The Real Internet Revolution

Venture Capital

from the no-VCs-needed dept

A month or so ago, I had lunch with a venture capitalist friend who I hadn’t seen in a while. We caught up on a bunch of different things, and at the end, he mentioned, “you’re the happiest entrepreneur I’ve talked to in probably three years.” I told him that was because I wasn’t looking for venture capital. Also, I’ve seen plenty of other “happy” entrepreneurs, and just about all of them also have no interest in venture capital, but are bootstrapping companies successfully. During the boom years, there was a myth that became way too popular that every startup needed to raise venture capital. In fact, many were judging how successful a startup was by how much venture capital they raised (as opposed to more reasonable metrics like, say, customers, revenue, or profitability). Certainly, there are businesses that require venture capital to implement their business plan (usually businesses that are highly capital intensive at the beginning), but in the “post-boom” years, more entrepreneurs are realizing the benefits of bootstrapping, and growing at a more reasonable pace. Business Week is writing about how many of these bootstrapped companies are doing really well right now, in part, because they didn’t go chasing after venture capital. Adding venture capital to a company changes many things about the company, and the pressure it faces. The bootstrapped companies tend to be more customer focused (if they’re not, they go out of business). Even more important, though, is that these bootstrapped companies are taking all the lessons that the no-longer-in-existence venture-backed dot com companies of the boom learned about the internet, and are applying them successfully. Plus, they’re taking advantage of what’s cheap now. People seem to forget, in the boom years, capital was cheap, but everything else (people, real estate, equipment) was expensive. These days, capital may be expensive but people, real estate, and equipment are incredibly cheap. If you can bootstrap, you get around the expensive part, and business looks good. Hence, the roving band of happy entrepreneurs.