Ask YC: Are you self-funding/bootstrapping?
Just wondering how many people here have been self-funding/bootstrapping their projects and how has that been working for you?
Personally, we've been self-funding Openomy (http://www.openomy.com) since it began in mid-2005. Overall, I wouldn't change a thing. We now have 50K+ users, a scalable infrastructure, and full control over what happens with the site.
That said, I think we hurt ourselves by not looking to take _any_ capital: we spent a lot of time rearchitecting our infrastructure to scale, and we still work on the project only on the side. If we could have hired a couple engineers and worked full-time, I think we could be much further along in completing our vision. We may have even been able to do more marketing (more == any)! ;)
Still, to note just how cheap it is to do a project like this these days, we spend <$1000/month on our servers (colocation/bandwidth + S3), and $0/month on anything else.
I'd love to hear from others and to see how bootstrapping/self-funding has treated you, what you enjoy the most, what the hardest part is, etc.
Published in 2008, this chronicle by @iseff details the mechanics of building a profitable, self-funded business without venture backing.
The community focused on B2B customer acquisition channels, cold email vs SEO distribution, and balancing full-time employment with side-project development.
Low living costs + high relative wages for a western-educated human being in South East Asia = my short-term boot-strapping strategy. See below-the-fold for details of that.
First, the past:
* I bootstrapped my first venture, called Ethical Style, when I was 20 and going to university (5 years ago). The idea was to support independent artists abroad by marketing (for profit) their products in N. America. I sold on- and off-line and made a little money, nothing big. I stopped working on it after a year, when I got accepted into a program that let me travel the world to promote Canadian businesses and meet "important" people (stayed there until I saw enough government fraud to make me sick).
-- Spending my own money on my first business, which I really believed in, felt natural, and I liked the idea of growing 'with' my business, one challenge at a time. The only reason I'd have rather had other people's money for that business, is because it was my first business venture, and I wish I'd sought more advice from people who knew what they were doing. Raising money would have entailed this sort of learning and possible mentorship.
-- An important aside: being in school was a big distraction and took away from the necessity of commitment to what I was doing. Had I really depended on this company as a full-time endeavor, I think I'd have kept at it longer and learned more.
-- The money I spent on this company was earned in a damned-hard-assed way: tree planting in the mountains of British Columbia. Camping out on the side of a mountain planting 2000-odd trees a day in the thick of bugs and blood and tendonitis and rain and snow was by far the most challenging thing I'd ever done, and I failed more at it than I'd failed at anything else in my life before I finally learned how to be successful 2/3 of the way in to the season. So there was a lot of sweat in that money I spent.
* In my last venture, we had 4 equal partners with a 'consensus' decision-making structure. Maybe this would have worked if it wasn't complicated by dramatically differential personal knowledge of each other's working styles, morals, and skills -- in our case we had to go through the difficult process of removing one founder part-way through, and then I burnt out from stress after living alone inside the product development office I started in China for half a year.
-- In general I don't think my personality was strong enough yet to deal with so many issues related to working with older people related by family, especially when most of our communication was on the phone or email (we'd never actually worked closely together, ever, before two of us -- then, later, one of us -- came to China to do the bulk of our product development work.)
-- This company is still going without me, and all relationships remained intact after I left, thank goodness
-- Taking money as a young, eager person, I wasn't forceful enough in putting my own point of view and thinking independently. I too easily believed what the older investor said, too easily gave them the benefit of the doubt. I like to think I'm a lot more skeptical now. So the psychological effects of taking money need to be included in the discussion. I like the idea of bootstrapping because of the independence that it fosters in my own psychological development -- but I think some investor situations would also help, rather than hinder this.
* I don't perceive capital as being all that scarce. If I have a good idea that convinces me, then I am relatively confident that I will be able to find funding to match the merit of my endeavor.
-- Finding good people to provide that funding along with healthy relationship and support, however, is extremely valuable in my books and not guaranteed or simple or straightforward (enter: luck, kindness, etc.). -- I think this attitude helps me, because I don't feel like I'm not taking capital because I'm not "good enough", eg/ it doesn't hit me in the ego and scare me out of having confidence.
--------- the present / future ---------- (story-telling time!)
