Kalzumeus Podcast Episode 11: Bootstrapping vs. Raising Money

My experience of bootstrapping vwo.com for the last 5 years has been the most phenomenal experience of my life. I've realized that constraint for our growth is not money, rather learning and understanding what matters in business and what doesn't. It's slow and gradual learning that I'm enjoying the most.

Last year, I was exploring whether funding could help us grow faster. Talking to VCs and the firms that got VC funding gave me the perspective that raising funds is RARELY a one-time thing. Once you raise funding (and dilute 25-30% of your company), no VC wants that money to be sitting in your bank and earn 0% interest. So your burn rate increases exponentially and most VCs want their funding to burn within 18 months. This means that in order to sustain the company you'd have to raise the next round and dilute another 25-30% of the company, and this keeps happening until exit/IPO where the investors typically end up holding 80% of the company and pretty much controlling its destiny. And remember it was who you toiled day and night to make your dreams successful.

Someone who had raised funding advised me - as long as things are going fine, you the founder are in control of the company. And if you're not growing fast-enough (think 100% year on year), the investors are in control. It's not that VC money is bad per-se, however, I think losing control of your company as a consequence of external funding is bad. Disruptions happen, new competitor emerges and you could be thrown out of your own company.

For us, having HQ in India gives us a good cost structure (although funding scene in India is changing that fast, salaries are getting through the roof) so we've been able to fund, reinvest profits and grow the company profitably (and have a nest egg for worst case). However, given the costs in SF / bay area, I'm not sure how would one go about bootstrapping a company for long. Would love to hear thoughts from fellow bootstrappers in high cost-of-living cities/countries?

PS: A bootstrapped company I really admire is Zoho. They're 1700 people and they say they have two IPOable products within the company. Very admirable.

here's my question to you guys.

the bottom of the curve is painful.

it feels like you are trying to push a boulder and it is moving by millimeters.

it does move and its not much but you just keep pushing and pushing. sometimes despair and anxiety takes over, it's never going to work, stupid, i suck, im fucking it up, find a job.

so how do you manage yourself in those situation?

The toughest problem I discovered was marketing, putting your product in front of people, getting it noticed.

Not having VC money to spend means you have to manage it yourself. But marketing I am finding out is TOUGH. In fact it is by far the most difficult aspect of bootstrapping. PPC and expensive ad buys are out of the question. So what do you have to get new customers?

Sales cure all. Selling is not a problem if you are dealing with people with the wallet and mind to buy. You just need to guide them.

But getting those people through the door, building that volume of quality leads, this is tough.

All in all I feel like bootstrapping is a juggling effort while trying to push a boulder down a hill so that one day it will start rolling by itself.