Should Your Startup Bootstrap or Raise Venture Capital?
ฝัง
- เผยแพร่เมื่อ 12 พ.ค. 2024
- Within the world of startups, you'll find lots of discourse online about the experiences of founders bootstrapping their startup versus the founders who have raised venture capital to fund their company.
Is one better than the other? Truth is, it may not be so black and white. Dalton Caldwell and Michael Seibel discuss the virtues and struggles of both paths.
Apply to Y Combinator: yc.link/DandM-apply
Work at a Startup: yc.link/DandM-jobs
Chapters (Powered by bit.ly/chapterme-yc) -
00:00 - Coming Up
00:31 - Lopsided Issue
00:51 - Most Businesses
01:19 - It's Not Shark Tank
01:49 - VC is the Outlier
03:31 - Fake Argument
04:04 - A Bad Plan
04:26 - Many Paths
05:14 - Trillionaires
06:25 - Bootstrap Winners
07:46 - Stirring the Pot
08:37 - Why Seek VC?
10:06 - It's Not Personal
11:00 - What About ____ ?
12:36 - A Simple Game
13:40 - Outro - วิทยาศาสตร์และเทคโนโลยี
Chapters (Powered by ChapterMe) -
00:00 - Coming Up
00:17 - Bootstrap or VC?
00:31 - Lopsided Issue
00:51 - Most Businesses Should Not Raise Venture Capital.
01:19 - Lot Of Shark Tank Stuff Are Not Venture Capital Back-able.
01:49 - You Don't Have to Raise Venture Capital.
03:31 - Whole Argument is Fake News.
04:04 - A Bad Plan: Most People Who Are Rich Did Not Raise Venture Capital.
04:26 - Many Paths.
05:14 - About Trillion Dollar Software Companies.
06:25 - You Have Won Even If You Are Bootstrapped.
07:46 - Who Is Stirring The Pot?
08:37 - Why Seek VC? Why Should You Apply To YC?
10:06 - It's A Business Transaction And Not Personal
11:00 - Stoke Outrage: What About ____ ?
12:36 - Play A Simple Game
13:40 - Outro
You know it's gunna be a good day when you get that notification that a new Dalton + Michael drops
fr
These guys are so good. I love them.
It’s been too long without our drug
@AnthonySistilli Stop listening to podcasts, do your thing finally
Strange because I found them obnoxious
Great perspective! I would also add a hybrid approach - bootstrap, find product market fit, then ask for VC money to scale. Most VCs want some form of traction to begin with. So if you caaaan, start your business, achieve clear success, have a vision for mass scale, and then pursue VC dollars. But if your company isn’t a potential unicorn that can return 100x return to your investors, then stick with the small software approach Michael and Dalton mentioned. The money is still good!
Liked the measured approach, but took issue with a couple points. The first one being that there is *definitely* a moral debate around whether to go VC backed. There are many perverse incentives that exist for VC backed companies and founders that just don't occur if you bootstrap. Second, the idea that "there are many paths" and "no one is pressuring you to start a VC backed company" is just not true. For many would-be tech entrepreneurs, the media landscape promotes and glorifies raising venture capital far more than it does bootstrapping or engaging with alternative models like starting a cooperative.
True but remember that VC's are businesses that want to expand and attract talent. They are mostly funding the narrative via expensive press releases in order to market themselves.
I agree. If you bootstrap, you do need an extra type of grit because you're not perceived as successful until you're actually successful. Whereas being VC backed, there's an immediate validation and perception of success. This isn't an internal struggle, but unfortunately something you feel from your peers and non-peers. I'd also add that there are certain disruptive companies that are more readily bootstrapped because they create a new market VS disrupting an existing market. If you disrupt an existing market, somebody with a lot of money to lose will be fighting you with a packed deck. You can definitely win, but the amount of mistakes you can make is limited. VC backed you can make a lot of mistakes.
Can confirm, 1.5+ years into a micro SaaS with a day job, solo, no co founders or team, no money. Grit is great word for it. It’s freaking hard.
I love these talks. Clear up so many cobwebs. I think another thing is the "VC" validation syndrome. "If I make it into YC, I'm a success".
The probability is better.
