Going from $0 to a $750m valuation still counts as bootstrapping, even though "not taking VC" is no longer technically true.
Incidentally, there's not necessarily anything to be "proud" of if you don't take VC. It depends on the details of the business. 37signals has done fine without taking VC (though they did take a personal investment from Jeff Bezos), but Google, Amazon, Facebook, and the like would never have been successful without substantial outside investment.
Taking VC money when your company is already successful makes a huge difference. If you already have a decent valuation, you can raise money while keeping a majority stake.
The difference is:
* Taking VC money from day 1 and have a founder with a 10% stake
* Taking VC money when the company is already successful and highly valuated, so it can raises millions while the founder retains 70% of the capital
That's day and night. In the first case the VCs decide, and they can fire the founder if they don't like it.
In the second case, the founder controls the company and can tell the VC "thank you for your advice but I'm doing it my way" during board meetings.
But ... Their talk and brand and story is "doing it our way, in Chicago, away from all that Silicon Valley VC nonsense"
I'm not disagreeing with their choices (if Bezos offers to in est you say yes) but it does rather dim their core story.
That's fine - this is all part and parcel of HN - the real "how we got there" is always more educational for those following than the story told afterwards
They were bootstrapped. They basically 'made it' on their own, and later took some money. They didn't depend on the investment to get big, it only came along much later. At least, that's what I've read.
It's definitely a bit of a fudge. I believe their argument is that the money wasn't required for day to day use in the business or to fuel growth and was really just a way to have someone as key as Bezos associated with the company. If true, I can certainly buy that argument.
Essentially, their argument was that if Jeff Bezos invested, they could have access to his advice and connections which was worth way more than any money he put in.
Amazon has been profitable for many years now. YCharts showing profitability by quarter: http://j.mp/13zx97Z for the last 5 years.
Also, note that Amazon's initial business plan was such that it would not turn profitable for quite a few years, instead focusing on sales-growth. IIRC, they turned profitable around 2002.
I was being hyperbolic. Sorry. Amazon has made a minuscule amount of profit. Their numbers are horrible. I can't believe their shareholders put up with them.
Their most profitable year, 2010, they only made $1.15-billion of profit off of $34-billion in revenue.
In 2011 they made only $631-million off $48-billion.
A company's value is equal to its discounted profitability, adjusted for risk. A company that loses money now but has a 10% chance of making ten billion dollars a year in ten years is worth more than a company that makes a million dollars a year with little prospect for growth. My own primary business, the Ruby on Rails Tutorial, is highly profitable, but I'd still trade its income in a heartbeat for, say, 1% of AMZN or CRM.
Braintree is not a great example of a company that "didn't take VC." According to Crunchbase they raised a $34 million series A round and a $35 million series B round. BigCommerce also raised a $15 million series A round and a $20 million series B round.
Yes, correct, people keep making this mistake. 37s only accidentally featured Shopify who took seed money, but they corrected it and removed them from the roll once it was pointed out.
Are all of these bootstrapped, or are some of them self-funded? If I start a company, and invest $300k of my own cash, is this bootstrapped or self-funded?
That's an interesting distinction. I'm not sure enough information is available in most cases to tell. Without knowing the personal finances of the founders, it's hard to say if bootstrapping means they started with $0, $10k, $100k, $500k, $1m, or $10m in the bank. The implication is often that it's closer to the low end of that list, but people who start companies after doing something else for some years often have a substantial cash pile they can use to self-fund. Especially true when people bootstrap a 2nd company after exiting the first; then it can be closer to angel-investing in your own startup.
I would call it "Soft Bootstrapping". It is a very important distinction to make.
I used to work for a company which was growing like crazy and were signing customers left and right. The company hadn't taken any external investment. I was amazed at their "perceived" organic growth rate and very proud of working there. Then, the bubble popped. One day, I found out that one of the founders who actually plugging in the difference every month from his own pocket. Frankly, I was little disappointed.
I think its important to take into account the financial positions of the founders or their investments in their own companies.
> Are all of these bootstrapped, or are some of them self-funded?
HN doesn't seem to make the distinction, for self-funding of less than $100K.
The thing I find particularly fatuous: "We were bootstrapped until we took VC money", as if everyone who takes VC money isn't in the same camp. I guess the company I founded was bootstrapped until our A round valued at $40M. Hey I created a $40M company by bootstrapping!
Here at Toptal we were boot strapped for more than a year before taking any money from a16z and others. It not only helps funding, it also helps the core of your company run at a fundamental level; seeing every operation through the lens of profit vs. loss which most (purely) funded VC companies don't grasp very well at all. It's extremely important.
Not until way after they were profitable. And they took him on as an adviser more or less, they didn't need the cash. Tell if me Jeff Bezos said he wanted to buy a part of your company (which gave you some access to him) you would say no??!
I would say yes in a heartbeat. Would I then make such a noise about being bootstrapped and profitable? Not so sure. Pretty certain I would add a * with an explanation every time I mentioned bootstrapping.
But is your version of events correct? I've never seen the story myself on a 37Signals post.
I think bootstrapping means 'we didn't take any money before we were profitable'. I don't think taking money later counts, and certainly they didn't take any because they needed to expand or anything. I don't think they need to put any caveats. 37s existed for years and years, with their own web applicaton products, before Bezos came on board.
Boostrapping doesn't necessarily mean you never take money. It means they go off the ground running and built a business that was profitable without taking investments. After it was profitable for years they took some money (I have no idea why at this point).
VCs take a stake in the company and drive the priority towards serious growth. VCs don't want your company to grow sensibly and return their money, they want it to have massive growth or fail.
Bootstapping lets you run your own company along your own lines, you firmly remain in charge.
It's often summed up as to what drives your creation of the startup: being "Rich or King".
Bootstrapping means that you created your company without taking in any outside investors (from the idiom pull yourself up by your bootstraps). VC means you took venture capital money.
A successful bootstraped company generally starts smaller and grows slower than a successful vc-funded company but the founders get to keep all of the ownership. With the advent of cloud computing its getting cheaper and cheaper to bootstrap and it's making bootstrapping much more of a viable and attractive option.
Taking VC means you need to look for an out. In my mind that's the biggest difference. They don't want to invest in a company to take a portion of profit, they want you to sell your company or go public so they can cash out.
http://peter.a16z.com/2012/07/09/software-eats-software-deve...