Why I switched sides: From bootstrapping to VC
There’s been a lot of talk about bootstrapping vs venture capital in the startup world recently, fuelled by the rise of self-funding as the bar to build and launch your own products is lowered, and the increasing frustrations with the bubble that is Silicon Valley.
As I’ve recently “switched sides”, going from bootstrapping to raising capital, I wanted to give my thoughts on both paths and the reasons I’m now taking VC money.
Why I switched sides
For a long time I’ve been on the bootstrapping path. For the past 10 years or so, Mike & I have been working on our own side projects, and for the past 3, we’ve started taking it more seriously, launching over a dozen projects including a SaaS we hoped to bootstrap to ramen profitability.
But at the start of the year, whilst sitting in a hotel in Bali, the glamourised home of the Digital Nomad, I realised that I needed to make a change, that this wasn’t the path for me right now.
Just 3 months earlier, everything was going well, I’d just set off travelling in Asia and was loving the sights, smells and sounds a new culture brings. I was living the Digital Nomad dream and was enjoying every moment of it.
So why, 3 months later, was I stepping away from bootstrapping and booking flights back to cold, cloudy London?
The main reason behind it all, was realising I’d been too narrowly focussed on one part of my life, work and building a business, and that I’d neglected other areas. I’d been so entrenched in my goals of bootstrapping that I’d lost focus on what really mattered, the life the bootstrapped business was supposed to serve.
Now this isn’t a work/life balance post, and bootstrappers aren’t inherently better or worse at this than those who take funding, the problem is when we elevate our business above our lives and those we love, rather than it being something that serves them.
Francis Bacon, the 17th century English philosopher and father of empiricism, summed up this paradox:
“Money is a great servant but a bad master.” — Francis Bacon
Similarly, your business can be a great servant but a terrible master. Working hard and being driven in pursuit of your goals isn’t a bad thing, in fact it’s most-often good, but sometimes we can get so sucked into this all consuming goal that we forget the very thing it was there to serve.
So why are we doing this?
What is the ultimate drive behind building a business, and which path is best placed to help us achieve our goals?
In his 2009 book Drive, Daniel Pink argues that the old understanding of motivation, that of the carrot and stick, is no longer sufficient, and that the 21st century human is motivated by three key drivers: autonomy, mastery and purpose.
Autonomy is the need to have control of the steering wheel of our lives and not be dictated to by someone or something else.
There has been a notable rise in autonomy in the workplace in recent years, with trends like remote work elevating the freedom and trust employees are given. Running your own business offers the ultimate allure of autonomy, of no longer having a boss and being able to chart your own path.
Bootstrapping certainly looks a tempting path when viewed against the autonomy yard-stick, with no investors to please you’re free to take the business wherever you want. But as many founders realise only after the honeymoon period has worn off, the reality of bootstrapping is far from glamorous and you’re often left at the whims of your customer base, whilst either spending your nights and weekends alone in front of the glare of your computer screen or anxiously watching your precious personal cash reserves dwindle as you try to take off before your runway disappears.
Venture capital on the other hand is no free lunch (though confusingly you can often get one at VC backed startups), with the cultural expectation to “crush it” by working crazy hours whilst moving towards an exit that is all ultimately in the pursuit of giving that illusive 10x return to your investors.
For me, my decision to step back from bootstrapping was first and foremost about autonomy — I felt there were decisions I needed to make in my personal life that I couldn’t easily do whilst on my current path. I realised working nearly every waking hour wasn’t healthy and wasn’t creating the life I desired. I needed to reevaluate everything from a clean slate, find somewhere to call “home” and start interacting with other humans more, you know, IRL.
Autonomy for me meant taking back control of the steering wheel and doing a course correction. My decision to step back from bootstrapping wasn’t one I pre-planned and I certainly didn’t expect it to lead to the VC-backed startup world, it was only 4 months later, having moved to London, after chatting with Barry that I realised that an opportunity for mastery was on my plate.
Mastery is the desire to improve and fulfil your potential. Any entrepreneur has this desire deep within them, whether taking funding or not. This desire is built upon of the “growth mindset” Carol Dweck introduced in her book Mindset, which states you can grow and evolve as a person, and by exerting effort over time you can achieve your potential.
The bootstrapping path enables you to have more control over the direction you go in and how you fulfil your potential, the mark you leave on the earth, whilst taking VC money provides the rocket fuel to make a far bigger impact, along with the risk (and likelihood) that it’ll all end up on the scrap heap in a few years time.
Working on The Dot with Barry, alongside the talented teams at Founders Factory and The Guardian is the biggest boost I could take towards fulfilling my potential. It’s the second reason for me “switching sides”.
Of the three, purpose has seen the biggest rise in the past few years, with the accusation thrown at Millennials of being entitled and too picky about what they work on a result of a spike in purpose-driven thinking in today’s generation. No longer are we happy to simply grow and have autonomy at work, we now want to feel like it’s all working towards some greater good, we want to feel like we’re making a difference.
Achieving purpose in our work can take many forms. For bootstrappers, you’re able to focus on creating the culture of your dreams without a relentless focus on profits, as Jason Fried & DHH have done by giving their employees 3 day weekends during the summer. For those who take funding, the allure of solving big problems on a huge scale can be a strong motivator.
Purpose for me is the third reason for switching sides. Working on The Dot gives me the opportunity to both create a healthy place to work, whilst working to increase young people’s engagement with the important current events going on in the world at a time when the news and our consumption habits are radically shifting.
The religiosity trap
The saddest thing I see in this debate is when folks religiously defend one path over another. You see this with VC hate on Hacker News (the classic “you raised how much?!? I could build that in a weekend”) and with anything and everything from The Valley, where vanity metrics like funding raised are praised whilst those building a real business are often sidelined.
Bootstrappers have created a religion out of building something from scratch and self-funding the entire thing. But what if that ideology leads to burnout? Or bankruptcy? Or not being able to go the distance?
For many, bootstrapping has fallen into the classic trap of religion, taking the heart of a message and putting rules around it. Bootstrappers aren’t simply self-funding, they’re part of a tribe. And as with any religion, you don’t question the core tenets on which it was founded.
Religion, left to it’s own devices, can be deadly. I say that as someone raised “religious”, and who has recently started going back to Church. Religion and blind faith are closely related as we are incentivised to accept the perceived wisdom without questioning it. Yet behind a religion may be truth, for those willing to search for it.
None of us should put our identity in something without questioning it. Bootstrapping may be right for you at times and not at others. Personally speaking, I’m working on a startup with VC backing for a multitude of reasons (some of which listed above), but that doesn’t mean I think self-funding is wrong, stupid or inferior. I’m doing so because the upsides of taking venture capital make more sense to me in my circumstances now than bootstrapping would. In fact, I’d be surprised if I didn’t attempt to bootstrap a business in the years ahead.
So let’s not religiously fixate on one dogma over another. Don’t mindlessly drink whatever Kool-Aid your camp is serving. Don’t kiss your brain away when you hear from different perspectives. Both bootstrapping and funding are admirable paths with their own upsides and downsides. We should all take a step back, evaluate what really matters to us now, and decide what our next step should be. One path isn’t inherently right and the other wrong. We don’t have to commit our lives to one camp or the other.
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Originally published at fredrivett.com on October 26, 2018.