VC money is the closest to a forgivable loan for early stage startups. If founders had access to other forms of forgivable loans for taking risk then VC will just be some niche field. There is also discontent that certain "elites" get access to other ppl money and pick winners and losers and get the upside but don't face downside risk. It creates a sense of haves and have nots.
Try to use your own money. I sold my house and put into the company. That skin in the game made me work long nights for two years. This will give you leverage. Secondly, being anonymous and not being noticed it’s good. There won’t be many people copying your product nor competitors attacking your infrastructure. Try not to be noticed as long as you can.
Did it pay off after 2 y of hard work, or are you still in the process of growing?
@@-blackcat-4749 We did not grew like a VC backed company, but we are currently with 700 paying customers and USD 70k in MRR. We grew 8x in 2023.
I don't have any money
What? My current startup is tiny and has been quiet as can be and we've been ripped off 3 times that I'm aware of, one of which was by a YC backed company who pivoted and changed their entire product direction to compete directly against us. We've barely been around 5 months.
Note: I always have to explain this after an ignorant comment saying "BuT How Do YoU KnoW TheY CoPiEd YoU?" ... Because we're a browser extension with a custom oauth system that runs on install and uses their session tokens for the platforms we're built to sit on top of to automatically create an account for them with our app. This means we have the emails of everyone who installs our extension including the founders who went on to rip us off.
I'm no longer working in VC or tech, and I still love to watch Dalton and Michael's YC videos.
What do you do now, if you don’t mind me asking?
@@semyaza555when you’re done in VC and tech you’re done done 😂💰
shoutout to Michael Seibel! We've missed your unique laugh, homie!
Amen to that
i was Very Confused about this Thank you so much for Clearing My Doubts, these two guys helping me build my Startup Thank you YC ❤
Thank you for the advice @YC
bro speaking facts ! Thanks Dalton & Michael
"No other mechanism exists" we used to have public markets fund early-stage companies. Maybe if VCs hadn't privatized the funding market while they actively kill companies that aren't immediately 100-baggers (the misery isn't equal btw - founders bear by far the brunt of it), this topic wouldn't be so controversial.
& there’s the “VC x 100” blah blah vs. bootstrap. There’s barely anything in between…
What’s the history behind public market funds? Does it actually work reliably for founders to acquire capital?
This is just plain false. VCs didn't 'privatize' the funding market - businesses went to wealthy venture capitalists because they couldn't get funding from public markets not the other way around. VCs don't actively kill companies, the companies just don't receive any additional funding.
VC make it more efficient. Business that doesnt show growth at early stage doesnt deserve continuous funding. You might say, oh they have potential, they might not now, but in the future it will be when it take off. But, no one can predict that and no one buy into "potential". Growth is easier to measure. even more so in capital market, even a quarter of bad performance can drain your funding.
Having been involved in the Portland start up ecosystem, I think it's very location dependant on the debate or not. Certain markets have different VC companies and different experiences than others.
I would also say many boot strapped founders are very proud of not having outside support.
This is a great talk breaking some of the outside noise that happens. ❤❤❤
I thoroughly enjoy this series!
Another great video, thank you guys!
Thank you for advices😊
Thank you for yet another informative discussion! 🤔Hmm -- social network for dogs?
Such a great duo !!!
I get so much from their chats. They should most definitely do a Netflix series!
Very Informative
"Hi Y Combinator, I really enjoy your videos and appreciate the effort you put into your content. I wanted to suggest considering the addition of multiple audio tracks in your videos. This could provide viewers with more flexibility in choosing their preferred audio options, enhancing the overall viewing experience. I've noticed other creators implementing this successfully, and I believe it could be a valuable addition to your already fantastic content. Keep up the great work!"
I have a hardware /software startup, I wish there was a middle ground like a VC lite that invested in companies that have a higher chance of success but promise only a 10x to 100x chance of return. Anyone know anything like that?
Private equity? And series A funds ?
Michael I have two questions for you. Please make a video on this.
1. English is not everyone's first language, if the Founder and CEO is not fluent in English, will that be an issue to raise funds? Given the fact that you guys only allow 10-15 mins interview, what if the founder's idea is good and his execution capability is also good, but he can't express everything during the meeting?
