Add comment July 14th, 2011
I bet that founders of bootstraps end up earning more money over the long haul out of their businesses than founders of venture-backed firms. The rare IPO may spike the numbers in the other direction, but I’d love to see the reality.
The question is, at a startup’s formation, is it better to focus on VC or revenue as the way to fund the business. That’s the first choice you get to make.
I think the odds favor bootstrapping since something like 1 in 200 firms are funded that seek funding without revenue, while somewhere between ten and thirty percent survive five years.
The next question is: if you have successfully bootstrapped the firm to a reasonable plateau that’s sustainable, do you spend time seeking outside investment or continue to grow based on revenue. Here there are a number of factors that make it a much more case by case decision:
- competitive landscape
- addressable market size
- use of funds (do you have a reliable model for generating demand)
- do the founders have the desire to grow the business to be able offer investors an acceptable return