[codegeek]

As another bootstrapped founder, I disagree with you.

"Our standard terms are for 10-12% equity."

The moment you give equity in exchange for money no matter whether its tinyseed or whatever, you are not bootstrapping. Your financial risk is lower because you don't have to pay this money back if your company fails. That is not called bootstrapping.

I bootstrapped with my own money AND some smaller loans which I am fully liable to pay off with a personal guarantee. If my business goes down, I am personally liable. That is bootstrapping.

[floridageorgia]

My 2c as a bootstrapping founder (who has not taken outside money): I don't think there is any virtue in funding your business with your own money. Call yourself bootstrapped or funded, what ultimately matters is that the business survives and thrives.

[whimsicalism]

Sure, but words have meaning and bootstrapping is specifically about not selling ownership for cash

[dustingetz]

.

[whimsicalism]

i don't understand what there is to argue over, i am just saying what the word means.

[xboxnolifes]

Right, but it's still not a bootstrapped business.

[jjeaff]

I think some people would not consider it bootstrapped if you have any outside loans. Usually bootstrapped means you funded the growth of the business with it's own revenue only. While small loans wouldn't matter much, to me, if someone gets a small million dollar loan from their daddy to start the business, it's not bootstrapped.

[codegeek]

Yes million dollars from daddy is not a real loan so i would call that free money or an investment which can be lost without conseiqences. A real loan from a bank with personal guarantee on one he other hand is very different.

[lmeyerov]

Important for others: Some loans do not extend this way and thus company bankruptcy (US) can protect you, so just opportunity cost. But the terms are generally bad, and why firms like tinyseed exist, esp. once revenue starts growing (though at that point you can potentially get a SAFE at better terms...).

Money is so sensitive! A Google millionaire bootstrapping on surveillance savings or a doctor taking favorable loans for starting a practice is different from say a college grad bootstrapping on no savings. Most SaaS is especially hard as there is typically no real revenue for ~years, compared to say B2B where each customer can easily pay for .5-5 people. So if operational expenses come from revenue, including sales/marketing/r&d, bravo.

[codegeek]

I hear you but most small business loans try to push you for personal guarantee. You can fight it but it usually is tough unless you have real physical collateral in the business which is not the case for software companies. I have talked to Bankers who told me that unless the business is brick and mortar with inventory and machinery or real estate, they cannot give loans without personal guarantee even SBA backed loans.

[lmeyerov]

The crew here already bootstrapped to (small) revenue, which means revenue-based loans are possible (https://www.investopedia.com/terms/r/revenuebased-financing....). I haven't been following this space recently, but it seems like there's now a big zoo of traditional lenders + upcoming tiny-vc's. IMO if you've reached something like 10K MRR but not enough of a userbase for crowdfunding, there's a world of options, the angel story may be the most friendly + not yet forcing you on the VC treadmill.

For pre-revenue... that's tougher. For a tech startup, consulting/services, SBIR, (lax) corporate day jobs, etc. all give ways to split between the startup and work without risking your nest egg. For b2b, I now like the model of well-paying design partners that you hustle to land before you take the full leap. But some people are rich, or comfortable with the risk/reward, or all sorts of other things, and go with personal guarantees. Pretty sure that's what I did with our first business credit card. In all cases, bravo to anyone who pushes to sustainable growth, it can be a life changer deal for both the company and the individuals, whatever financial path they pushed through.

[chinathrow]

> If my business goes down, I am personally liable.

Why? I also own my own business (an LLC somewhere in Europe), but if it goes down, I am not personally liable, at all (unless it's due to gross negligence established by a court case).

[jasode]

>Why?

His comment included the fact the he took out loans with a "personal guarantee".

When you're a small business starting out with no assets (like factories, equipment, etc) -- which means no collateral, or no business revenue... the banks won't provide so-called "business loans" unless there's a personal guarantee.

Therefore, if the business fails and the company is shut down, the founder is still financially on the hook to pay back the loans. (Barring drastic options like filing personal bankruptcy.)

[codegeek]

You nailed it!!

[HWR_14]

Basically, he personally borrowed money and put it in his LLC to finance it. For tax and other purposes, this is a more complex transaction that is somewhat legally different (the business took out and should repay the loan, avoiding his personally being taxed for the money). However, that's the best way to understand what happened.