Have done one investor funded startup (not a huge success) and now three years into a bootstrapped startup (slowly beginning to be successful), I can see the attractions of both models.
However, it's very apparent that investors have very different motivations to founders. Averaged over their work, investors need to have a few big successes and don't mind if most fail. But a founder only works at one company, so their expected return is less in this "go for broke" model.
Taking funding gives you the resources to do more. Bootstrapping gives you the time do it right.
Time will tell which model is best for me. I suppose it's whether you take a short or long term view of your career, and your desire for size of success.
I talked to a lot of people at the Business of Software conference (basically a conference by and for boot strappers) and a huge number of them had five hard years followed by easy street. I know for myself, the three years we've been going have been as much about learning new skill sets as they have about building customers and product. Three years in, things are opening up a tiny bit, but I definitely feel like we're on a five year plan.
That timetable makes sense. There's just so much to do and learn, and the number of people involved is inherently limited by the resources available. Three years is probably the time needed to build something wonderful and learn about the environment within which it exists, and then you've got two years to learn how to sell it!
"No plan survives contact with the enemy." ~ Field Marshal Helmuth von Moltke
Of course, one always 'knows' how to sell the product from day 1. It's just that the more you do, the more you know about how to actually sell it. I've found that being in a startup is a continual learning process, where you mainly learn how little you know!
If you've been successful in your startup with the same sales plan that you had at the very beginning, then I'd be somewhat shocked.
I can relate to this post quite a bit. During the dot com boom, I worked as a consultant to quite a few startups. All of them have since disappeared, but all were great ideas that would have survived had they not need to be immensely popular immediately. One example was a movie streaming service that would right now be way ahead of netflix, which wasn't even a thought at the time, but there just weren't enough people with broadband then.
Compare that to now. I'm running a bootstrapped startup that has time to wait on customers. We have the patience to work with existing customers and nurture them and make them very happy. We are cash flow positive and there's really no reason we won't keep growing forever.
We got started several years ago and are in a market that sees newcomers come and go within the span of 6 months. I've watched the industry leader crash and burn -- it was venture backed by SAP Ventures and many big names in silicon valley, but it was too soon. Not enough customers and the vc's closed the doors.
Some of our competitors do what they do precisely because they don't have a long term vision. They have the short term vision that wants to pop! Get big fast or die. But not all technology gets big fast. Sometimes a patient slow growth of customers is the way to go. That's the traditional way businesses get started, grow and succeed, but today, it seems the majority of tech entrepreneurs think the only way to go is the vc path to spectacular growth, but old style businesses still work in technology too.
Lesson is, take your time. Get profitable enough to quit your job and concentrate on the business and own all of it for yourself. Slowly grow your revenue like you would a salary or something else. You don't need a million dollars a year to be happy, if you're making $100k or even $40k on your own with a product you've developed, you can easily live off that and have all the freedom and luxury that comes with being your own boss -- or well, having customers who are your own boss. But with even 10 customers, it becomes a lot easier to say no to the wrong direction and focus on the path forward.
On the other hand, it's almost impossible to say no to an employer or a venture capitalist that pays your rent and they can easily steer you in a direction that isn't in your long term best interst, which is and should always be happiness.
It is interesting to see how one competitor assesses the demise of another but the author does not really offer much to show that "VC is a competitive disadvantage" or that it really was instrumental in EventVue's failure in this instance.
The EventVue post explaining the failure (linked in the post) identifies several key mistakes involving flawed execution but not suggesting that the company had overextended itself on account of its funding. The money raised was apparently a small angel round, with a somewhat larger follow-on round, one would assume from the same angels. At some point, they determined that there was no good market worth pursuing and shut it down.
I don't see anything here to implicate VC funding as the culprit. In saying that, I would add that I love bootstrap companies and believe that, in general, they represent the wave of the future for the startup world. I just don't think anything in this piece supports the idea that VC funding kills companies (VC funding, whatever its shortcomings, is and always will be an integral, and major, part of the startup world and, indeed, of its premier segment).
A prime strategy of many of the bootstrap companies I work with is to use bootstrapping, coupled with angel funding, to build valuation while deferring any attempt at VC funding and, then, once initial goals are met, to approach VCs from a position of comparative strength and high valuation so as to get good terms. Others, of course, seek to bootstrap their way toward an acquisition. I would say only a minority plan to build for the long-term in the way the author of this piece discusses (this path can be treacherous in fast-changing tech markets).
The post itself is a good one. I just think the author assumes rather than proves his point about the effect of VC funding on a startup.
However, it's very apparent that investors have very different motivations to founders. Averaged over their work, investors need to have a few big successes and don't mind if most fail. But a founder only works at one company, so their expected return is less in this "go for broke" model.
Taking funding gives you the resources to do more. Bootstrapping gives you the time do it right.
Time will tell which model is best for me. I suppose it's whether you take a short or long term view of your career, and your desire for size of success.