for the majority of reality that is not covered by such a descriptor, it is significantly harder to find a path this way.

Unless you're an Oracle consultant on one end of the scale, or a WordPress theme designer on the other end, you're probably not going to be able to repeatably find lots of clients who want a little of your time and are willing to pay enough for you to work on the side.

A lot of clients want to hire consultants for full-time work, and they are frequently only looking for bodies to fill chairs. Finding a decent client that treats you with respect and understands they can't monopolize your time is hard, hard work.

So if your R&D effort is not related to your consulting--or your contract terms assign ownership of all work materials to the client--you'll just end up in the same situation as having a job.

I suspect the only reasonably repeatable path for early funding for big R&D efforts is through obtaining grants. Learn grant writing, or pay someone who does do grant writing (imagine the longest paper you wrote in college and quadruple it). There are a lot of research grants available, even for independent people not associated with accredited academic research environments. There are even grants for work in the arts.

I've spent the last two years doing freelance consulting. The money I've made was great, but I'm no closer now to starting a company than I was before. You should only do consulting if consulting is what you want to do.

Outside of America this is basically how you have to do it pre-traction.

You could say "I want to build colonies on Mars, I just need 10 Trillion in capital!" or you could say "I want to build colonies on Mars, how can I get there even though I only have 1 / 100,000th of the capital?

The same goes for all these startups that think they need 2 million or 10 million dollars to start. You need skills and $100 to start. Someone mentioned distributed systems as an "unbootstrapable product" which is total baloney. Start by identifying clients that would buy your product once it exists and help them distribute their systems. Build up your team and use your spare cycles to build out the features you think you're going to need but currently can't find anyone to pay you to build them.

If you are still hung up on Space X starting with $100m, let me ask you this. Say Elon had lost it all on Telsa and he was starting with a loan from one of his friends to start Space X. How small would the loan have to be for you to confidently say that Space X would never get people on Mars? To me, the size of the loan only dictates the speed of reaching the ultimate goal.

More importantly, the goal of SpaceX is fundamentally the colonization of Mars, and the idealized method to do that is a fully reusable interplanetary spacecraft. If SpaceX had tried to build that and only that from their start they would have rapidly ran out of money, even $100 million, and had little to show for it. Instead they bootstrapped their way toward acquiring the capability to design, build, and operate such things while also building a corporation capable of funding such operations. Initially they built a small orbital launch vehicle, just barely at the limit of market feasibility, using very conventional technologies and very conventional designs, applying innovation peace-meal where it made sense. Even then it took them several tries to get a launch vehicle that worked, and it wasn't even very competitive in the launch market. But it proved that SpaceX was capable of building launch vehicles, which enabled them to get grants and contracts to build a launch vehicle that was.

It wasn't a demo or a prototype, the Falcon 1 was a fully functional "MVP". And it wasn't investment funding that got them to the next stage, it was effectively pre-orders for the next generation of their product. Then you look at what they've done since, they've built iteratively, advancing toward their goal, but even now they still haven't gotten everything into place that they need. They're still working on partial reusability, still working on manned spacecraft, still working on clustered core staging, and so on. But even so they have viable products that are bringing in a lot of revenue, with new products coming online soon that will bring in even more revenue. They are still several iterations and many years away from their goal but by the time they get there they'll have the expertise, experience, and revenue to actually make it happen.

As with most endeavors, it's almost always easier and better to get to a big goal iteratively. That's how you build skill, it enables you to sell your earlier iterations to maintain revenue to keep your company alive, and each iteration provides lessons which inform the next and can reshape the grand idea you once had.

First you bootstrap something less ambitious. Then you can use that money to start more R&D heavy companies.

Of course many natural-going ideas are also amenable to being bootstrapped (software development tools/services would probably be a good example), but key here is ideas that naturally arise from your area of expertise.

You can't. That isn't a problem though. The 'bootstrapped versus capital-backed' dilemma is false. It's not a case of one being better than the other so much as a case of "the one that's best for the business and its founders". Often there won't be a choice - some businesses have zero chance of raising money before they start and some have zero chance of starting without raising capital first. The discussion is usually around whether or not the majority of SaaS startups need to raise money first rather than any business.

