Here is the central reason for bootstrapping: nobody will lend you a dime on an idea, nor can you sell any percentage of an idea for anything.
To see this clearly, take one of the most successful recent tech startups you can think of, say one of those hot items going for a billion, rewind it 10 years, and, placing yourself in the point of view of the founder (but knowing how things actually are to unfold), write down this knowledge: write down every single thing that will lead to this becoming a billion-dollar company.
Now, I'm telling you that even with the wisdom of 20/20 hindsight vision, no one here can write anything that would have convinced anyone, had they had that document ten years ago, to invest $100,000 into 7% of that idea, of that business plan, with no steps performed nor any revenue or anything else.
In other words, looking at an investment that -- due to perfect hindsight -- we know results in guaranteed 70000% return in 5-10 years (the quotient of the 1B current valuation and the valuation of $1428571 that 100k for 7% implies) -- we can't get a dime.
that my friends is the true reason for bootstrapping. To turn the ten thousand dollar idea - to say nothing of the million or billion dollar idea - into something that is, well, worth a dime.
(Of course, there's another point, that's hard to remember in the current climate of investor ferver. Not only do bubbles pop, but investor sentiment can sour for all sorts of reasons that have nothing to do with you. If you've bootstrapped, but can't raise money, then all you're left with is -- cold, hard cash streaming in every month until sentiment changes, or you change, and you finally can. Overall, that is not such a bad place to be...)
I agree that you have to have something that people can invest in - something that has value - before it will get any money.
chmike's question of how does YC do it then? It's based on talent, as he said. The people / founders with domain expertise / knowledge do have a certain value to them - and that is really what they're investing in.
If you're an engineer, then your value to tech startups and investors is seen even more valuable.
I wonder, in the most recent batches, how many YC accepted companies went in with just the idea vs how many had already started building something/had a demo.
It's how small businesses around the world have, and continue to start their businesses.
Web startups, ironically are one of the fields that enable bootstrapping a lot more with the low overheads, and how much one or two people, or a small team can get done.
Of course. You're right. It's really about announcing the time, energy, sweat, effort, etc. you've put into it - and by announcing it I feel people in a way are celebrating it, that they are proud of it - which they should be.
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[ 3.5 ms ] story [ 40.1 ms ] threadhttp://en.wikipedia.org/wiki/Bootstrapping_(statistics)
http://en.wikipedia.org/wiki/Bootstrapping_%28compilers%29
To see this clearly, take one of the most successful recent tech startups you can think of, say one of those hot items going for a billion, rewind it 10 years, and, placing yourself in the point of view of the founder (but knowing how things actually are to unfold), write down this knowledge: write down every single thing that will lead to this becoming a billion-dollar company.
Now, I'm telling you that even with the wisdom of 20/20 hindsight vision, no one here can write anything that would have convinced anyone, had they had that document ten years ago, to invest $100,000 into 7% of that idea, of that business plan, with no steps performed nor any revenue or anything else.
In other words, looking at an investment that -- due to perfect hindsight -- we know results in guaranteed 70000% return in 5-10 years (the quotient of the 1B current valuation and the valuation of $1428571 that 100k for 7% implies) -- we can't get a dime.
that my friends is the true reason for bootstrapping. To turn the ten thousand dollar idea - to say nothing of the million or billion dollar idea - into something that is, well, worth a dime.
(Of course, there's another point, that's hard to remember in the current climate of investor ferver. Not only do bubbles pop, but investor sentiment can sour for all sorts of reasons that have nothing to do with you. If you've bootstrapped, but can't raise money, then all you're left with is -- cold, hard cash streaming in every month until sentiment changes, or you change, and you finally can. Overall, that is not such a bad place to be...)
Don't understand me wrong, I'm also convinced bootstrapping is the preferred way to go if we can afford it.
chmike's question of how does YC do it then? It's based on talent, as he said. The people / founders with domain expertise / knowledge do have a certain value to them - and that is really what they're investing in.
If you're an engineer, then your value to tech startups and investors is seen even more valuable.
pg, can you tell us something about this?
It's how small businesses around the world have, and continue to start their businesses.
Web startups, ironically are one of the fields that enable bootstrapping a lot more with the low overheads, and how much one or two people, or a small team can get done.