Should Your Startup Bootstrap or Raise Venture Capital?

Summary

The speakers discuss the debate around bootstrapping versus venture capital funding for startups. They argue most businesses shouldn't and don't raise VC, as VCs only want to invest in companies with huge growth potential to yield large returns. They see no moral argument for either approach and think the debate is fake controversy. However, some companies do require lots of upfront capital where VC enables businesses not otherwise possible. Ultimately both models can work, it depends on the specific company, goals and needs. The choice is situational, not ideological.

Takeaways

• 😊 Most businesses should not and do not raise venture capital
• 💡 Venture capital is meant for high-growth startups aiming to provide large returns
• 🤔 The bootstrap vs VC debate is largely fake and driven by those looking to profit from outrage
• 📈 Trillion dollar software companies have all raised VC funding
• 😎 You can build a very successful software business without VC funding
• 💰 Most wealthy people did not raise VC funding for their success
• 👍 It's ok to start bootstrapped and raise VC funding later if it makes sense
• 🤝 VC funding is a business transaction, not something personal
• 😠 Don't let outlier silly VC deals outrage you
• 🎯 Focus on serving your customers, not debates that don't help you

Q & A

What percentage of businesses started each year receive venture capital funding?

The speakers estimate it is definitely single digits, if not less than 1%.

What is the main goal of venture capital as a product?

To invest in something that could potentially be worth at least 100 times more, if not 1,000 times more than the initial investment.

Have any trillion dollar software companies been built without venture capital funding?

No, none of the trillion dollar software companies have been built without venture capital funding.

What mechanisms are available if you need millions of dollars upfront to build your startup?

Venture capital is one of the only good mechanisms to provide millions of dollars upfront if you need it to get your company to break even.

How should founders view venture capital funding?

As enabling entrepreneurship and startups that otherwise wouldn't exist, not as cannibalizing other efforts.

Who benefits from stirring up debates about bootstrapping versus venture capital?

People looking to build a following and monetize the controversy, even if it's not fully real.

Why might a venture capital firm say no to funding a startup?

Not because they dislike the founder, but because the potential returns don't justify the investment based on the business proposal.

What type of game does Michael Seibel prefer to play in business?

A simple, straightforward game where both parties understand the terms of the partnership clearly.

What is the main takeaway regarding bootstrapping vs venture capital?

There is no moral high ground in either approach, it depends on the specific business goals and needs.

What is Michael Seibel's perspective on the debate itself?

He hopes it continues because he sees it as largely fake and engagement-driven rather than reflecting an actual issue.