No Venture Capital Needed, or Wanted

I'd like to see more of this in tech startups. Especially with all the free info from groups like Y Combinator that's online to help them. Just people in college, on summer break, or even retirement just cranking out code for a platform and doing sales trying to make it work. Should be more success stories out of it. I think most of these people just try to do too much themselves without external support both as a sounding board on their ideas and for how to run a startup. They probably read business books more tailored to lifestyle businesses and such whereas a startup has different rules.

I&#x27;ll share our story and current situation:<p>We bootstrapped with time (evenings &amp; weekends) until we had enough revenue to keep the lights on, at which point we quit our full-time jobs and pursued it 100%. We&#x27;re in our fifth year now and we closed 2015 with $2M in revenue. Excluding compensation, our operating costs (servers, professional services, supplies, t&amp;e, taxes, etc) are about $125k.<p>While things are great, growth has also slowed due to sheer bandwidth available from only 3 people. We&#x27;ve definitely struggled with hiring. When a new employee&#x27;s salary directly comes out of your own compensation, you tend to become very particular about people pulling their weight, so we&#x27;ve churned through 10 people so far. I&#x27;ve had a very difficult time competing for top talent.<p>At this point I think the networking and advice would be the most valuable thing a VC could bring to the table, as we have an abundance of cash and technically a very easy business to scale. Just need capable people who like to be well-compensated.

I noticed all these entrepreneurs had access to at least 100,000 dollars of capital and most several times more then that which I think makes such self funding easier said then done, at least for a large class of Americans. How much capital does a founder usually bring to the table for the first round of VC funding?<p>side note: I also happen to be in the market for a new mattress and was wondering if anyone has tried these Saatva&#x27;s?

It is the great irony of our times that a domain that requires so little working capital to start and grow reasonably well (software) is so hungry for money infusions. I hear that you need the money to grow quickly and growing quickly and capturing networking effects is the path to getting a horn on your horse. I&#x27;m not buying it. Being profitable as quickly as possible allows you to reinvest that money which then multiplies into even more investment capital.<p>Getting the know how and connections I can understand but VC for the money to fuel hyper growth...it sounds like a questionable proposition. Why would I put off testing the most fundamental hypothesis of my business (can it be profitable)?<p>Are there any known companies that explicitly didn&#x27;t take any money after YC? It feels like once you take the first bit you&#x27;re sliding down the slope since investors are pushing to take further rounds which usually pop up valuation. YC-&gt;bootstrap mode seems like a reasonable approach but the YC program seems to be built around pitching to the next round of investment (demo day). Has YC considered an alternate program where the explicit goal is being profitable after the program (black number day instead of demo day)?

I was reminded of 37 signals&#x27; &quot;Bootstrapped, Profitable, and Proud&quot; series.<p><a href="http:&#x2F;&#x2F;37signals.com&#x2F;bootstrapped" rel="nofollow">http:&#x2F;&#x2F;37signals.com&#x2F;bootstrapped</a>

&gt; In their haste to get financing, start-up founders often fail to read the fine print and later discover that they have signed away huge shares of the profits.<p>Does this actually happen?

&gt; [...] took $350,000 of his own money to write a business plan.<p>That is by far more money than I&#x27;ve seen in my entire life. Of course you don&#x27;t need money for your startup if you&#x27;re already rich.

In Japan, Start Today Co. Ltd. (better known as Zozotown, a popular online apparel retailer) went public this year without having raised any venture capital. $5B mkt cap at this time. Founder also owns way more than 50% of shares and recently bought over $100M USD of modern at at auction.<p><a href="https:&#x2F;&#x2F;www.google.com&#x2F;search?q=TYO:3092" rel="nofollow">https:&#x2F;&#x2F;www.google.com&#x2F;search?q=TYO:3092</a>

I have noticed there are a lot more companies on the east coast (including my own company) that are like this. Yeah I won&#x27;t be a billionaire but I think you can make a pretty darn good living with lifestyle businesses.<p>I have wondered if it&#x27;s a cultural thing or just that there is more money&#x2F;investors&#x2F;people willing to take&#x2F;give money in California.

One thing I haven&#x27;t seen mentioned yet in all the comments (or maybe I just missed it)is that a capital infusion can allow you buy talent and expertise which in turn permits you to grow faster.<p>In the article Rudzin worked for 20 years within the industry and he surely within that time had accumulated a lot of niche knowledge which helped him succeed.<p>Say X is a high school teacher with an insight that a better mattress is needed in the marketplace. She follows up on this and goes on to start a company that initially shows traction. X after a while will discover that her lack of knowledge in finance, distribution, negotiation, HR, legal etc (in a general sense, and on an industry-specific level) is a barrier to her companys development. Capital will help solve this problem by allowing her &#x27;buy&#x27; and domesticate expertise within the company and and use same for expansion and growth.

I&#x27;d like to see more companies bootstrapping with help from their communities they build that see real value in their products. Building a transparent and open product with community feedback around things that work is the core of what we&#x27;re trying to facilitate with Baqqer (<a href="https:&#x2F;&#x2F;baqqer.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;baqqer.com&#x2F;</a>). I believe this builds strong, robust products that aren&#x27;t built in a silo and launched without an audience.

&gt;When he created Spokeo with three college buddies from Stanford University in 2006, he tried to get equity financing, but was turned down by more than six angel and venture capital investors.<p>Maybe my perception is warped but is this even _possible_ today, or during the peak a year or two ago?

This is the money quote.<p>“I don’t remember seeing a company going public on the Nasdaq in the last 20 years who arrived at the I.P.O. with only management owning the company,” he said. “It’s almost a rite of passage.”<p>Why would you sell a business that you owned 100% of that was able to be bootstrapped to $100 million in revenue. What possible business that you could invest the proceeds in that would be better than this?

i&#x27;m surprised chobani is not listed here as it&#x27;s one of the most successful story of entrepreneurship with personal funding (+ small business loan) lately.

Venture Capital is needed to establish a ponzi-scheme like escalation in value. Multiple parties agree over a period of time that the company has increased in value, the most recent party making it true by handing over some money at the largest valuation.<p>No less than Steve Blank puts forth this idea: <a href="http:&#x2F;&#x2F;www.inc.com&#x2F;zoe-henry&#x2F;steve-blank-tech-bubble-burst-ponzi-scheme.html" rel="nofollow">http:&#x2F;&#x2F;www.inc.com&#x2F;zoe-henry&#x2F;steve-blank-tech-bubble-burst-p...</a>

garbage