Highly Successful Bootstrapped Startups
Published in 2011, this chronicle by @davidw details the mechanics of building a profitable, self-funded business without venture backing.
Core Principles for Independent Builders:
Charging customers from day one acts as the ultimate filter for building software that solves genuine, high-urgency problems.
Keeping fixed overhead low and leveraging lean infrastructure allows founders to stay alive until market tailwinds kick in.
Small, repetitive improvements in customer retention and conversion rates yield massive returns over multi-year horizons.
Community Debate Themes:
The community focused on B2B customer acquisition channels, cold email vs SEO distribution, and balancing full-time employment with side-project development.
CATEGORY Bootstrapping & MRR →
HISTORICAL ERA Web 2.0 Genesis (2007–2013)
COMMUNITY SCORE 226 points
TOTAL DISCUSSIONS 68 comments
Hmm. Let's see. We're AirBnB. After 4 months of bootstrapping by selling Obama-O's, do we take $20K from YC? Of course! It's YC, and we can still bootstrap if we want. After a few more months, do we take $600K from Sequoia and another firm, and let rapacious VCs into our tent? Well, we're hungry because the Obama-O's ran out, so OK. The next year, do we let Ron Conway and Ashton Kutcher(!) and others give us $7.2M more? Tough decision--we can control everything and have a nice, small business like--what was that highly successful company? Carbonmade--and bring in $1M in revenues a year, 100% ours, or give up a third of the business for seven times that. What to do, what to do? We cave in to The Man and take the $7.2M. What, you seriously wouldn't want to hang with Ashton and Demi? Another year goes by and Mark Andreessen and Jeff Bezos want to join in with a crazy Russian and give us $112 million for another 10%. No way! This kind of offer insults our bootstrapping dignity. Besides, if we're highly successful like Carbonmade, we could make that much in 112 years on our own and keep 100% of it, after expenses. But we sell out anyway, at a billion-dollar valuation. We might each get a few hundred million with a successful IPO, but it's just not worth it compared to the satisfaction we could have if we owned 100% of a million-dollar company. Paul Graham must be ashamed of us. We drown our sorrows in an apartment in Saint-Tropez that we rented through AirBnB with Ashton and Demi. Bruce Willis stops by to say, "What's with the sad face, boys?" He's not as tall as we expected. We give him a glass of absinthe. The Mediterranean sun is not unpleasant.
I've heard of 3 out of 10 of these highly successful startups. I think we call ourselves successes prematurely to try to accelerate the arrival of true success. Again today a very good friend who runs a startup with great potential trumpeted the fact that he is profitable. Looking deeper, turns out he's no longer pouring cash into the company, but unable to pay himself a salary.
Lets cut the bullshit guys. You're "highly successful" when you're able to pay yourself and your employees above market rate salaries and retain profit for growth.
Edit: ...as well as being able to start making a dent in the debt you may have accumulated during the cash burning phase of your startup. If you want a really fucking scary exercise, plot your cashflows to date and do a NPV or IRR calculation on the flows. You'll have quite the come-to-jesus moment and will realize how deep the hole is you need to climb out of before you can call yourself successful.
I was just discussing this with my wife last night. My 2 friends and I bootstrapped our company for $300. Knowing that all the success we are enjoying now came from our hard work and that no one else can take any claim to our any part of our success is such an awesome feeling. I talk to a lot of local angels and VCs now and what they offer really doesn't seem that interesting to me anymore. The business I have now will probably never make hundreds of millions of dollars, but I don't feel the need or desire to hit those kind of numbers if it means I have to sacrifice my lifestyle now (a very awesome lifestyle).
Bootstrapped startup owner here... I am of the opinion that if a business on the Web needs millions of dollars to get off the ground, then it's probably a business that isn't worth getting off the ground.
I realize that there are exceptions and there are ideas that need funding to get going, but the whole incestious culture of venture capitalists, investors, and startup idea owners often doesn't foster real innovation. It instead lines the pockets of a select few with millions of dollars. Just a slick redistribution of wealth.
The media needs the sports-like entertainment that lives inside startups to sell their stories, don't get upset because these other successful businesses are not talked about all the time, they just are not that mainstream and IMO some people don't like the attention, so they go low profile and still are extremely successful, just like you know someone did something great at some point that changed your life, and you never got to know who did it.