While I am currently waiting rather passively for the twin progenitors of startups (idea + energy) to consummate their relationship in my life again (I'm still in the pre-conception stage of my third venture) I'm replying to this anyway because of (1) self-perceived inevitability of my starting a new venture in the next 6-12 months, and (2) my decided preference to bootstrap, after a rough experience with a push-forward-faster-than-you-can-comprehend-your-own-world, aggressive-angel model of my last startup.
A few months ago, my own burnout (http://news.ycombinator.com/item?id=69097) landed me in the heart of the Middle Kingdom with almost no money, energy, or much of anything else (thank god I still had my laptop!).
After doing absolutely nothing for a good-enough while (and sleeping for curiously long hours) I found an apartment in northern Beijing to share with friendly Auzzi, American, and Icelander flat mates, and just chilled out.
Soon enough, I was able to read again (not being able to read anything productively was quite scary, let me tell you), be interested in things again (in the midst of my burnout, I remember muttering to friends that there was "not a single website on the entire internet capable of capturing my interest in any way" -- now, I have dozens of entire books waiting to be read, and hundreds of websites that I am voraciously drawn to), and generally found myself re-building my sense of self and confidence.
A couple of months ago I found a part-time job preparing rich Chinese students to write their SATs. Low costs and high relative wage made it easy to save up some $$$...
So, in a couple of weeks I'm headed to South East Asia to put my feet on the sands of a beach for the first time in 3 years, and then see what it's like to be poor in the tropics again. I've always loved traveling (especially the people one meets) and am quite interested in ideas relating to the "distribution of the future" to those who haven't got access to it yet. Though, I will more than likely be keen to make my next venture for-profit, even if it does have some empowerment of villages within its business model.
So, given the ready availability of well-paid teaching -- which can even be quite enjoyable if it's not just straight English teaching -- or online consulting/design, which can be done on any beach with a net connection, I think I will stay out in the land of cheap eating and warm sunshine until I've begun to implement my next idea, whatever that may be.
Then, depending on the nature of my idea, availability and necessity of a co-founder or initial employees, and cash-in-my-pocket, I'll either stay out here and attempt a life of work-whilst-continuing-to-enjoy-paradise, or head back to a more startup-friendly city in North America. Frankly, what I miss most of all while being out here is regular face-to-face contact with brilliant/interesting/kind people who speak my native tongue. Finding some sense of connectedness to like-minded people will be at or near the top of my list as I consider my next living base.
I'm Canadian, so my options may be limited to Montreal or Vancouver, which I consider the only livable destinations given who I am. I wouldn't mind visiting "the valley," but that would be contingent on making the right connections along the way.
"... Openomy is completely free for now. In the future there will be an additional premium membership, in exchange for some nice extras. ..."
Is there any reason why you are not charging something? Sure you need free accounts to let people try the service. What about a Pro-Version like flickr. [0]
A question I'd like to ask is:
``` Q What nice extras do you offer?
``` For me nice extras would be:
- ability to create a profile
- ability to see images embedded in a page
- tools specifically to post to twitter (simple twit poster) , archive the post, process meta data (who replied, when)
- tool(s) specifically to post images to flickr (simple flickr uploader), archive image, text, tags & who replied.
- rss feed back of flickr + twitter archive that I can customise (select twit + flickr images mixed, only twitter, only flickr, only flickr, only flickr images by tag etc)
- allow my friends to subscribe to my feed
This is an abstraction above your current service. But is readily consumable. The real problem is being able to find what people want, then charge for it. Flickr built this kind of back-end then built the photo site on top of it. Is this what you need? A purpose built public site on top of you data service?
"... Over the past couple of years, as we predicted, the world is moving to an almost entirely web-based software model. We post our photos to Flickr, write our documents on Zoho, etc. Unfortunately, it's much too difficult for us to use our photos posted on Flickr within our documents on Zoho. ..."
My view is you are doing a great job of creating the basic building blocks to achieve this. What I'd want to see is a pay for use service that allows you to demonstrate these aims. [2]
Your service utilises commodity bandwidth and storage. If you look at how flickr utilised these same commodities by harnessing the explosive use of cameras I'm sure you can see a way to make money from it. How flickr balanced the back-end development (infrastructure) with the front-end (consumer facing) is a case study in itself. This means more development, but that's what it's about right?
