This article was written by Ken Leaver who comes from a product & commercial background. He has founded multiple companies and held senior product positions at SEA tech companies like Lazada and Pomelo Fashion.
Ken runs his own agency that helps early stage companies execute faster and cheaper. Check out his linkedin at: https://www.linkedin.com/in/kenleaver/
Guest Author: Ken Leaver
I’ve been thinking about this lately as i’ve been in a number of VC-funded companies in the past and also bootstrapped a number over the years.
And I feel like bootstrapping has started getting ‘sexy’ again the past year or so.
But what I find interesting is the different mindsets…
When you bootstrap you go in thinking… “How do I create a microcosm of a commercially viable business as quickly as possible?”
And so you’re very quickly looking for a path to profitability because you see your personal cash burning each day.
While doing this… you iterate a ton on all elements of your business very quickly to optimize for this profit. And because its still very small with few people, you can do so very quickly.
Now let’s examine the VC-funded approach way of thinking… “How do I build something that grows very fast… and i’ll figure out how to make it profitable later.”
So you grow and add resources while burning VC’s cash…and you feel great for awhile.
Till you realize… oh shit.. This thing is structurally not anywhere close to being profitable.
Either I keep buying more time by raising more cash (which decreases my ownership) or I make some very painful restructuring.
The problem with this restructuring is that often… you still come up shy of being profitable.
And each restructuring is painful and costly… perhaps with some bad press mixed in.
When you see how this plays out over and over again… you see how much of a better route it is to focus on creating a commercially viable model early on.
If you need cash to scale faster… you raise after you’ve actually got something that is more or less break even.
I think more and more veteran founders are realizing this is a healthier (and easier) path.
