When I started Indie Hackers back in 2016, I chose the term "indie" to represent our independence from jobs and 9-to-5 schedules, from bosses, from capped salaries, from offices in fixed locations, and from investors who try to dictate how we run our companies.
But today I might have to cross investors off that list. It's becoming increasingly common to have investors and yet, somehow, remain indie.
To an alien visiting Earth for the first time, it might seem puzzling that any founders would dislike the notion of having investors. Don't both parties have a mutually beneficial relationship? Ideally, yes. But historically, not necessarily.
For decades now, funding for Internet companies has primarily come through venture capital, and venture capitalists have a very particular model: invest a ton of money into startups, then push them to grow as rapidly as possible. The result, predictably, is that a few startups win big, but most go down in flames. Rob Walling put it perfectly in our recent conversation:
Let's say you put $10, $20, $30 million into a company, and you say alright, become a billion-dollar company. Instantly, your risk shoots through the roof that you're gonna fail. Because you're gonna hire 50-100 people, there's way more chaos, you're moving way faster, and it just makes it more likely that you're going to fail… It really increases your likelihood of either failing, or being a unicorn, a billion-dollar company. They want it to be binary.
If you're okay with that kind of polarized outcome, VC is for you. But for the majority of aspiring founders, raising venture money requires doing the unnatural and unpleasant — contorting your business and your lifestyle into something far riskier and more stressful than it really needs to be.
It also means giving up the very independence you sought as a founder in the first place. VCs are gatekeepers who can tell you "no," like a boss denying you a promotion or a raise. And even if VCs decide to invest, they typically put in enough money to demand board seats. Either way, you now have a boss.
So that's the first piece of the puzzle: venture capital = a loss of freedom and independence.
Naturally, founders who didn't like the VC option turned to other forms of funding, but for years they only found more of the same. Accelerators like Y Combinator describe themselves as "the earliest stage of venture funding." And individual angel investors often follow the same playbook. For example, here's Nivi's advice for angels on the influential Venture Hacks blog:
Focus your attention only on companies with the potential for a 100-1000x return. Otherwise, pass. Without these large exits, your portfolio will not achieve a venture return.
Since venture capital was the only game in town, funding became synonymous with venture capital. And that's the second piece of the puzzle: all funding = VC.
Putting the pieces together, if VC means giving up your independence, and if all available forms of funding are really just venture capital in disguise, it follows that all fundraising requires giving up your independence.
It's no surprise then that bootstrapped founders have been banding together since the end of the dot-com boom, literally defining themselves by their opposition to funding. The very tool that should help these founders accomplish their goals has instead, for decades, excluded them.
In 2010, these frustrated bootstrappers were my heroes. I looked up to people like Jason Fried of Basecamp and Peldi Guilizzoni of Balsamiq, who'd somehow found a way to make millions of dollars building SaaS apps without raising any funding. That's hard to do today, but it was even harder back then.
There was no Indie Hackers, no MicroConf, no playbook full of transparent founder stories. Stripe wasn't available yet, and it could take months just to be able to charge credit cards. Developer tools and resources like AWS were rarer, harder to use, less powerful, and more expensive. And the Internet was a smaller place, with fewer customers online willing to pay for software.
Even the culture itself was against you. It sounds bizarre, but at the tail-end of the last recession in 2010, making money was considered… stupid. The name of the game was to raise funding, give away your product for free, achieve hypergrowth, and figure out your business model later. Sean Parker's character in The Social Network captured the zeitgeist perfectly in just a few words:
A million dollars isn't cool. You know what's a cool? A billion dollars.
Coincidentally, I applied to Y Combinator the same month that movie came out. Despite the fact that my heroes were bootstrappers, their path seemed so much harder to follow.
It's remarkable just how much has changed.
All of the aforementioned challenges reversed course in the intervening years, making it much cheaper, faster, and easier to get started. How many businesses wouldn't exist if not for Stripe? If not for AWS and its competitors? And if not for the countless founders who've been generous enough to share their stories and strategies over the years?
We've also seen an explosion in the number of people who've learned to code, which is the gateway drug to starting an Internet business — over 85% of indie hackers got their start as software engineers. When you factor in the argument that we're in the midst of code disappearing as a gatekeeper, the number of potential founders should only continue to skyrocket.
The result is that we now live in a world with at least tens of thousands of indie hackers building profitable online businesses. And I'd wager the vast majority of them happen to think that a million dollars is pretty cool.
This isn't exactly a situation investors can ignore.
Just like founders, investors look for under-served but fast-growing niches where they can profit more easily by avoiding the competition. And indie hackers have proven that they can build high-margin, high-revenue businesses in vast quantities. If venture capitalists won't invest in indie hackers, others will:
For the first time, founders who are seeking independence have a variety of funding options that conform to their goals, rather than requiring founders to conform to the venture model. Accelerators that allow you to participate remotely. Application processes that take hours, not months. Funding that's returned via revenue, not equity. Investors who don't take board seats and who won't push you to blitzscale or raise round after round.
And these examples are just the tip of the iceberg.
The big question is: Will this work? There's a reason why venture investors never took this approach before. I asked Rob of TinySeed this very question, and here's what he had to say:
The common wisdom in the VC space is you make money on your Airbnbs and your Ubers, and you lose money on most of the other ones. But the way we've modeled it out that doesn't appear to be the case… There are so many more companies that can be successful 7- and 8-figures than there are can be billion-dollar companies.
From an analyst's perspective, I wouldn't bet against an ecosystem of smart people who are competing to help other smart people make money. At least not in the long run. And the pandemic-induced recession we're facing may even be a catalyst. Startup valuations are falling, which makes VC a less attractive option. Meanwhile, many traditional high-growth startups have shifted their focus to simply surviving the next few years, and thus behaving more like indie hackers who prioritize cash flow over growth.
From an indie hacker's perspective, however, whether or not these new models succeed is irrelevant. It doesn't matter! Either way, there's finally capital available that can help you accomplish your goals without sacrificing your ideals, and that's something worth taking advantage of.
At a cultural level, "bootstrapper pride" has always been something that binds us together as a community. Bootstrapping is synonymous with independence, and for most indie hackers, independence is the entire point.
But to the extent that it's possible to remain indie despite raising funds, the calculus changes, and attitudes will shift accordingly. It may be the case that new indie hackers who don't hold any preconceived biases against funding will do a better job taking advantage of the changes in the ecosystem, as more experienced indie hackers take longer to adapt.
In the long run, "bootstrapper pride" will eventually be replaced by "indie pride," which is a more direct and accurate manifestation of many founders' goals, anyway.