[0] The free version of flickr allows limited usage. It does not stop you upload images, but the cost for use is worth it if you intend to use it over a longer period.
[1] Caterina Fake, ITConversations, "The History of Flickr", http://www.itconversations.com/shows/detail1755.html
[2] One area I don't see is how you can share your data with friends, like friendfeed [1] does so well.
Self-funded. We're not averse to taking outside capital, but I want to make sure we don't take money until the right time in our company's lifecycle. Given how many times our assumptions have been proven wrong, I don't think we've reached that point - I like having the freedom to change directions and try a different tack without having to justify it to investors & staff. I've been an early employee in a couple funded companies that were at roughly the same point in development that we are, and was always struck by how stupid management was. This way we can be stupid and correct for it without getting caught in the blame/frustration cycle that overtakes a lot of VC-funded companies. Investors probably also appreciate us not spending their money making mistakes; I doubt we could get funding at this point if we tried.
I've been working full-time for 4 months (+ 9 months with a day job), my cofounder still has his day job but is quitting in a month or two. I'm still in my 20s and saved up a whole lot of money from my last job, so we could go for quite a while like this.
Everyone's completely right about the reduced effectiveness of moonlighting; in my experience, a 10x drop in productivity is not unusual. Also, I've found that there are some projects that you just can't do while employed elsewhere, because you can't load the whole project into your head on just nights and weekends. The two sites we released while I was still employed were basically dead in the cradle, because they don't solve anything that hundreds of other sites haven't already solved. Quitting has given me the time & attention to pursue much more ambitious coding projects.
Also, those cost figures seem high. We spend $80/month or hosting and make about $60 back on advertising, so it basically pays for itself.
first off - this is one of the best threads i've seen here in a long time and I'm deeply inspired to hear others stories of bootstrapping success and failures.
We have bootstrapped rephoria from day one and are now nearing the one year mark but alas have yet to ship our product. I lost my day job mid last last year and thought it was going to be a massive blessing as i had been working nights for two months proir and was feeling the constant strain...wrong. We were not ready from a team capability standpoint and with no funding was constantly stressed by money issues.
During that time we experienced so many setbacks and disappointments but have kept pushing as we are continually inspired by the potential of the vision. Basically it was not until I took a day job some 4 months later that things got rolling again.
As of today we are closer than ever to launching and what we are launching is far better than what I would have launched last year, so in reality (hindsight) at that point we were not ready for investment.
As first time entrepreneurs I believe that we will need to get past launch - get real users - and validation of the model - at which point I will make a strong push to secure an angel round.
Bootstrapping is a fundamental entrepreneurial quality - it forces you to believe in yourself, your team, and your idea in the face of all odds. If you can make it through you will be a superior entrepreneur. Bootstrapping is part of the true Hacker spirit. That said the ability to achieve scale and growth is greatly enhanced by having the funds in place to focus and execute on the plan in a timely fashion.
My twitter a few hours earlier read: Wishing i could hit the biz refresh button and have the time i had 3 months ago with the team i have now.
Both Magnatune (http://magnatune.com) and BookMooch (http://bookmooch.com) are bootstrapped by me.
The hardest things for me are:
1) sometimes you come up with an idea that would make money at a certain scale (in my case, lots of shoutcast radio stations of Magnatune's music) but you can't do it because you don't have the money
2) I have to put a lot more time into making the software I write efficient and scalable, because I can't afford to buy lots of machines when the site grows. So, for instance, I tend to avoid doing a lot of SQL queries, which might be handy, because scaling that requires lots of SQL server machines.
3) In the old days (10 years ago, when I self-funded Lyris, which eventually became a success) a big problem I had was getting licenses to technology (C++ libraries, database servers) but these days open source replaces all that.
4) doing without employees. That's both a benefit in the near-term, as I have to learn how to do everything lean and well, but a disadvantage if there are rote tasks to do now as we scale. With BookMooch, I've managed to get volunteers to do those rote tasks, but with Magnatune, I got 3 not-very-well-paid part timers.
- John Buckman