I have lots of friends I admire who are either VC’s or entrepreneurs in VC-funded companies. Brad Feld is one of those people. He’s a major force in the VC world and person whom I admire for how he handles his relationships and the world around him. I asked him what he thought about my position on bootstrapping and VC’s. Brad replied “…your arguments – while cogent – are – at least in my opinion too narrow. There are plenty of reasons to avoid VC – and plenty of major successes without it. However there are plenty of good reasons to take VC dollars and loads of great companies that resulted.”
Brad, I agree.
As you may have already picked up, I’m a die-hard fan of the bootstrapping entrepreneur. While that tends to put me at odds with the VC model of growing businesses, I don’t believe they are mutually exclusive. In two ways. First, just because you take on funding doesn’t mean you don’t have a bootstrapping mentality in growing your business. And two, VC funding is better for some entrepreneurs and business models.
I see several ways companies/entrepreneurs have benefited from VC funding:
1. It’s not in the entrepreneur’s nature to bootstrap.
Scraping by, working day-jobs while moonlighting, supporting a family, wearing all the hats in the company, working out of your parent’s basement, sleeping on your sister’s couch. Not for everyone.
2. The company COULDN’T have gotten off the ground without outside funding.
Some technologies really DO take a ton of resources before you can make your first sale. Can you imagine someone developing a new pharmaceutical in their basement? Or enterprise-level software or technologies that requires thousands of developer-hours before it’s ready for sale? Marketplace, sometimes developing a big enough marketplace to be able to sell advertising through can make a difference (Lijit is a great example of this).
3. The company couldn’t scale in a big way without outside funding.
While I could argue that Amazon & Google COULD have scaled their businesses in a profitable way without outside funding, they clearly have made a bigger impact on the world and have enjoyed larger levels of profitability because they took big money early on.
4. The VC’s connections or experience have had major impact on success.
There’s is benefit to having someone on your team/board who is in the month-to-month of several other related businesses. I’ve seen/felt this in how I’m able to share best-practices across the different companies I’m involved with. I’m also able to facilitate faster answers/solutions/connections to get things done. VC’s can also provide a ton of experience/connections for follow-on financing, sale of the company, and going public.
So, thank you to all the great VC-related folks for all you do to help entrepreneurs bring their dreams into reality, and who have put up with my relatively one-sided banter about bootstrapping.