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Part II: Venture-backed to Bootstrapped

Do me a favor and ask ten random start-up folks if they think companies should be venture-backed or bootstrapped. On second thought, don’t do that. You’re guaranteed to get sucked into a dark world of debate filled with endless vitriol, judgment, and exaggerated eye-rolls…Yeah, I’ll take a large order of “no thank you,” please. (The short answer to that debate is, “It depends.”) The point of this post isn’t to debate which method is better. This post is simply about one (unbelievably good-looking, fantastic & super humble) person’s perspective on what it’s like to be in a venture-backed world vs. a bootstrapped world. On one hand, I’ve had the fortune to be an early employee at a successful NEA-backed company. On the other hand, I’ve also recently launched my own venture — insert plug, PINCH Crawfish Kitchen — using both bootstrapped funds and crowdfunded capital. Here are a couple of my observations:

 

  1. Mo’ Money — The most obvious observation comes down to $$$$$ (I’m going to exclude talks of equity, as that gets pretty hairy, pretty quickly). At a venture-backed company, you’re given money to make the decisions you presented to your investors. With a bootstrapped company, you’re hyper-aware about Every. Single. Penny. It’s important to note, however, that you can still be (and should be) mindful of your burn rate when you’re venture-backed. Too many companies burn through money at ridiculous rates and ultimately waste their funding. Don’t do that. Additionally, much of your company culture can be derived from how you/the company perceives money. The company I worked for developed many money-saving habits early on, and as a result, much of our culture was fixated on, “how can we save more money” — spanning from parties to how we set up our work stations.
  2. Mo’ Problems — With more money comes more temptation to lose focus and spend unwisely. Just a word of caution. In my bootstrapped company, we have a laser-like focus on making money — simply because this is how we get paid. When time is your most precious resource, we spend as much of it as possible trying to create value for our amazing customers. We want them to experience the best Southeast Asian Street Food they’ve ever had! Meanwhile, at a venture-backed company, many of our initiatives were directly influenced by how we thought investors would perceive it. We legitimately spent hours working on pitches, pitch decks, models, etc. This isn’t necessarily a bad thing, as it helps your company truly understand its mission, LTV, churn, and so on, but you do lose time enhancing product ideas and other market strategies. Some other awesome upsides from receiving funding included the ability to easily obtain talent and new technology. This allowed us to scale effectively and grow quickly. Conversely, bootstrapped growth is typically slow and steady.
  3. Blast off in my (Mentor)ship — When you’re living in a venture-backed world, mentorship is a click away. Investors typically have a wide network of unbelievably talented and smart individuals/advisors. And because your company is already vetted, you get automatic credibility. I can recall having several of the world’s top “thought leaders” of a certain industry in our corner. With a bootstrapped venture, finding mentorship is a daunting and grueling process. You’ve got to be a bit shameless in your relentless pursuit of a mentor who is willing to, first, believe in your vision, and second, willing to take you all the way.
  4. Tick, Tock, Tick, Tock — Currently, I have no formal deadlines when it comes to PINCH. It is up to me and my co-founder to accomplish things in a timely manner and to push ourselves to constantly do more. However, in a venture-backed company, you’ll have hard deadlines, timelines and goals that MUST be reached. Your investors are counting on it. You feel the fire underneath you at all times. To be honest, sometimes it’s nice having that fire — especially when you’ve stayed up extra late the night before binge-watching ‘Stranger Things’. (If you haven’t watched this show yet, you haven’t lived)
  5. Shoot for the Moon — In both cases, setting huge goals is par for the course. Just because you’re bootstrapped does not mean you should not be trying to reach the stars. However, venture-backed companies typically have loftier goals — such as a becoming the next FB or IPO — simply because it is more realistic to get millions of dollars in funding to help propel their own valuation into crazy large numbers. A bootstrapped company has one goal: to be profitable. Slow and steady growth does not afford the luxury of ever ‘being in the red’.

 

Regardless if you’re bootstrapping or trying to raise a round, having a great product and being able to execute are the most important things. Because at the end of the day, receiving money is just one aspect of your company — albeit an important one — but providing value, putting forth your best effort and fine-tuning your product are ultimately the things that will validate your company and get you the money you deserve. Speaking of having a solid product, have you heard of PINCH Crawfish Kitchen? I hear their food is amazing. 🙂

 

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