Bootstrap or VC

Disclaimer: All opinions are personal.

I have been running my bootstrapped venture over a year now & previously been on a startup team that went from angel-seed-series A. Having seen both the sides closely I have some thoughts to share. I’m writing mainly to solidify my own thoughts but you might find it a fun/useful read.

tl;dr – Both sides of the camp over glamorize their approach (yeah bootstrappers too), while in fact they both have pros and cons and really serve different purposes. Good news is, it’s one of the easier decisions in your journey. It ultimately depends on founder’s goal, personality & nature of the problem to some extent.

Let’s first look at major pros & cons on both sides.

When’s VC money good

  • Some problems are hard & market rewards only at the end (if you ever reach there). E.g. Drug to arrest cancer growth requires significant effort in experimentation, trials, regulatory approvals etc. Most founders won’t have resources to pursue this on their own & VCs have appetite for these kind of risks. So the problem fits VC model very well. Most SaaS problems don’t fall in this category though. If you think your “AI powered email marketing platform” falls in this category, you are either delusional or don’t know how to deliver iteratively.

What’s good about Bootstrapping,

  • Most bootstrapped founders start some kind of a side project (while having a full time job) & once they have enough conviction/desire/savings then jump full time on the project. This initiation method generally results in picking a good/real problem. It allows them time to toy around different ideas & more often than not they have seen how a failed response from the market looks like (curious onlooker signing up via ProductHunt is not a real customer).
  • Once they go in full time, they know if the customers don’t start paying in the next 6 to 12 months, they are out of business and back to the drudgery of a 9 to 5 job. Limited time and resources acts as a forcing function to optimize for  revenue/profitability. And the best early stage product decisions are made when you optimize for revenue/profitability. You can argue that it leads to local optima but I would take that any day over dying on a unicorn path.

Downside of VC,

  • Only two things matter at early stage: problem & the customer. In VC model significant amount of time/energy is spent in – raising capital, hiring, office logistics, team dynamics, managing investor expectations and such. All of it seems necessary & normal when you are part of that ecosystem, but if you think objectively as an outsider, all of it is a distraction from the two things that matter: problem & the customer.
  • In my last company we built location tracking as a service. Real problem for developers, decent solution, lots of organic signups/traction. All’s good. We come into investors radar, raise a bunch of capital. Now suddenly, we gotta be the “leader” in the location space. We have to be “visionary”, we should think beyond location tracking & serve every location use case that there is. In pursuit of grandiose you might miss the focus on your bread & butter. It’s a death of a company when that happens (and an eventual long drawn one for VC backed ones).

Downside of Bootstrapping,

  • It’s f**kin’ hard. Let’s say you start as a side project alongside a full time job. That means devoting your weekends and daily downtime to a project. Even if you do that for a year non-stop it really just comes down to ~3 months of full time effort. Doing that takes a lot of toll on your mind, body and relationships. Plus in the business world, nobody gives a damn about how much effort you put in, so it can all be for nothing.
  • To give a real shot at bootstrapping a SaaS business from nothing you need to have savings that will sustain you for 18 to 24 months at least. And you should be able to accept the fact that it can all lead to Zero financial earnings. I have been lucky to have some savings, have no dependents, and I’m building out of India where cost of living is low. Not all the pieces fall into place for everyone and I know some really talented people who can’t afford the risk for one reason or another.

Enough with the wisdom. How should I choose?

  • If you want to make a mark on the world/ leave a legacy /earn a billion $/ be famous, bootstrapping is not going to cut it (or at least not an ideal path for your goal). Let me explicitly state that there’s nothing wrong in any of those desires, most of humanities greatest achievement probably came out of one of those desires.
  • If you care about freedom, autonomy, are not interested in building/managing large teams, and can be content with better odds of moderate income (compared to low odds of large income in VC model) then bootstrapping is the path for you
  • Are you just flirting with the idea or are ready to commit ~10+ years of your life to it. Accepting investor’s money and abandoning the ship 2 years in because you are not psyched about the problem anymore feels unethical to me.
  • Are you a good generalist? A VC backed founder can be great at one or two things & can hire the best talent for gaps (assuming non-fatal gaps) but bootstrapping founder can’t have that luxury.

Lastly, I recommend choosing the path & then picking the problem that suits it. Since the life of founder in both these are very very different. Somehow the journey occupies more of our life & becomes more important than the mission/destination. Plus the odds of success are more when you choose the path that is in harmony with your personality & goals.

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