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VC Bootstrapping

Interestingly, I've come across a couple of VC articles that discuss bootstrapping a business rather than relying on a VC cash infusion.  Times have really changed.

http://www.inc.com/resources/finance/articles/20040801/noVC.html

http://www.feld.com/blog/archives/2004/08/bootstrapping_t.html

ISV owners:  Do any of you have any additional words of wisdom about bootstrapping an ISV?

Ewan's Dad
Monday, August 16, 2004

I bootstrapped my last enterprise (an affiliate online poster store) and am using the residual income to fund work on http://www.heron-language.com.

My first word of wisdom: ROI (return on investment) 

If you find a way to turn $1.00 into $1.01 spend every dollar you can scrounge. Experiment, diversify, and measure.

My second word of wisdom: Branding

Branding is an inexprensive way to multiply the effects of marketing. Heron is an example of an effective brand: short, easy to remember, hard to confuse, easy to say, associated with something recognizable, has a logo with a color and font component.

Christopher Diggins
Monday, August 16, 2004

There is a lot of overhead in the VC world.  If you are looking at a business that will not be worth 10M or more, VCs won't talk to you. 

This is not because they are stupid, or shortsighted, its just that their investment criteria requires it.   

My advice is:

1.  be stingy with your money
2.  be stingy with your equity
3.  Construct a corporate entity where you have majority control.
4.  Keep your day job.
5.  Plan for 3-5 years of nights and weekend work.
6.  Spend 6 months doing market research.

Crackhead
Monday, August 16, 2004

KNOW YOUR CUSTOMER


That is the single biggest obstacle that technologists face, even if selling to other technologists.

Know:
1. thier needs
2. Where they'd look for you
3. How much $$ your product is worth to them.
4. How they're solving the problem now (who/what is doing the job they're looking to "hire" your product to do).

Mr.Analogy (ISV owner)
Monday, August 16, 2004

This may be contentious, but I would argue that marketing is more important than product. You can sell anything to anybody. Imagine selling a can of brown, fizzy, sugar water at $2 a shot.

On a related note, the most successful ISV's have shoddy products. Just look to Microsoft for a prime example. You just need to convince people they need your product. 

Christopher Diggins
Monday, August 16, 2004

VCs usually form partnerships which must cash out in five years. If they don't see a business that can be sold or brought public for at least 10 times what they put in, within five years, then it's no go.

.
Monday, August 16, 2004

"I would argue that marketing is more important than product. You can sell anything to anybody"

Insightful, Christopher.  I agree.  If you have a solution that meets the needs of 1% of the market buy you know how to reach that 1% effectively, that's better than a superior product (with broader capability) that might satisfy 10% fo the market but with lousy marketing that can only reach 1% of that 10%.

So in the first example, you have 1% of the market, in the second you have .1% of the market.

BTW, I'd argue that MS's product's aren't lousy. They're merely mediocre. However, I'd argue they're quite good given the constraints they faced (time to market, availalbe hardware, maintaining backward compability). What engineers see as those constraints are things that are an ADVANTAGE to the customer.

I.e., what is a technical masterpeiece may be a marketing flop.

BTW, MY example of marketing trouncing product design is BOTTLED WATER. When you can sell WATER for MORE than GASOLINE (here in the USA anyway) that is a triumph of marketing over product. Especially since bottled water is actually a poorer product than tap water: very little regulation of quality, water sitting in a bottle can go "bad", etc.

Mr.Analogy (ISV owner)
Monday, August 16, 2004

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