Why Bootstrap? Part 1. Lifestyle Business
Having a business that’s consistent with the values of my lifestyle has become an increasingly important factor for me. I used to hate the term “lifestyle business”, cause I think it often conjures the vision of a small tiny business that generates just enough revenue to feed the entrepreneur packs of ramen and provide a 1 bedroom apartment somewhere in Thailand. It might sound nice to some…but that’s not my dream. I actually hope to run a profitable company, with a nice creative office with fun amenities, employing a couple dozen talented people, where everyone earns enough to live comfortably. That pretty much sounds like many VC backed startups right?
So what does bootstrapping a business have to do with one’s lifestyle then?…and how does that different from a VC startup? To me, “lifestyle business” has nothing to do with leisure or less work…to me, it’s really all about having complete freedom to make independent decisions. VC backed startups cannot provide this level of autonomy because you now have investors, and investors come with expectations, perceptions, and accountability. As a VC startup, you have to live up to VC ideologies…and as a bootstrap startup, you can embrace your own business ideologies. Let’s take a simple example to illustrate.
Before you’re funded, the only person you’re held accountable is to yourself and maybe a cofounder or two. Assuming you’re a typical entrepreneur and self-motivated to succeed, you’ll likely do a good job making decisions for the company’s best interests. After all, it’s your company…you probably want it to succeed more than anyone else.
The moment you take on funding, even if you’re the CEO & founder of the company, you’re actually held accountable to your investors (no matter how hands off they are)…whether officially or unofficially. Sometimes, this results in being propelled away from some decisions you’d like to try as the CEO. For example, let’s say you decided that the best thing for your company is to move yourself to Argentina and build out a distributed team around South America. You did the math, and calculated that you can save 70% on employment costs, 50% on office infrastructure, and 50% on personal living costs…all while feeding your soul with new cultural stimulus.
I guarantee this would be a highly scrutinized decision for a typical VC backed startup. Investors would start to wonder if you’re playing games with their money, and plans would start hatching to replace you as CEO. Or, they’d simply just stop supporting you in future financing rounds. Justifiably, from an investor’s perspective, they rarely come across this scenario. Their typical portfolio company likely runs their startup out of one of the major tech hubs in the US…so your fiscal rationale is scrutinized, cause hell, every other startup that resembles you faces the exact same budget concerns and somehow they make it work. As for your soul, well, you’ll need to suck it up cause that’s what ever other successful VC backed founder does. You can go back to working on your soul after you IPO in 6 years and become rich.
For the bootstrapped startup…the decision is rather simple. Does this decision make sense for the business and is this something you want to do on a personal level? For better or worse, there’s no accountability to investors, expectations, precedent, or perception. It also helps that there are many other bootstrap businesses that probably runs this way…so you won’t feel like the black sheep of your group of entrepreneur peers. To me, “Lifestyle Business” means the freedom to make decisions without external scrutiny…no matter what unorthodox business path that leads you…no matter if it’s for the economics of the business or the economics of your personal life.
One of the things I admire most about startups versus established companies is that startups can be innovative, unorthodox, and perhaps even a bit irreverent to standard business practices. Startups are usually nimble and can make decisions and pivots without much bureaucracy and inhibition. This is one of the few competitive advantages startups have over a more rigid established business. As VC backed startups are becoming more sophisticated in their operations, I think they’re losing this startup advantage to some extent…while this edge is still unfettered in the bootstrap world.
When bootstrappers talk about this concept of “lifestyle business”…I believe they’re actually referring to this deeper spirit of having the complete freedom to make decisions based on their own ideologies, and this is a freedom I personally hold in high regard.