There is no need to 'pick a side' ... this should not be a flame war. Honestly, the 'argument' is over the best way to make millions. That is like arguing over whether it's better to 'have your cake' or 'eat it too'.
Exactly. My favourite slide that I saw at Startup School was Paul Bucheit's one that said "Advice = Limited Life Experience + Overgeneralization", since it was a great antidote to all the other talks.
If you listen to the 37signals guys, they're going to tell you the best way to get rich is to do pretty much what they're doing. If you listen to PG, he's going to tell you the best way to get rich is to do pretty much what he did. Both business models are valid, and they both work. If you're thinking of starting a business, you should keep both models (and several others) in mind and pick the one that best suits your situation, your needs, your ambitions, your available funding and your product.
Of course, that doesn't mean that it's useless to sit around and discuss the upsides and downsides of various business models -- that's actually a very useful discussion. But it is silly to argue that one is better overall.
Having a fairly unhealthy obsession with entrepreneurship, and having actually read some of the research, rather than generalizing from my own experience, there is one basic reason why VC funding works better than bootstrapping. That is that small companies (less than roughly a million $ in revenue) are much more likely to be hurt by random events - key employees leaving, acts of god, macroeconomic events, etc. Getting big isn't just about making millions, it's about increasing the chances of survival. And when you hear a bootstrapped company talking about their path as the only way to go, just repeat the words "survivorship bias" to yourself.
I agree. My only input is that I believe entrepreneurship is about wealth creation.
One can make the argument that if we make money for VC's, then we make money for ourselves. I think there are plenty of examples (especially in the Silicon Valley) where this is true. That's the "a small slice of a large pie" school of thoughts. The other side of the same argument is that if you bootstrap your company, then you are on your own and the world conspires against you. So at best you have "a large slice of a small pie".
I think these are false choices. My own experience (I had two startups, one of each) is that bootstrapping is not a lifestyle but a tactic in wealth creation.
I believe the speakers at Startup School are all in agreement that the world has changed and that it is possible to build a meaningful company with sustainable revenues by bootstrapping. But bootstrapping does not mean that you don't take VC money, just not for R&D.
When you have a working product and a workable business model, then you can go out for VC money, but now as "working" capital. And if you can take it further and actually become profitable, trust me, VC's will be kicking down your doors wanting to buy a piece of the action.
I enjoyed the Startup School presentations very much, especially that of PG, PB & DHH and the following is my takeaway ...
“Make something people want … don’t ignore but try to understand [people’s] advise … listen [mainly] to yourself … don’t worry too much about money … the secret to making money online … is to ask for it.”
I believe they are arguing that the optimal solution might be "a medium slice of a medium pie". As one of the commenter has stated, "getting the bus back in the middle of the road where it belongs".
It is like: A guy is told "hey get a supermodel gf!" and "hey get a friendly gf!", when the poor guy would go out with any girl given she is neither ugly nor psychotic.
I have to believe that many people have done "the same thing" as Paul Graham, 37 Signals, and other successful people, and still gone nowhere.
I'm skeptical that people are really good at recognizing everything that they have done and the influence, good or bad, it had on their success, such that it ports well to other people and situations.
Folks probably cannot do "the same thing" as other people, because these other people cannot themselves accurately tell you what they really did, rather what they ended up deciding in retrospect was important to recall.
There is not much that you can learned from people who failed, neither.
I think PB's comment is still the best, "Advice = Limited Life Experience + Overgeneralization".
However, what I learned is that if I accept that there is limitation to other people's advise, I would still like to hear from them in order to help me make my own decision and according to my own circumstances.
My experience with startups is that it always come down to impedance match. Having an academic background in mechanics, what I learned is that condition for perfect impedance match is when system is at resonance. The opposite of resonance is dissonance. In my previous career, I had discovered that dissonance is in fact a resonance, but it is a resonance of a sub-structure when someone has put an artificial constraint on the sensory point (such that there is no signal).
In some way, that's how startups work. Just because you fail doesn't mean that the rest of the world has failed. In fact, they might very well have succeeded but somehow you just weren't part of that success. So our job is make sure that we have as perfect as an impedance match with the rest of the world as possible, so that we are part of the resonance and not part of the dissonance.
This sounds very theoretical. But it is not. It is really about paying attention to others in your eco-system (VC's, customers, co-Founders, channel partners, etc.) and make sure that you are part of their success. Specifically in this conversation thread, we are talking about starting startups with VC money or through bootstrapping. I never felt that it is a religious question. Either way will lead to success and either way can lead to failure.
But as entrepreneurs, our job is to figure what VC's bring to the party and if we take VC money, how we could be part of their success. If we don't take money from VC's, how we could still be successful nevertheless.
<blockquote>"[O]ur job is make sure that we have as perfect as an impedance match with the rest of the world as possible, so that we are part of the resonance and not part of the dissonance."</blockquote>
As a starting point, this analogy seems useful to me, but I believe that when probing further, more complexity often shows up. Various stakeholders might have different impedances; e.g. your investors might resonate with you on a different frequency than your customers do. There can be many mismatches like that, and I don't see how I could possibly foresee them all while I'm building in order to prevent them upfront.
Another aspect: paradigm shifts in Thomas Kuhn's sense seem to <i>require</i> dissonance. After all, how can you make a radically innovative product if you're in perfect resonance with "the rest of the world"?
To some engineers, "Make something people want" might seem like a less precise directive than "Match impedances", but it might actually be more useful when getting up in the morning thinking of what to do today.
Recently, I talked about how "Entrepreneurship is a deep desire to create and destroy at the same time." So clearly we have to be in dissonance with some and resonance with others.
But more importantly, to follow up on your comment. The question really is about "making something people want". We all know that this is a necessary condition but is it also sufficient. In the old days, it would take a lot more than that to succeed (so it was not sufficient). But time has changed. I believe today under certain constraints, it can actually be both. In the following, I talked about "narrowcasting" and "entre-sumers" which are the corner stones for such paradigm shift.
