Perhaps the art of bootstrap is not discussed enough here.
> Many business models must pass through these phases.
I think there are very few categories of companies that ~must~ go through a "Growth Phase". Sure, there are rocket companies like SpaceX and Uber/marketplaces that only work at scale... but the majority of internet software companies cost very little to get up and running and have very, very high gross margins.
Meaning for many companies, the only thing stopping them from immediately entering the "Sustainable Phase" is an incessant need to maintain extremely high growth through excessive spending.
Is it? Outside of Silicon Valley, I don't think there are many businesses that deliberately lose money in an unsustainable way. I know all of mine have been (at least marginally) profitable from day one, at least.
In software it's development costs. Outside silicon valley, in the non-techie world, there are many things that work the same way. Eg real estate - building a building is an upfront investment of piles of money that the building doesn't earn back for years. Or eg opening a McDonald's.
The main difference in tech startups is that it's not just entrepreneurship, it's innovation too, so it's unknown whether the product will earn back the money. But sometimes McDonald's falls, builfings fail, etc. The odds there are better though.
Let's say I have an idea for a new type of air purifier. I will need to build prototypes, test them, sort out manufacturing, build large numbers, get agreements with various distributors, and all this while not bringing in much if any money yet. If all goes well, however, the investment pays off and once I'm making my new product at scale I more than make up for those initial costs.
Twelve years ago, I bootstrapped my own company. Took a very small loan from my parents ($5,000), got a friend to work with me and we were off and running. We still worked our full time jobs, but I was taking vacation on Thursdays to cold call clients and give them my elevator pitch. Then it was setting up appointments, making the presentations and trying to get people signed up using a subscription based model we had developed while he was working on the mobile app development.
We were about two months from generating enough revenue to quit our full-time jobs when my buddy died suddenly and unexpectedly. It was pretty hard to continue after that. I slowly wound down the clients I had signed up over the next year or so, and quietly closed the business after two years. I still do business under the company name, but the organization is long gone.
If nothing else, it proved to me you can bootstrap your own company on your off-time, and eventually make that transition to full-time with very little to no overhead (office space, equipment, employees). Also, it showed me you don't need $10M in funding to build a niche company serving an underserved industry.
But bootstrapping isn't easy. Cold calling people isn't easy, getting out there and grinding away on a consistent basis isn't easy. Having your own money invested with a "do or die" attitude isn't easy. Believing in your idea isn't easy. I'm not sure constantly having to raise money is any easier, but the difference is one one hand you're constantly working on your product and business which makes your business sustainable. On the other hand, I'm not sure constantly chasing investors and their money will really benefit your company in the long run.
> But bootstrapping isn't easy. Cold calling people isn't easy, getting out there and grinding away on a consistent basis isn't easy.
VC funded business have all these same challenges. On top of them you need to somehow find time to raise money and endure board pressures often conflicting with your vision as a founder. I have two bootstrapped business behind me, and in the middle of a third, and although I could use more funding, I am also concerned about taking it. I think I would be overwhelmed with the additional complexity (perhaps I am not one of those "infinite business capacity" founders).
Yeah it was devastating. Died of a massive heart aneurism. We were scheduled to meet that day and his wife called and told me what happened. I guess he died pretty instantly. It was so massive, it literally ripped his aorta in two.
The company he was working at came out in full support of his fiancé. The entire church was standing room only. They had some 150 people just from his office who knew him which was really heart warming. He was a really great guy, gone way to soon. He was still in his 30's, I was pushing 40.
When something like that happens, it really makes you think about your own mortality and if you're really living every day to the fullest, or just breathing. It really made me take stock and make a lot of changes in my life. I just don't take anything for granted anymore.
The above seed stage startup could be in the boat where they won a customer bootstrapping, but are now scaling through the use of sales engineers etc.
A 100k per month burn may translate to needing to win 1-10 deals to break even.
