Seattle tech startups prefer bootstrapping

 

Photo: Kristine Kisky, MorgueFile

 

An indicator that may seem obvious to many, in a poll of Seattle startup entrepreneurs like Christian Chabot of Tableau Software, Steve McCracken of CultureMob and Josh Petersen of the Robot Co-op, bootstrapping is the way to go.

 

This from blogger Gregory T. Huang at Xconomy who admits:

 

…these entrepreneurs were self-selected for not taking VC money in the early stages of their companies. So what they say is not necessarily representative of the innovation community.

 

He plans to balance out with some thoughts from Venture Capitalists and Venture Capitalist-backed companies in a future post.

 

What are the problems associated with taking too much outside funding according to these entrepreneurs?

• Giving up too much equity or control in your company
• Having unreasonable profit goals that cannot be met given your company’s business model
• Being pressured to meet those goals even at the expense of more modest success
• Better return on smaller investments.
• Operational inefficiency because of too much early financing (How do you know how many employees you need or can support before you’ve even made any money.)

 

All of this might seem perfectly reasonable in an industry that requires very little in terms of heavy capital investment but consider Jackson Fish Market co-founder Hillel Cooperman’s comments on what kinds of business probably should consider bootstrapping:

 

In general, I think most consumer Web startups, unless they have to produce something physical, or buy some type of machinery, or have some unusual technological infrastructure need (indexing the Web for example), or have to upend some huge player in an established market, should always operate at the barest minimum they can.

 

Now eliminate the first use of the word Web in this sentence and think about how many non-Web 2.0 businesses this could apply to. Any ideas? Comment below or on our Yahoo! or MySpace Groups.

 

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Comments

[Richard Giordano]

What an interesting dilemma! I never thought about how bootstraping could force someone to give up equity in thier idea in order to save money. It's a real catch-22.

[Shawn]

Actually Richard, just the reverse. Using bootstrapping saves the amount of money needed for startup which in turn means less outside investment at the outset and more control and equity over what you create.