It is tough to have these two mentalities at the same time:
> Your employees adopt your bootstrapped mentality and they, too, are careful of where they spend your money and try to be as resourceful as they can with limited resources
and
> Could I go and raise a few million bucks in a seed/series A round today? As a second-time founder, yes — I’ve said no to several investors already and have a strong network.
The biggest expense in almost any startup is employee salaries, so raising money almost certainly means higher salaries for employees. So you are basically saying: "I'm rich and have connections, but it is better for the business if we all are very lean". While it is true that being lean is probably better for the business, it only works if the employees buy into it. Maybe you are giving employees tons of equity and that causes them to buy in, but otherwise the whole thing seems pretty hollow.
Other than equity, there are a number of choices there. One is working conditions: you have a lot more freedom to grant people unusual working conditions if you answer to nobody. Another is compensation. Not only could you grant more equity, you can also use contractors or part-timers more freely, or otherwise mess around in ways that VCs tend to frown on.
VCs are very optimized for "go big or go home." It's nice to not have that pressure early on, for the founders and the other employees.
It's interesting how different the feel is at different companies -- VC-backed vs private-equity-backed vs public. Bootstrapped is potentially a different feel, and a better match for some people.
Does it work out that way in practice? No clue. Never worked for one of these, though I've worked for VC-backed, private-backed and public.
I guess it depends on the type of company he wants to build. Does it work? Remote companies work for some, and don't for others. Not using contractors works for some, and doesn't for others. It all depends on your existing team/culture/product.
I really don't think that's what he's saying. When companies have a lot of capital at their disposal they tend to make more wasteful decisions. Dump money into poorly optimized Facebook ads or pay over-priced PR firms. We see this all the time.
There is a certain scrappiness that comes with being a bootstrapped startup. Your ad budget is $0 and you have to come up with creative ways to generate buzz. The struggles end up forming a foundation and culture for a much stronger company in the long run.
So he isn't raising capital so he can penny pinch his employees. He's not raising capital so his employees can be a part of a business that will be around in 3 years.
It's another example of "the properties of gasses": they expand to fill their containers. The more money you have, the more money you spend, even if you don't really need to.
When it comes to investor money, at some point you basically have to spend it. That's the expectation of investors: they gave you the money so that you would invest it to expand the business faster than it could organically grow. If you hold onto it and try to continue running a lean business, you'll run into issues.
I'd be curious to hear more about these issues, either from founders who've encountered them or VCs who've created them. I understand the idealogical variance at stake, but the key difference is not whether that money will be spent, but how quickly.
I think the ideal situation for a founder would be to grow the company organically, while having money in the bank available to overcome hurdles that can sidetrack a bootstrapped company.
There is a balance here that I believe maximizes a company's long-term sustainable success rate. Sure it requires discipline, but that's a foundational attribute for startup success of any kind.
Entrepreneurs who have a) a very strong track record or b) easy access to large sums of capital can do whatever they want.
For the rest, it's helpful to conserve resources while searching for a business model or product/market fit. Then, once you find fire, pour gasoline on it.
I think the other way around this is to simply have less employees. This is the path of many "lifestyle businesses" (VC speak for small business that happen to be tech-oriented).
> so raising money almost certainly means higher salaries for employees
> but otherwise the whole thing seems pretty hollow
uh, what? why? how did you come to this conclusion? you're wrong. not only are you wrong, you are also assuming he's being cheap to his employees. you just made up this fact in your mind, and assume it to be true. quite frankly, that's you projecting.
we're bootstrapped and we pay people higher salaries to incentivize them to work for a smaller, "unstable" company. if we raised money tomorrow nobody's salary would change. my salary as a founder probably wouldn't change. i'm pretty sure that anything beyond a nice dinner to cap the occasion, i.e. just paying ourselves more because some new money showed up, would be frowned upon pretty heavily by anyone investing money.
and i am aware of several name-brand funded companies that pay people less than market just for the privilege of having their company on a resume.
bootstrapping doesn't mean "be a cheapskate and pay everyone under market" it means "earning and using revenues to grow the company at the early stages and possibly beyond". you can bootstrap and pay people above market salaries, or pay yourself a wildly inflated salary if you are the owner.
you have a fundamental misunderstanding of how modern small businesses work, probably because you have never run one.
> Your employees adopt your bootstrapped mentality and they, too, are careful of where they spend your money and try to be as resourceful as they can with limited resources
and
> Could I go and raise a few million bucks in a seed/series A round today? As a second-time founder, yes — I’ve said no to several investors already and have a strong network.
The biggest expense in almost any startup is employee salaries, so raising money almost certainly means higher salaries for employees. So you are basically saying: "I'm rich and have connections, but it is better for the business if we all are very lean". While it is true that being lean is probably better for the business, it only works if the employees buy into it. Maybe you are giving employees tons of equity and that causes them to buy in, but otherwise the whole thing seems pretty hollow.