Yeah, but the reasons for failure are different. A startup usually fails because the founders are convinced they can't do whatever they want to do without investors and they never raise any money. OR, they do raise money and eventually run out of it because they never made enough money to support the costs that were enabled by ... the investment.
A bootstrapped business is alive as long as the founder is willing to continue trying to make it work. So a bootstrapped business doesn't fail per se — usually the founder fails to make money within the timeframe they'd hoped for and gives up.
I didn't start making real money with my business until I was 4 years in. There wasn't some magical day where I got lucky and started making money. The first 4 years was me basically being an idiot and making every mistake possible. It gave me the education I needed to price my product appropriately, position it, and sell it.
Some might say I'm a "survivor" but I don't think I am. I'm just determined as hell and didn't give up when I wasn't making any money. I worked freelance contracts and kept the thing going because I knew at the very least I was getting smarter even if I wasn't bringing in money, and eventually the education would probably prove useful or pay me back. Better and cheaper than grad school anyway, right? I sometimes think about the people who are "Masters of Business Administration" on paper and have never actually built or run a business.
The people I know who have successfully done it aren't geniuses with a bunch of money and lots of connections. They all just had the same determination to stick with it, adapt, learn, and find their way to what they want. There is definitely some pain and self-doubt involved, but like I originally said, you come out stronger for it.
>A bootstrapped business is alive as long as the founder is willing to continue trying to make it work. So a bootstrapped business doesn't fail per se
I'm going to rewrite your comment in more concrete terms and by doing so, you can let me know if I have parsed your meaning correctly.
For example, in California, the annual filing fee for C-Corp or LLC business entity is $800. So, for as long as the entrepreneur is diligently paying the $800 each year, the business has not been formally "shut down" and therefore, has not "failed". (Alive != Failed)
With that adminstrative setup as the baseline, we consider your next comment:
>didn't give up when I wasn't making any money. I worked freelance contracts and kept the thing going [...] even if I wasn't bringing in money,
I think this means that one can get any 9-5 day job and keep the "bootstrap business" as a side hustle for years that never brings in significant money. It can never be considered a "failure" because of 2 properties:
(1) the business wasn't formally wound down (just continue to pay $800/year admin fee).
(2) a money-losing business still provides "education" and founder comes out stronger. (Not sure if this also implies that failed VC business does not provide education and strength)
It seems like your advice is dependent on a hyper technicality of what "failure" means to you instead of engaging the spirit of the comparison between VC vs bootstrapped.
I go back to your first comment which already had as a condition "want to make enough money to be independent". Many current and former bootstrapped business founders will disagree that it's "not hard." It is extremely hard to create a self-sustaining bootstrap business that brings financial independence reasonably fast. (The "fast" being relative to working 30 years at a 9-5 job.)
Also, when you rely on phrases such as "determined as hell and didn't give up", you're inadvertently falling into the same "survivorship bias" for your bootstrapped business which the article complains about for VC businesses. Being "determined as hell" is an unfalsifiable attribute. Oh, you say your bootstrapped business failed?!? It happened because you weren't determined as hell.
I'm sympathetic to bootstrapped businesses because I sold custom software that way but touting the advantage to non-VC businesses as one that let's you redefine "failure" in an idiosyncratic way which keeps the business from meeting that criteria -- is not very compelling.
In any case, if the business is in a domain that can be bootstrapped, by all means, do that option. The founder will have more leverage. Leverage is good.
The point to my first comment is that advocates for "bootstrapped businesses" will have the same cognitive biases as the essays for VC businesses.
* When I said, "I wasn't making any money," I meant not anything of significance. I wouldn't consider a thousand or two thousand per month significant, which is where I was at for a while. If I can't live on it and hire an assistant to delegate some work to, it's not significant. If I couldn't pay admin fees it would be a failure. But yes, I did redefine failure for bootstrapped startups because I think it's valid. VC-backed startups don't have this flexibility / time to learn the hard way.
* In regard to being determined, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it. Your product gets better. Your personal network grows. You're more yourself in more uncomfortable/growth situation. Your odds of failure drop the longer you work on achieving something — not surprising.
I'd guess 99% of the people who have taken at shot at learning a second language fail (or give up or get bored) before they become fluent. Does that mean the 1% who made it and say "practice every day" have some level of survivorship bias? It's kind of absurd. Bootstrapping a business to success is like anything that takes time and effort and is based far less on good fortune than people think.
You parsed what I said pretty deeply and I'm not that smart of guy, so if there are flaws in what I wrote here that's understood - but you might understand what Im trying to get at.
>In regard to being determined, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it
This is survivorship bias. You're a survivor and can look back on the set of decisions you've made in the past to rationalize your current success. I've seen countless businesses linger for years only to shutdown later and sell their assets.
I find learning a language a poor analog here as it's much simpler and generally within your control. More effort is more closely tied to more results. Language learners aren't typically affected by seasonality, fads, or market conditions.
It's all of these other factors that make analyzing business success factors tremendously difficult. Because it's so difficult, it's easier and more straightforward to assume "I'm successful, so my decisions were the right ones" than "I'm successful mostly due to luck".
>, I know this sounds like survivorship bias but you really do get better at what you're attempting to do by sticking with it.