2. Whats your view when a startup wants to serve both B2B and B2C? For example, lets say someone wants build project management tool and lets name this company XYZ. Now, business like this could have market on both B2B and B2C side. Individual can join in XYZ and use it for their own personal project. Same way, big corporation could signup in XYZ and use it for their day to day work. For a startup like this what should they highlight most?
Always delivers great content. I love em so much
Me too!
Out of curiosity, where do angel investors fall in this?
Angel investors are not all the same, they come with different intentions depending on how deep their pockets are & what type of businesses they want to involve themselves in. Some focus on VC backable companies at the very early stages with high potential, others support shark tank level companies or even small businesses. Know your investor and the businesses they’re interested in to assess whether they are a great fit. Also I found angel investors to be much nicer to work with than most VCs.
It sounds like it all comes down to the unit economics and scale your Startup can provide long-term (assuming the product is good and in demand).
Scalability > everything. Many companies get Venture backed even with flawed unit economics. But unit economics matter a lot for bootstrapping.
Thank you for another insightful conversation. The discussion touched on the concept that VCs are looking for a return of some particular multiple on their investment. Have you considered a video or discussion about finding that "sweet spot" where founders and VCs find the most mutual benefit?
What are the lower bounds of what's considered "Venture Capital"? I'm trying to bootstrap a SaaS company. I don't have the cash in the bank to make it successful, but don't think it takes much to get there. We're approaching having a demonstrable (not quite launchable) product. Once we have it in "show me" state, I plan to start hunting for $100-200K, the amount of money I think it's going to take to get us to first-paying-customer usability. But based on what I read and see on TH-cam, it sounds like the term "Venture Capital" is more in the megabucks realm, and what I'm searching for might be perceived as "too small to bother with". Is that the case?
I think a big point missed or understated was owner’s freedom. If you get an investor based on an ambitious business plan you got yourself a boss. In my case I would avoid it as much as possible, otherwise being a founder would be too similar to being an employee
"I'm not going to name any names..." okay I will, it's 37signals 😂 I thought this was an excellent discussion by the way.
These captions are wild. Some of them read the absolute opposite of the point being made!
How much of the advice on this channel also applies to non VC-backed startups?
Launch early, talk to your customers, and build something people want applies to all startups
Michael and dalton videos are so amazing and make sense
does anyone know if there's a way to get feedback and advice from an investor on how to monetize a product? I built a software that people use daily and they love it but I don't know how to monetize.
Give them the good old fashioned paywall
Edit: out of the box/ white label, subscriptions, memberships, etc
The truth is that the answer you're seeking can either be as easy or complex as you think is necessary. On the simpler end of the spectrum, pick a few limits in the product that feel aligned to what users perceive they're getting value from and then start charging. On the medium end of the spectrum, run surveys with your users and try to figure out what the sweet spot is to monetize (van westendorp, maxdiff, etc.). On the far end of the spectrum, you can break your users out by persona/cohort and get really fancy about pricing scales/limits and put certain pricing information behind a form where the customer needs to contact you.
My suggestion would be to start simple on the simplest end of the spectrum. Charging users will teach you a lot about what they actually value.
Love them❤
Luckily I've started thinking about VC business ideas before TH-cam even existed, so at least the "had been convinced by youtubers" weight is off my shoulders 😅
Who are those guys? They’re awesome!!
Even if the number is 1% , it is quite impressive, as it means that if we divide all businesses in a group of 100 , we can bet on the chance of getting one vc backed startup from each group.
I like the VW...
Some of the best content on TH-cam
In 🇿🇦 Private Equity has consumed all the capital and atrophied VC. Bootstrap or die.
5:35 Not true. Microsoft did not need VC money. Gates famously is quoted as saying he only took a VC check to get a VC on the board. The money wasn’t needed and just sat in a bank account.
My definition of a great podcast is when hosts laugh more than they talk, and 100000 people still want to watch it
The real issue is being VC backed is seen as "success", so founders spend all their time pitching VC's and trying to raise, instead of talking to customers and building their start up. All the pro-bootstrapper guys couldnt handle the grind of pitching 100 VCs and getting rejected 99x so they hate on it saying "bootstrap or bust, VC sucks" 🤣
as a bootstrapped founder, you should definitely raise capital
YC is like an HR outsource for VCs. Take all with a grain of salt
I could watch these guys talk about anything. Such a cool vibe to this series. That they talk about startups is just a bonus.
