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In 2006, Harvard Business School professor Noam Wasserman published paper titled “The Rich vs. the King: The Entrepreneur’s Dilemma.” The dilemma in query was whether, as a founder, you would relatively make money or maintain control—which meant you couldn’t have each.
Wasserman argued that if you need to get wealthy, you will need investors, at which point losing control becomes inevitable. If you need to be king, you will have to fund your enterprise yourself, which implies your potential for huge growth is null and void.
“Entrepreneurs are faced with a choice at every turn between making money and managing their ventures,” says Wasserman. I’m writing“Those who cannot decide what is more important to them are often neither rich nor powerful.”
With all due respect to Wasserman, that’s simply not true. For evidence, look no further than Spanx’s Sara Blakely, GitHub’s Tom Preston-Werner, Chris Wanstrath and PJ Hyett, or Tough Mudder’s Will Dean and Guy Livingstone, all of whom are bootstrapped founders who launched their corporations to profitability without any outside investment.
As a bootstrapped founder myself, I imagine there is a lot of misinformation and false assumptions on the market about not only what bootstrapping is, but also what its advantages can be.
Why Bootstrapping Is Still the Best Kept Secret
Let’s start with the basics: Bootstrapping means starting and running a business without outside investment, using the capital the founder has and the revenue the business generates.
The opposite of bootstrapping is raising capital through angel investors or VCs. These kinds of operations often get a lot of press for a few reasons: First, flashy funding rounds are seen as newsworthy events, and there’s a strong public perception that a company that receives large amounts of capital is poised for massive success (although that is not at all times the case). Additionally, bootstrapping founders are often more focused on putting their resources into building and developing their products than on PR or media activities.
For example, technology company Zoho became the first bootstrap SaaS to surpass 100 million users. In response to Reddit post When asked why bootstrapping corporations like Zoho don’t get much attention, one commenter said the answer is easy: the path is simply not that attractive.
“[Bootstrappers] They don’t go to startup meetups, they do not go to VCs and they don’t need their money. You focus on your product and customers, not your visibility on [the] “startup scene,” wrote a commenter.
VC-backed growth vs. bootstrapped growth
One of the biggest misconceptions about bootstrapped startups is that they’re the same as small businesses that are focused on staying small. That’s normally not the case—and definitely not the case for me. I grew Jotform from a side hustle that I did on top of my full-time job into the enterprise it is today, with over 25 million users worldwide and over 660 employees on five continents.
Bootstrapping startups are actually just as ambitious as people who take investment. While their growth may be slower and more incremental than if they received a huge injection of VC money, each share the same goal: to develop into a large, successful company.
VC-backed startups are often forced to grow rapidly. That can — and does — work, especially if you’re comfortable handing off the CEO role to someone with experience managing that sort of expansion. But if your goal is to remain and grow with your organization, making that form of rapid change can be very difficult.
With bootstrapping, your development should be regular and continuous. I often think about this in the context of my two oldest children, who are now 6 and 8, when they began learning to play basketball. When they began training two years ago, they didn’t know easy methods to dribble and their shots didn’t land anywhere near the basket. But they got better and better over time.
I haven’t taken my kids to practice in the last few years because I need them to develop into skilled basketball players (although I won’t complain if they do). I take them because learning the game has made them stronger, built their confidence, and taught them discipline. But the fact is, it’s taken time to enhance. It wouldn’t be the same if they spent all day shooting hoops from dusk till dawn for a month straight—it’s the consistency that built them.
The same goes for bootstrapping. You cannot make a product a success overnight by spending thousands and thousands of dollars hiring a whole bunch of employees and buying tons of ads. It takes time to build a good product, and it takes time to learn easy methods to be a good CEO. If you plan on being wealthy and a king, in Wasserman’s language, bootstrapping is the solution to go.
There are still a lot of misconceptions about bootstrapping, mostly because bootstrapped corporations don’t get as much publicity as people who go the VC route. But through regular growth, they will — and do — reach the same great heights, often in a more sustainable, long-term way.