Wrote this as a tweetstorm but thought I'd share it here.
As a formerly bootstrapped founder who mentors a bunch of the same, my view has evolved on whether it makes sense to raise capital.
In short, more bootstrapped companies should consider raising money.
A few reasons why:
It's really easy to major in minor things if you're operating on a shoestring budget. Negotiating SaaS subscriptions, hiring outsourced consultants vs FTEs, and throttling advertising spend.
Most founders I work with want to grow - but they hesitate to make the right decisions by operating with a scarcity mindset.
Capital is plentiful right now. It won't be forever. There are investors like Earnest Capital, Clearbanc, and even bank debt is more accessible for software companies.
Even VCs at the early stages are investing on SAFEs that won't dilute founders too much. If you wanted to raise VC to take a bigger swing, even if that fails your downside is still protected.
Tech talent is expensive, and getting more so. As more companies move to remote, the arbitrage on exceptional talent will no longer exist. Those Eastern European Engineers who may have made $50/hr a few years ago are now making $100.
Both competition for talent and for software is getting more heated. There's an expectation from customers for simple things like cyber-insurance and compliance that can eat into your profits
Even the smallest niches have multiple competitors these days, and it's better to be the big fish in the small pond than one of the guppies.
There's something romantic about grinding your way to profitability, but often founders end up doing too much work themselves. If your company will be successful anyways, it makes sense to front-load some of that risk.
eg. Raise 200k to hire 2 salespeople —> add $200k ARR.
Your value has gone up by $2m, and it cost you $200k.
Jobs are pretty good these days. Frankly, a remote job will give you a much better lifestyle these days than building a company. Most bootstrapped founders I know don't really want to go live on a beach somewhere, they want to build a great company. Better to do that faster.
Unfortunately, things are getting more expensive. $5k/mo profit used to fund a decent lifestyle for a single person in a major city. Now that number is more like $10k (pre-tax).
Raising money will allow you to take a salary, which can help you operate from a position of abundance when making decisions.
It probably won't feel that different to the founder if they raise money or not. Most bootstrapped founders have 1000 things on their plate - from payroll to adwords optimization. Offloading a few of those might even decrease the stress levels.
Even if you've raised some money, you can still build the company and lifestyle you want.
It's a lonely gig building a company without support. Good investors can help founders navigate these challenges, introduce them to other founders, and help create a better support network.
The beautiful thing about building a company is that it is up to you. I admire and respect anyone that is in the arena - no matter how your company is funded. If you can bootstrap your way to accomplishing your dreams - hell yeah.
Open your mind to all options, and choose what is best for you.
Link to tweet is here: https://twitter.com/jamesclift/status/1367234086490624000?s=20
Appreciate any feedback!