Microsoft is a trillion dollar company that was basically bootstrapped.
Only raised $1mm in 1981 ($3.16 in today's money), 5 years after founding, without needing the money ONLY to get access to an advisor.
I got great ideas love to apply for YC can someone help me to do it. I mean someone that did it.
Was that a DHH reference? I am sure there are others, but he seems **really good** at getting people agitated (see typescript)
For the context, Twitch isn't a profitable company. So the guy on the right did the exact opposite of what he suggests. Be wary of what people claim; it's often not that simple.
But twitch brings in a consistent user base with strong engagement and both current and potential advertisement dollars. It also builds network effects for Amazon. It’s not just about profit if other parts of the business can produce incremental value for the acquirer.
Twitch not profitable, but someone paid $40b for it, so valuable
If I would have wasted all my time pitching an idea, I would have nothing. I bootstraped my video Chat marketplace with profits from my plumbing company.
Gradually raises voice: "But WHY won't they fund my social network for DOGS?!? 😡💨💨"
tfw you went on shark tank and then raised money and then learned this lesson the hard way
10:55 How on earth did WeWork get funded?
It was nothing but a real estate rental biz, masquerading as a tech company.
Thumbs up - If you want to hear Dalton and Michael's breakdown on a future video.
it was funny great speech, describing all insight
❤
I think Micheal might be on to something when he says social network for dogs
7:51 is that DHH?
>social network for dogs
hey guys I have a good idea for a business
Hello from Singapore.
These guys are doing the classic take away. " you don't need VC funding. In fact I don't recommend it!" Lol 😂
I love how this video fails to cover the pros and cons of VC - and conveniently hides the fact that VC can easily steal the soul of your company from you 🐉
Am I too young, old, or stupid that I don't know what is shark tank?
Microsoft was bootstraped
Microsoft raised $1M from TVI back in 1981
Someone please fund the social network for dogs!!! Ha! Please!!!!
Microsoft was essentially bootstrapped. So there's one $1T biz that was bootstrapped.
Bitcoin is $1T "startup". No VC fund raised.
Ethereum was $570B "startup". No VC fund raised.
Ethereum was funded by its founders for ~1m and they also ICO for ~20m.
I’ll make this short: you should bootstrap. The vast majority of you, should bootstrap. Period.
I'd fund your social network for dogs Dalton, the big VC's just don't get it smh
Jet fuel for the win!
Vaportalk
Great take! Check us out if you want to hear some more stories from self funded founders :)
Does Bootstraping = Operating Default Alive?
No. At least not in my case.
It means you get to decide what “alive” means. 😅
Understand that the vast majority of businesses should not raise venture capital and that venture capital is not interested in investing in the vast majority of businesses. 0:54
Recognize that most businesses started each year are not venture-funded, making VC-funded businesses a rarity. 2:18
Acknowledge that venture capital is designed for investments that can potentially return 100 to 1000 times more, and putting 'jet fuel' into something that cannot grow significantly is detrimental for everyone involved. 2:50
Realize that becoming rich or successful does not necessarily require raising venture capital, as many wealthy individuals have achieved their status through various means other than VC. 4:29
Know that if your startup does not need venture capital upfront, you should not pursue it just for the sake of it; venture capital should be sought if there is a clear need for significant investment to achieve business goals. 8:57
Remember that raising venture capital involves a business transaction where you must convince investors of a potential significant return on their investment. 10:11
Avoid falling for engagement bait online that tries to incite outrage by comparing your startup to seemingly unworthy ventures that received funding; stay focused on your business fundamentals. 11:35
These guys are so full of themselves and patronising.
My app idea will cost 100k to set up, all I wanted was an MVP. Still hustling
Can we talk about this ?
I'm amazed that people don't get this intuitively.
hahahaha
Not even a serious conversation. Not helpful.
this video is so smug, so disingenuous and so bad it hurts my head...
♥️