Bootstrapping vs investor money

June 5, 2020

Investor money is a big temptation. Bootstrapping is hard. It has its advantages but you may appreciate them only later.

One of the perks is that you need to focus on paying customers. This is a very good driver for finding the real pain points and tuning in to the actual customer needs.

Hard pressure makes diamonds and these gems might be the insights and product decisions that are the foundation of our company later on.

The struggle is real. Having a bit more money makes life easier. A bit more team members, a bit more time to focus on other things than doing your admin at night.

The stress shifts from immediate survival to performance pressure when you take some investor money. Now, you’re not just with your founders in the company anymore. It’s a joint venture with other people who have invested in you and they have a say on your future decisions.

External funding is a category type of issue. It’s just a matter of degree when you have external investors on board but when you don’t you have still more opportunity liquidity in the direction you’re going with your company.

Some decisions have very long-term consequences and therefore they should be considered carefully. Buying out investors is hard or at least costly if you change our mind later. Divorces are seldom pretty even in the business setting.

There are no right or wrong answers but experience tend to make some entrepreneurs shying away from institutional funding if they can. They know there are no free lunches and sometimes compromises may break your spirit and motivation.

VCs and entrepreneurs seldom have perfect alignment in their objectives. This is just the nature of the beast and comes from the different business models and their stipulations.

Make sure you genuinely understand what you’re getting yourself involved with. We tend to appreciate something only when we don’t have it anymore (e.g. think freedom in terms of decision-making).

Maybe selling to customers is not such a bad thing after all? Revenues are a pretty sweet deal in many ways. Long live bootstrapping.

Baby steps every day

June 4, 2020

The big secret in achieving big wins is simple. You just put one foot in front of the other and keep repeating it.

You do tiny course corrections and improvements in very short intervals. Any single step does not sound like much but when you add all them together you realise you have reached the peak.

This is why it often takes a decade to become an overnight success. And this is the secret to the competitiveness, too. You can copy the outset but you cannot copy the experience.

The process teaches you a lot and gives you a unique perspective that is hard if not impossible to reverse-engineer.

Continuous improvement is neither a new thing nor a very exciting concept. Yet, it is like compound interest. So easy to grasp but so difficult to comprehend and follow in practice.

The path is not linear even though it’s often smoothened out after the fact in the success stories that are told later.

Who wants to go for a ride where you don’t know where it ends, what happens in the middle or when you have arrived?

Curiosity and the reluctant founder

June 3, 2020

Continuous learning is one of the themes that keeps coming up in my recent Talks with Petri –podcast discussions.

Probably, it’s my selection bias but still, it’s interesting that the common nominator seems to be curiosity. People mention it themselves so it is an important theme to them.

Playfulness and ever questions how things work and why things are the way they are result in them to find interesting unexpected outcomes and segways to new things and discoveries.

The old saying that the best startups are not founded by entrepreneurs but by ideas that have found the founders may hold some truth in it. In many cases, the problems are there just waiting for someone to apply the right solutions to them.

And for you to find them you need to turn enough stones or run into them. This rarely happens if you’re sitting at home on your sofa and thinking about things. You increase the chances by doing something that interests you.

Often, the motivation comes from frustration. You start to do something and realise that it’s hard or difficult to do something. Yet, you want to accomplish your goal and therefore you start to figure out the ways to solve the issue.

Suddenly, you start to find more people who are into the same problem and have already figured out part of the solution. This leads to a niche and in some cases to co-founders that start to solve the issue together for others.

Another theme seems to be the view that the successful founders are hesitant to start their company. They may even dislike the idea and really hate it. It’s the necessary evil for accomplishing the desired outcome.

I wonder whether a reluctant (and grumpy) founder is an early indicator of a potentially successful business case.

Inflicted mobility

June 2, 2020

We are approaching the half-year post and so much has already happened. Hong Kong is no more and people are fleeing from the Chinese rule. The USA has its own domestic issues to sort out, and the COVID-19 has opened eyes for many to move away from expensive locations such as San Francisco.

White-collar workers are now experiencing what it feels like to move away because of external forces. Entrepreneurs should do that also if they realise that they are been restrained by their local environment.

Matt Ridley’s new book How innovation works illustrate the regulatory capture, the slow death by risk aversion and overregulation in many societies. The innovative individuals are the once that are fighting against windmills for years.

David vs. Goliath battle may sound noble but often it is a misplaced conviction. There’s a dear opportunity cost while you’re fighting against the conservative forces or against the red tape that is supported by the incumbents.

The world is not holding its breath while you’re putting your energy towards the slow change of society. Eventually, you may win but at what cost?

What if you would have just moved into an environment where they embrace or at least tolerate what you’re doing? You could focus your energy, time and resources on building the very thing you’re passionate about and convinced that the world gravely needs.

This is especially true in some peculiar cases where the local market is an anomaly globally but it just happens to be the entrepreneurs local market that is even too small to make any dent to the actual business at scale.

For example, Finland has its rather unique position in the world towards donations. They are heavily regulated and a solicitation is a criminal act. Even the national carrier Finnair stopped offering carbon compensation earlier this year. In another case, the legal environment puts a new initiative entirely into an impasse.

Bengt Holmström mentioned in his talk a few years back that people have their reasons for their actions even though the bystanders may not understand them. A personal situation or emotional attachments may hold you back even though in the long run it may yield diminishing returns, and losses to the society.

How do you see the products and services that could be benefiting us but are never built? A classic Bastiatian dilemma.