I have talked with quite a number of early stage startups who are all bootstrapping. They aren’t interested in VC (yet) and are focused on building their startup on open source software, generating revenue out of the gate and growing organically.
As higher levels of funding dry up, entrepreneurs are having to reassess all of their options. One of them is to bootstrap the company, and event to do it as a sidestartup. There are a number of benefits to doing so:
- Don’t have to spend time on raising capital
- Maintain full ownership of the company
- Stay focused on the product / service, by not having to scale up too quickly
- Can work with customers directly
In the software / Internet space, will we see the number of bootstrapped startups increase? Do they have the chance of rivaling funded startups for the total number of people, IP, etc? The potential is there, the tools are available, and the ideas are ready to be executed upon.
About nathan kaiser
I think bootstrappers have a BETTER chance at succeeding than the funded guys. Maybe I’m biased because my two successful companies were bootstrapped and the unsuccessful one was funded.
1. Bootstrappers by necessity have attainable goals, not low-probability land-grab tactics that usually fail.
2. Bootstrappers can change goals/tactics/products/anything based on the environment (read: recession + changing technology) whereas funded companies have to do what they raised money to do. (Until the B round where they change their minds completely for another $10m.)
3. More people make money bootstrapping than raising money, and now everyone knows it. There’s enough transparency from the likes of 37signals or even my own Smart Bear that everyone knows it can be done and can even read about how it is done.
Right now Smart Bear is feeling the recession just like everyone else, but we have money in the bank and we’re lean enough that we’re still not burning cash. (We’re just not making the profits we were last quarter.)
I dare you to find 3 VC-funded companies with our amount of revenue who can say the same! Bootstrappers are the ones who will survive the recession, and they’re the right way to start for the same reasons.
Now is the best time to start! Go for it!