Only three things that money can’t buy
That’s true love, homegrown tomatoes, and company direction.
John Denver as a VC-backed Founder
I was a VC-backed founder for the last three years. My co-founders and I were in pivot hell for the majority of our startup journey. A year after raising capital, we decided that the market for our original product wasn’t venture-scale. We spent two years endlessly spinning up and down clearly venture-scale ideas. Recently, my co-founders decided enough was enough and quit. After informing our customers, investors, and advisors, I am left figuring out what to do next.
Over the last few months, I’ve thought long and hard on whether I should continue being a founder. I want to be a founder for similar reasons as every other founder, so I won’t bore you with my motivations. Instead, I want to discuss my decision to get a day job and become a part-time bootstrapped founder. Financially, I am not at a level where I can afford to be a full-time bootstrapped founder—although I wish I could. Bootstrapping appeals to me because the VC money was more of a headache than a benefit at this stage in my journey.
The money wasn’t always a headache. When going from 0 to 1, VC capital was extremely useful. With a clear product direction, it was clear where I should spend the money—headcount and marketing. When I decided to pivot and start again from the -1 phase with millions in the bank, I was quite positive. I believed that having all of this extra money would make speed up exploration and we would be back to executing within the year.
However, the biggest problem with having VC funding during the -1 phase was the expectations it brought. These expectations pressured me to work on clearly venture-scale ideas. This limitation led me to work on ideas that I would’ve never considered working on if I didn’t have VC money, but hey these are obviously big ideas that if I can just somehow get 1% of the market I’ll be hailed as a genius. I spent two years building these ideas because:
I was embarrassed to admit to my friends and family that I quit my high paying, high status job to work on a small (yet interesting) idea.
I desired to be a full time founder so I worked on obviously venture-scale ideas to keep the money.
I couldn’t convince my co-founders to work on my interesting ideas (that seem small) so I stuck with working on the obviously venture-scale ideas to avoid conflict.
I had recurring meetings with my investors where I shared our company status and didn’t want to be the ugly duckling in their portfolio.
These expectations are hard to get past as a founder. VC-backed founder outcomes only make sense with large exits. Many bootstrapped founders would love a $1-2MM exit, but there isn’t a single VC-backed founder who would be happy with that outcome.
There are, of course, numerous benefits to having money. You get to be a founder full time (I’ll talk about the tradeoffs for this one at the end). You can pay for user acquisition. You can pay for email enrichment products. You can pay talented contractors to do design, voice acting, or whatever skill you don’t have. You can pay cloud providers for expensive GPU time. You can pay to fly to meet a customer in person. Money does help you make progress, but these purchases don’t cost millions of dollars while you are -1. Overall, my co-founders and I spent ~$80K/yr exploring markets excluding our salaries. Split between three co-founders, that comes out to ~$27K/yr/person. That’s a manageable expense for a software engineer in a HCOL area. [1]
I wasn’t conservative with how I spent the money, either. I tried really hard to find areas where a few extra dollars could speed up the process. From paid user interviews to $100 bottles of wine, nothing worked as well as Google search ads or cold outreach with a good value prop.
After 2 years of failing to gain traction, I now believe that venture capital is neither good nor bad—it is a neutral tool. Sometimes you need it, other times its best to leave it alone. The tradeoffs (money for expectations) at the -1 phase were not worth it for me. I would raise venture again if:
I have a lot of conviction that getting to point A would be very valuable and I need a lot of money to get to point A.
I’ve built a box that takes in money and spits out even more money. There are competitors and it’s winner takes most/all.
I’m excited to drop all of these expectations and get back to just being a bootstrapped founder working on ideas that are interesting to me. I’m also, oddly enough, excited to get a job. Having a job is a very underrated way to explore a market. For one, you get instant access to experts and clients to talk to. I’ve told a few founder friends my plans and there are two arguments against this decision that really stick out to me.
On being a part time founder: You shouldn’t be half in, half out. You should focus on working a full time job or being a founder.
