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12 Lessons I learned Moving from Bootstrapped to Venture Backed

Rob Walling

Drip

Serial Entrepreneur. Co-founder of https://www.drip.com/ and http://www.microconf.com/. I'm rarely on Twitter.

Minneapolis, MN
Rob Walling

Rob is a serial entrepreneur that most recently started Drip, which was acquired by Leadpages in 2016.

Having done both bootstrapping and a funded business, Rob knows the good and bad parts of VC funding.

The Bad

1. Communication is painful

Launching multiple features a week is much harder when you're not bootstrapped

2. Board meetings are a pain in the ass

3. Culture is Hard

When you hit 15 or 20 employees, culture gets really hard.

It's easy to do it badly (like with a mission statement generator).

The Netflix Culture Document and Balsamiq Culture Document do it well.

4. Hire for both skill and personality

If you hire just for skill, you get folks in who aren't a good fit.

If you hire just for personality, you have to train everyone and can't move very fast.

5. Things Rob never had to deal with

Classic things like raising funding, monthly reporting, annual audits, and legal complexities Rob didn't need to deal with.

The Good

1. You can hire specialists

Specialists and partnerships give you a huge boost in growth and make it easier to run your company. Areas like HR, specialized developers, and GDPR are ripe for specialists.

2. Pay Market Salaries

Early on, Rob lost a great developer because of a $10k difference in salary. Having more money means you don't need to make this compromise.

Being venture baked lets you pay market salaries

3. Hire Senior Talent

Only being able to afford junior developers means you move much slower.

Only being able to afford junior developers means you move much slower.

4. Use a recruiter

As a bootstrapped founder, you don't realize how much of your time you spend on hiring.

If Rob starts another company, he'd hire a recruiter a lot earlier.

5. Don't waste time to save a few dollars

As a bootstrapped founder, you feel compelled to penny pinch and save little dollar amounts in places like AWS, which is taking away focus from the rest of what you're trying to do.

Don't waste time to save a few dollars - just increase your revenue

What's wasted time? If you're evaluating Kayako or intercom and thinking mostly about price, you're probably wasting your time. Same for Zoho vs. Gmail, Wistia vs. Sprout Vieo, GoDaddy Hosting vs. WPEngine, etc.

6. Use Standard Job Titles

In a bootstrapped company, you just make up job titles. Once you have a recruiter who's searching for new people to fill your made up positions (ex: "Senior Scaling Architect"), your life will be much easier if you use more standard titles.

Also, don't elevate titles too early. If you hire a normal customer success person, don't name them "Head of Customer Success".

7. Be less stressed?

You can be a hell of a lot less stressed when you can just hire people to handle the tedious problems of business. It's not guaranteed to make you less stressed, though.

Does venture funding make you more or less stressed? @jordangal

Does venture funding make you more or less stressed? @sdmattg

Does venture funding make you more or less stressed? @Jus10McGill

So... what can you do?

Rob isn't saying you should raise funding, but there are definitely things to learn from it.

Here are some options:

  • continue bootstrapping
  • consider VC-Funding (gross)
  • "Fundstrapping": raise some money at the beginning, then never raise money again

When fundstrapping, boostrap to $20-30k MRR, then raise a single Angel round. You'll get the best of both worlds.

tl;dr:

Funding lets you:

  • Hire for specialization
  • Pay market salaries
  • Hire senior talent
  • Hire faster
  • Work with a recruiter
  • Not waste time to save a few $$
  • Use standard job titles
  • Be less stressed

"Fundstrap" with a single round of funding to get the benefits.

Questions

Did you have to answer to a board?

We had enough luxury to hand pick who was on our board, and we got along really will with them. It could've been a shit show.

It sounds like a lot of your negative parts of funding are just things that happen at scale.

It's exacerbated when you have funding. Basecamp has grown over 12 years; hiring ~4 people a year makes it much easier to establish culture. Moving faster with funding makes it a lot harder to establish culture.

Do you have advice on protecting culture?

Yes - write things down, and hire people who are on board with your written vision.

Is there anything else you wish you could've afforded?

Customer acquisition! Leadpages perfected the paid acquisition revenue model.

As a micropreneur, what's the advantage of fundstrapping over a bank loan?

If you want to be a solopreneur, grow something up to $10k or $20k MRR and have an awesome lifestyle business. Rob did that for several years and eventually wanted something more.

The advantage over a bank loan is that it's lower risk - if the business fails, your personal credit isn't destroyed.

If I fundstrap, how much of my business do I need to give up?

First bootstrap to the $20-30k MRR mark so you have a $4-6M valuation, then sell 10% for ~$500k.

When do you pay it back?

Either when you get acquired or by paying dividends.

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