The Real Internet Revolution

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.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Anonymous Coward, Aug 6th, 2003 @ 10:26am

    And then, there are also terrible bootstrapped com

    founded by losers with no clue of how the real world works, who go utterly spastic at hiring someone they don't know.

    reply to this | link to this | view in thread ]

  2. identicon
    Mike, Aug 6th, 2003 @ 11:37am

    Re: And then, there are also terrible bootstrapped

    Not quite sure what your point is, or what it has to do with this story. Of course there are some bootstrapped companies that aren't going to do well. I don't think anyone indicated otherwise.

    The point was simply that the venture model doesn't work for everyone, and companies are finally realizing that.

    reply to this | link to this | view in thread ]

  3. identicon
    Anonymous Coward, Aug 6th, 2003 @ 12:42pm

    Re: And then, there are also terrible bootstrapped

    Hehehe, I knew Mike wouldn't "understand". We have this cultural mystique built around the concept of propeller-heads who start their business in a garage and become the next Big Bad Empire, so they can join the Big Bad Boys they opposed in the first place.

    The reality is that most "bootstrapping" companies are more accurately described as "terrible companies that haven't received funding yet".

    reply to this | link to this | view in thread ]

  4. identicon
    Mike, Aug 6th, 2003 @ 1:28pm

    Re: And then, there are also terrible bootstrapped

    Er, there is no cultural "mystique" around bootstrapping. The culturla mystique has always been around getting gobs of venture capital.

    Even venture capitalist admit that too many companies think they need venture funding when the reality is they don't.

    I understand your point just fine. It just has nothing to do with what we're talking about, and is, well, wrong.

    Having fun trolling?

    reply to this | link to this | view in thread ]

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