This is funnily enough the reason I quit my job the first time around. I wasn’t making enough progress on my side projects so I decided to quit my job and go all in. But these last few years have taught me that just like capital, focus is also a neutral tool. Sometimes you should focus, other times you should explore. Forcing yourself to focus on a direction for the sake of progress is just movement disguised as progress. After quitting the first time around, I found a breakthrough idea within 2 months. For a long time I thought quitting and going all in was the secret to my last success. Looking back, there’s no reason why I couldn’t have found that idea while exploring part time. What drove much of the success was that I had developed deep conviction in the idea naturally. Customer conversations were very positive. I was personally interested in the space. The market opportunity had a chance to be massive. Everything just lined up. What drove that initial -1 to 0 was my willingness to go all in after I developed deep conviction, not before.
To get out of the -1 phase again, I need time to explore and naturally build conviction in a space. Quitting my job did gave me a lot of time to focus, but not the right type of time to build conviction. There are two types of time that I now realize are important to founders:
Founder Time: The number of hours you can spend a day working.
Market Time: The number of months you can last in a market without giving up.
What I didn’t realize at the time was quitting my job gave me a lot of Founder Time in exchange for Market Time. The obvious reason was because I was burning through my savings. This is easy to mitigate so I saved up enough money to explore for a year full time. My hope was that I could spend more Founder Time to find an idea, build a product, and get traction before my savings ran out. The non-obvious reason was because I was an impatient person that focused before I needed to.
I quit my job the first time around because I was impatient and wanted results now. I dropped everything in my life so that I could focus all of my Founder Time on going from -1 to 0. Unexpectedly, spending all of my Founder Time only to get low to middling results led to me burning out and reducing my Market Time. Most often, this wasn’t because people hated my product it was because it was really hard to distribute my product to enough people in a short time frame.
While going from -1 to 0, most of my time was spent waiting around for people to respond to my emails or click on my ads. It could take a few weeks for people to have a problem, consider solutions, and decide to talk to me. Sometimes customers only had the problem at specific times of the year (i.e. e-commerce returns after holiday season, manufacturing delays due to Chinese New Year). Having a lot of Founder Time did not make the world move faster. Since I was just waiting around, my extra Founder Time was spent building features no one asked for and polishing a product that no one used. I thought that I was doing the right thing—I was focused on the problem and doing everything in my power to move the idea forward. Now I know, endlessly spinning for the sake of “focusing” is just a huge waste of time. I honestly feel like it would’ve been time better spent partying in Thailand while I waited for emails. Then I would’ve burned myself out on partying in Thailand instead of my startup ideas.
Looking back, what I needed here was more patience AKA Market Time to let my idea prove itself. Having a job should give me the patience to ride out an idea to it’s conclusion instead of forcing results because I have nothing else to do. It doesn’t even have to be a full time job. I just need some time sink where I can feel productive as my ideas run their course. I now think it’s a good problem to have to prioritize my Founder Time. Over the last 2 years of pivoting, I never felt like I didn’t have enough Founder Time. Three years ago, I quit my job to get more time to explore ideas. Now, funnily enough, I’m getting a job to have more time to explore ideas.
On exploring non-venture scale ideas: You aren’t being ambitious enough. You shouldn’t waste your time working on non-venture scale ideas.
I want to call out that this is not telling me that I should only work on obviously venture-scale ideas. It is suggesting that if, after going from -1 to 0, the idea caps out at say $10MM ARR that I should stop and go look somewhere else.
I don’t have a good argument against this. It’s true that getting a business off the ground is incredibly hard, so shouldn’t I aim for the stars? I don’t know what’s right or wrong here. All I know is that I am personally tired of killing interesting ideas because they aren’t venture scale. Being in pivot hell for the last 2 years made me realize that there are plenty of $1MM to $10MM ARR businesses to be built that don’t require a lot of starting capital. The abundance of opportunity just gives me so much energy to keep being a founder even though the outcomes aren’t venture scale. This energy means more to me than my ego. Besides, venture scale ideas can be non-obvious.
So, here’s to me going back into the workforce. A big thank you to Michael Lynch. I was inspired to write this after reading his most recent blog post. Like him, I’ll be continuing to write about the ideas and results of what I build and explore. Unlike him, I will be writing under a pseudonym as potential employers may look unfavorably at me for being a part-time founder.
[1] The obvious money sink that I have ignored is product development. Building good products (even basic demos) is very expensive, but my co-founders and I did it ourselves for dirt cheap salaries. If you need to pay for product development, the math will probably work out drastically different.