Yes, I agree one can get better at something by continuing to practice it. But that's independent of what "survivorship bias" means. It seems like you're thinking of "survivorship bias" as a measure of honest self-reporting instead of an unemotional mathematical bias. Your "determined as hell" example is not the same as "language practice" in the next example:
>I'd guess 99% of the people who have taken at shot at learning a second language fail (or give up or get bored) before they become fluent. Does that mean the 1% who made it and say "practice every day" have some level of survivorship bias? It's kind of absurd.
Survivorship Bias means ignoring an uncounted population (counterexamples) when considering an attribute. Yes, your language example would be absurd since it includes both the successes who practiced every day _and_ the failures who didn't practice every day. This matches our intuition; my son doesn't practice Swahili language every day so he failed at knowing Swahili.
Your "determined as hell" anecdote isn't like that. To remove sampling bias of survivors from your advice, we have to count the _other_ entrepreneurs (not you) who were also "determined as hell" but still turned out to be business failures. The _other_ entrepreneurs can also create "better products" and "grow personal network" and still fail at the business.
>but you might understand what Im trying to get at.
I understand your positive advice for a successful bootstrap business. I took issue with _how_ you presented it because it copies the same logic flaws of survivor bias that the article is complaining about. It seemed like you were so passionate about your success anecdote that you overlooked what "survivor bias" actually means. Therefore, you didn't notice that it also applied to your comments of bootstrap being "not hard" if one is "determined as hell".
Any lessons learned that you want to share? As the owner of a very small consultancy shop I know it's very hard to extract generalized advice from your own failures, but still...
Sure, although my experience is in the product business. some of these might be applicable:
* Find a niche market where there is a need and the prospects aren't broke. Eg, they have money to spend for the potential of ROI with your product.
* Break your revenue goal into concrete building blocks. If you need $x/year to make this a profitable venture, how many customers do you need?
* If you need a lot of customers (IMO, > 25) you need to think about both marketing and making your product and making it possible for them to self-service. Eg, driving inbound so you don't have to rely so much on outbound.
* Right down your goal and make a plan to achieve it. Does that mean emailing / calling prospects? How many per day? How many trials does it take to convert one customer? These are simple metrics which will eventually help make your revenue "predictable." Great books on that topic.
* Sales is #1 priority. SV is hyperfocused on brilliant engineers. In bootstrapping, it's all about money. I'd spend more on a great salesperson than an engineer.
* Make yourself uncomfortable. Don't like cold calling? Cold call anyway. You'll get good (or at the very least not half bad) at everything.
* Take care of yourself. You are your own vehicle to success. Your mind and body are business partners. Your bad habits can hinder you severely. 9-5 employees can come to work hungover every day and probably get by fine - but an entrepreneur can't.
* If something isn't working, change it. If something's working, do more of it. That includes pivoting product, market, etc.
* Don't get too elated or depressed. There can be incredible highs and crushing lows. Failure is a teacher but success is a better teacher.
* Be humble. Recognize that you're an idiot and that you don't know shit, even when you think you know shit. It's how you keep your mind open to learning new things. Your own ego can be a roadblock to success.
* Learn to delegate. When you start out you'll do everything — but eventually you will find you have low-level tasks which, if offloaded, would make you far more productive. That's when it's time to hire. Resist the urge to just do it yourself. Your ultimate goal is that you become the brain of the company and you delegate the physical work to the staff you've built.
There's a lot more but those are the ones I could rattle off.
Damn this is by far the BEST advice i have read. HOLY SHIT! I would like to THANK YOU VERY MUCH whoever you are. I have been grinding it out with my tiny start up and its making $3k-$5k/month. I was thinking i need money to grow and should seek funding but then i realised what VC would fund me? i got no secret sauce no technology no VC would give a rats ass about my start up and anybody can copy me at any time. I been at it 2 1/2 years and i think now i will follow your advice and double down my efforts and use the profits to pay a contract SWIFT engineer to build an iOS. Then grow the thing AS much as i possibly can. I'm sorry for hitting you up for a sale but i always gotta be selling! If you have a tesla and would like to sell, please consider sending it to me: https://onlyusedtesla.com/
A bootstrapped business is alive as long as the founder is willing to continue trying to make it work. So a bootstrapped business doesn't fail per se — usually the founder fails to make money within the timeframe they'd hoped for and gives up.
I didn't start making real money with my business until I was 4 years in. There wasn't some magical day where I got lucky and started making money. The first 4 years was me basically being an idiot and making every mistake possible. It gave me the education I needed to price my product appropriately, position it, and sell it.
Some might say I'm a "survivor" but I don't think I am. I'm just determined as hell and didn't give up when I wasn't making any money. I worked freelance contracts and kept the thing going because I knew at the very least I was getting smarter even if I wasn't bringing in money, and eventually the education would probably prove useful or pay me back. Better and cheaper than grad school anyway, right? I sometimes think about the people who are "Masters of Business Administration" on paper and have never actually built or run a business.
The people I know who have successfully done it aren't geniuses with a bunch of money and lots of connections. They all just had the same determination to stick with it, adapt, learn, and find their way to what they want. There is definitely some pain and self-doubt involved, but like I originally said, you come out stronger for it.