Would You Like To Earn Ten Million Dollars?

Question: Is earning ten million dollars a success?

Answer: it is or it is not — depending on the structure of your company. Let me explain.

Let’s assume that you have a VC funded SaaS business that made $12 million the previous year.

In that case, given that the valuation of the company is typically a multiplier of the annual revenue, your investors will lament.

Despite the million dollars in revenue, the valuation dropped, which means that, on paper, they lost money.

An interrogation will start: what went wrong? Is the CEO good enough? Perhaps you should be kicked out and replaced by someone “more competent”?

Honestly, if that’s the case — no, I personally wouldn’t like to earn ten million dollars.

What Are the Three Scenarios?

The truth is: once you accept ANY venture investment, your fate is sealed: you are under constant pressure to perform and increase the valuation by a certain percentage each year. According to Kerr, Nanda and Rhodes-Kropf (2014), most venture-backed startups fail, and returns come from a few outliers.

Of course, mathematically, it is impossible to keep the momentum forever. For this reason, only three scenarios are possible:

Scenario #1.

You go all the way from 0 to 1.

You outwit, outsmart, and outplay all your competition, win the race, and become the market leader.

And then you are world-famous, get all the girls, and so on.

No need to say it’s an improbable scenario.

Plus, if you want to know how the path of a hero feels in practice, just listen to Elon Musk’s or Jensen Huang’s testimony about how it feels to lead a company to success.

Spoiler: it is not pleasant at all.

Scenario #2.

You fail and history forgets your existence. Fair enough.

If you don’t turn all your stakeholders into enemies in the process, you can start another startup in your field, and raise again…. Rinse repeat.

Scenario #3.

You get swallowed by another, bigger company — that is, you make an exit.

…and if the valuation is high enough at this point, investors are happy.

While you are left alone with a pale of cash on your table, and with empty nest syndrome.

Your baby — your passion. Was just sold to the new owner and your existence feels pointless all over again.

* * *
To sum up, once you take the investment, there is no more chance of reaching homeostasis.

You are under constant pressure to grow. So occupying a market niche and achieving a steady income is just not an option.

You grow or you die.

So, which scenario would you choose?

What Is the Power of Bootstrapping?

Let me tell you what I would choose: none of the above.

The reason is simple: while you might think that you and your investors are playing in the same team, it’s not necessarily true.

For you, your company is your life, your passion, the first and last thing you think about during the day.

For your investors, your company is yet another record on their books. As much as they like you as a person, numbers speak to them more than you do.

After all, they invested in the company, not in you.

Sometimes, your goals align.

And sometimes, they don’t — while you’d prefer to take one step back and then two steps forward, your investors would just keep the status quo and proceed one step at a time.

Or vice versa.

But there is a way out: a technique known as bootstrapping.

Why Trade Time for Money?

Bootstrapping means that you are sitting at the steering wheel.

No one will hand you cash to speed up your growth.

But at the same time, no one will put their fingers on the steering wheel.

Which saves a looooot of time when you think about it.

It’s a gambit of sorts.

The truth is, once the number of stakeholders with decision power goes up, the time you need to invest in making decisions grows like N squared.

With three or more people on board, it often becomes mayhem.

Yes, with investors on board, you get a financial cushion… but at the same time, your day (as well as your leash!) shortens substantially.

In 2002, Elon exited PayPal and put $100 million of his own money into SpaceX instead of seeking investors for this risky business. According to CNBC (2020), Musk later said he expected both SpaceX and Tesla to most likely be worth nothing.

He did this for a reason; he had a clear vision for the company. And so he preferred to put his wealth on the line rather than keep on wasting his time and nerves on debating with investors.

Time and decision power are both of the essence, both to your business and your mental health, long term.

A Patch Called Cash.

A question: why do you even need the money in the first place?

Is this effective medicine for your business or a temporary patch for an open wound?

Is this an additional turbo engine for your working business model or a fuel to keep a business that doesn’t even have a functional model in the first place?

If you haven’t achieved the product-market fit just yet, is it money that you need?

Or rather, what you need is the time to talk to the customer, get feedback, and strategize better.

If you didn’t find the right people to build your MVP, is money the problem? Or rather, is it that you lack the vision and charisma to get people excited about the concept and team up with you?

Of course, some types of businesses (for instance in biotech or space tech) really need the investment, as they involve cash-heavy research and manufacturing.

But typically, for most SaaS, consulting, and other businesses based on Intellectual Property, money is not the problem, but rather, holes in the market research, the product, the team’s expertise or synergy, and/or the go-to-market strategy.

You won’t solve any of these problems by just injecting cash. According to Winborg and Landström (2001), small-business founders routinely rely on dozens of bootstrapping techniques instead of external financing.

So, will the investors’ money solve the problem of missing the product-market fit. Or just postpone it via supercharging marketing by brute force (that is, by injecting tons of cash in the business)?

What Is the Secret of Bootstrappers?

I’ll tell you a little secret: you can get almost anything in this world for free.

If you can listen and internalize advice, you can get the best business advice for nothing. Let that sink in.

You don’t need mentoring in accelerators. You don’t need to pay for advice with advisory shares.

You just need to find wise people, ask questions, and listen.

If you let go of your ego, you will learn and grow much faster than all those founders who give away shares, join accelerators, and then argue with truthful advice.

Today, you can also do valuable marketing for free. It’s so easy to attract less via LinkedIn, Twitter, and other socials!

All you need is to show competence and learn how to make sales calls. Which you can learn by trial and error, no course necessary.

By the way, to make a good sales call, you need one skill: you need to listen.

Moreover, you can get lots of computing power, free tickets to most industry conferences, and other tools and benefits that will get your business rolling.

People’s brains are made to solve problems, so just give others a chance to save your problems for free. They will be happy.

So, all you need to do is to join local communities, and do one thing: listen.

You get the idea.

What Is the Connection Between VCs and Bootstrappers?

Now, can a VC and a bootstrapper become friends or business partners?

Yes — and they even should. I see concepts of VC and bootstrapping as complementary, not competitive.

After all, according to U.S. Bureau of Labor Statistics data, roughly half of new establishments fail within five years regardless of funding style.

While a VC thinks big and is great at scaling, a bootstrapper is great at cutting costs to the minimum. According to Gompers et al. (2020), VCs themselves rank the founding team above product or market when investing.

It’s a powerful combo that can lead to great margins, and to the market dominance long term.

Plus, it can prevent inertion, ineffectiveness, and shitification of services (also known as enshittification) that massive, maturated tech companies often suffer from. According to the American Dialect Society (2024), “enshittification” was voted the 2023 Word of the Year.

So, if you are a VC reading this, think of a bootstrapper as an advisor. You won’t regret.

Last Thoughts.

Lastly, I’d like to share some general thoughts on bootstrapping.

Firstly, I cannot get over the feeling that when a company — or a cake — is shared between too many people, it becomes the tragedy of the commons. No one feels the full responsibility anymore.

Many problems travel from hands to hands as the founders hope investors will solve them… while investors linger hoping that the team will remove all the roadblocks on its own.

In the end, it’s often that the more people, the slower the business.

Besides, to a bootstrapped, all doors are open. Let that sink in. ALL DOORS ARE OPEN.

If you are good enough, you can work with anyone on anything.

I recently co-published a research article showcasing how you can predict the dynamic of COVID-19 pandemic using agent-based models.

I’m not associated with any academic institutions; my only affiliation is my company. I was just good enough.

Lastly, we live in BEST times in history for bootstrappers. You can leverage your skills on AI so effectively that given enough effort, you can build even without having much talent.

Only the lack of motivation can stop you now.