[threeseed]

This is simply not true.

The optimum path for all startups is to either bootstrap entirely or bootstrap up until the Series A where your negotiation position is the strongest because you know your unit economics and can demonstrate clear product-market fit.

Of course many startups may simply not be able to bootstrap. But equally there are many startups who could but choose the YC/VC track because of cargo culting, naivety or ignorance of all of the issues that it comes with e.g. dilution and the low percentage of startups making it to Series-A.

I would argue that most founders instead of emulating Stripe, Airbnb etc should look to florists, bakeries, ecommerce sites etc and learn the fundamentals for growing a business in a cost-effective and sustainable way. And then decide after they have a successful lifestyle business whether YC/VC will take them to the next level.

[tptacek]

I've spent most of my career bootstrapping and I don't think this is true. If you are going to be the kind of startup that raises outside funding, you're better off following the YC playbook than you are trying to build negotiating leverage by achieving PMF with a slow go-to-market. Three big things I think you're missing here: first, the relatively low cost of previous-to-priced-round funding, second, the outsized impact of social proof (from YC itself to seed funders, from YC to A-round investors, and from seed funders), and third, the marginal value of a going-concern bootstrapped business to an A-round investor, versus the ability to plausibly tell a story about rapidly growing to a point where you can earn the investor a high-multiple return on their investment.

I think it might help to remember the investment strategy VC firms have. No matter how you structure a startup, it is more likely than not to fail; that's what companies do. The winners in an investment portfolio have to pay for the losers, which mean the winners have to pay big. And funds themselves have lifespans; for several reasons, they need to reach an answer on investments within a set timespan.

I think not raising money at all is a great strategy, and when it's viable, it's probably always superior. But if you're going to raise at all, slogging it out on pure sweat equity isn't a great way to build up credibility for an A-round. It might have been in 1999, but I don't think it is now; now, I think if you want to raise an A-round, the happy path is to raise a syndicated seed round first, and clearing the way for that seed round is probably one of the 3 biggest things you get out of YC.

[skmurphy]

My sense is that you data set is drawn primarily from 2010 to 2022, the current funding environment has different properties (closer to 2008-9 and 2001-3).

[tptacek]

You think it's gotten easier, since 2022, to get an A-round term sheet without first getting a seed round?

[skmurphy]

I think it was easier 96-2000, harder 2001-4, easier 2005-7, harder 2008-2010, easier 2011-2022 (March), harder since March 2022.

I was suggesting you were judging the likely 2022-2025 funding environment based on 2011-2022 (March). I think startups will be better served, where they can, to bootstrap for the next two years than making plans that require funding to get started.

Reasonable men may differ but you have been at this for a while and experienced the dotcom boom, the meltdown, 2008, and the post 2011 boom.

[brianwawok]

Bootstrap is more likely to hit a 10M exit

VC funded is more likely to hit a 1B exit

Depends on goals….

And yes I chose bootstrap.

[gamblor956]

There are tens of thousands of bootstrapped companies that have had 10M "exits" when the founder ultimately decided to sell...after years of profits.

There have only been a few VC backed companies that had billion dollar exits...only a few dozen that have even had profitable exits...which is about the same number of VC backed companies that have actually achieved profitability (but there is little overlap between these two groups)

Bootstrapped companies are more likely to survive, and thrive, than VC-backed companies. You just don't here about them much because they've got realistic business plans, and that's not sexy to read about.

[threeseed]

It's not a binary choice.

You can bootstrap until Series A at which point you can decide what direction to go. Either a successful lifestyle business or a bigger VC backed business. But you can't choose if you take YC/Seed.

And you are more likely as a founder to acquire life changing wealth with a lifestyle business than a VC one.

[tptacek]

Why can't you choose if you go to YC? Plenty of YC companies have not raised A rounds.

[skeeter2020]

voluntarily not raised A rounds, or been unable to though?

[tptacek]

Voluntarily not raised A rounds. What do people think happens if you don't raise after YC? YC isn't a conventional VC firm. They don't take board seats. They don't need you to shoot the moon (they'd like it if you do, but they're not structurally dependent on it). They are in fact pretty chill about you going on to bootstrap after your batch wraps up.

[brianwawok]

True, but a big reason to use YC is for the fundraising contacts. If you never go to A, you gave away a lot of your company for not a lot of money.