It's hard but possible. Your team could do consulting on the side to pay for the R&D. A hardware company I am very familiar with did this for 2 years and skipped all seed funding, to build a highly complex and expensive hardware product. It was succesful.

What about universities and government funded projects?

Are you also under the impression that most interesting R&D need significant funding?

I can't speak of "most interesting", I can only speak of what I've worked on :-)

The latter requires more capital to expedite the ROI for the VC whereas the former is typically a much slower, organic process that may not reach an equivalent scale for 10+ years. I'm a firm proponent of bootstrapping and organic growth. After a few years of positive cashflow and growth you can walk into a commercial bank (gasp!) and setup revolving lines of credit or expansion capital to fund more growth.

commercial banks are incredibly hesitant to do this even if you've passed the magical 5 year mark. their commercials loans are underwritten by people who are extremely risk averse, and the "commercial bankers" at your local branch are basically the people who aren't good enough for investment banking i.e. the b-stringers who don't understand how a technology business works. they'll just say no. in fact, it's their job to say no. i have my doubts as to how much money they even make with their loans. most of their revenue comes from fees these days.

however - there are thousands of specialized finance firms who will gladly help you, because there is a massive hole in the middle of the money market for these kinds of funds. they will provide you with:

* revolving lines of credit

* commercial equipment leases

* straight up loans

* special insurance

* lots of other industry-specific stuff that a bank just doesn't even know exists

this entire industry has sprang up "overnight" in the past 10 years - the vast, vast majority of new businesses in america are bootstrapped (think restaurant, construction company, small accounting firm, small scale manufacturing/machining, software companies, etc). venture capital and large banks are not involved. this isn't their game. it's "main street".

these specialized firms generally specialize in an industry i.e. construction, technology, food service, etc. and will know at a glance if your business is healthy or not. and don't worry - they'll find you. they have a knack for swooping in at exactly the right time. they also will not require a personal guarantee, which is a huge leg up on the banks, who will make you sign at least 2 or 3 documents saying they own your life.

if you ask me, commercial banks are nearly useless for anything but checking accounts and wire transfers. they're run by morons, or at least people who don't give a damn about technology businesses, which is tantamount to being a moron in the 21st century.

second, what you're saying is so blindingly obvious that it doesn't even need to be said - startups do not fall into the category of traditional businesses with strong P&Ls and great balance sheets and constantly increasing margins, like a bank wants to see. most bootstrapped startups operate at break even, or can even dip into loss for a few months at a time. these are the companies that need the money.

this will immediately disqualify you for a bank loan. which is the original premise of this entire thread - the banks won't give you shit.

So as a bootstrapper are you still taking this approach past year 3 or 4? At a certain point you need to hone in on that repeatable / scalable business model and put up some numbers or fold.

If you're a couple years in and have bootstrapped past breakeven your funding options AND odds of survival are greatly improved- so why not orient around that outcome?

I'm not here to defend the absurd behavior and ignorance of commercial banks just pointing out that sometimes the game changes if you can afford to take a slower more incremental approach to growth than what is typically demanded by VC.

when the bank sees this, they will flip the fuck out. but someone with experience in your industry and a specific financial product designed to help you will know exactly what you're doing.

it's repeatable, it's scalable - however, it requires money to grow just like every other business. this isn't skating by on ultra thin margins with $50k in the bank - it's a business with significant cash that needs significantly more cash, and is willing to sacrifice margins in the short term to grow. and that's not what banks do (these days).

In startup world, they get also eliminated quite rapidly as they will just fail. Success of any startups is not to raise funds but to get customers who will pay for value and for that bullshitters cannot trick the system.

if only this was true!!

Peer review doesn't work in science because nobody cares to review unknown or lesser known authors.

Or so I've heard. All of the administration at my university is of course irreproachable. (Hi boss!) But the stories my friends tell me... ;)

This is necessary but unfortunately not sufficient. You still have to do all the sales and marketing grunt work. It is amazingly hard to get people to pay money even if they love your product. Brutal and depressing.