Rob Walling - The Trade-Offs Of Bootstrapping vs. Raising Funding (Turing Fest 2022)

The typical startup narrative includes a garage, a brilliant idea, and boatloads of venture capital. But with the shrinking costs of starting up, bootstrapping is as viable as it's ever been. Add to that the rise of "Indie Funding" - angels and smaller funds that are willing to invest in companies without the expectation of billion-dollar exits - and founders and their teams have a lot of options to weigh as they grow their company. There are many trade-offs between these approaches, and there is no "best" path to travel. This talk explores the trade-offs that not just founders, but also management and employees should expect when they choose to work in a bootstrapped vs. a funded company.

Head to www.turingfest.com to learn more about Europe's best cross-functional tech conference.

Transcript

1. The Trade-offs of Bootstrapping vs Raising Funding
2. What we’re covering ๏ What funding buys you ๏ Bootstrapping ๏ Venture funding ๏ Indie funding
3. My experience ๏ Bootstrapped 6 companies ๏ Venture funded ($38M) ๏ Invested in ~100 startups
6. De fi nitions
7. Bootstrapping ๏ No outside capital ๏ Includes “self-funding” ๏ Lifestyle vs Growth bootstrappers
8. Venture Funding ๏ Institutional money ๏ General partners ๏ Goal is 3x+ return over 10 years ๏ “Power law” needs unicorns or decacorns
9. Indie Funding ๏ Works with “base hit” outcomes ๏ Usually supports long-term, pro fi table companies ๏ Mix of personal and institutional money ๏ F&F, some angels, Indie.vc, TinySeed, Upekkha, etc ๏ Higher success rate, but smaller successes
10. VC/Indie/bootstrap 1/9/90
11. What Funding Buys You
12. “I don’t know what I would do with the money.”
13. In your personal life, money saves hours.
14. In your business, money saves years.
15. “It's all things we would've done but would have had to hold off until later. For us, it was compliance (SOC 2 Type 2 and HIPAA) so we can start closing bigger deals. Also infrastructure for scaling and compliance.” Ruben Gamez SignWell
16. ”Money allows you to hire more senior roles than you could afford as a bootstrapper. Especially when it comes to sales and development, senior folks are always more effective than their junior counterparts. Funding has allowed us to ‘live in the future’ in this respect.” Craig Hewitt Castos
17. Bootstrapping
18. Pros ๏ Simple ๏ Maintain full control ๏ Don’t need permission ๏ Can run a company for decades and take pro fi ts
19. Cons ๏ “Hard mode” ๏ Move slower ๏ Lack of mentorship & network ๏ Dif fi cult/impossible to start certain types of businesses (Amazon, Uber, Google, Facebook, Stripe)
20. Intermission
22. Venture Funding
24. “I've always wanted to stay bootstrapped and grow as much as possible organically but a lot of people right now are telling me that it would be unwise not to take the money.” Ilya Semin Datanyze
25. “Talk me out of it, Rob” ๏ Board seats? ๏ Control of the company? ๏ Pressure to hire? ๏ Pressure to grow faster?
26. “Why I did it” ๏ Good terms ๏ Credibility. We were selling six- fi gure, multi-year contracts and being bootstrapped hurt us. ๏ Hiring became easier. ๏ Extra capital gave us breathing room to experiment with go to market strategies.
28. Pros ๏ Move fast ๏ Can hire senior people early ๏ Don’t waste mental cycles on small expenses ๏ Instant network + advice ๏ Market credibility
29. Cons ๏ Often kills “good” businesses because you must aim for unicorn outcomes ๏ Growth at all costs (T2D3) ๏ Foolish spending / “Thrashing” ๏ Lots of time fundraising ๏ (Sometimes) loss of control ๏ Boards (and board meetings)
30. Indie Funding
32. Pros ๏ Lower growth expectations than VC ๏ Maintain optionality (buys you time to fi gure out if you’re going to be a base hit or unicorn) ๏ Advice, mentorship, and (sometimes) community
33. Cons ๏ Lower valuations than VC ๏ Only supports certain ideas (probably not Uber or Facebook) ๏ Some terms are unproven/complex ๏ Not as many funding options as venture
34. Thank you! rob@tinyseed.com ‒ tinyseed.com