The internet is littered with horror stories detailing the many challenges of entrepreneurship. We’ve all read the tales of founders wrestling for years to find product market fit, of co-founders squabbling over equity, of the CEO riddled by anxiety as he drains his infant daughter’s college fund to keep his start-up afloat for another month.
Cautionary tales? Sure. But while these circumstances may be relatively common, ultimately they gain notoriety in the tech media simply because they are alarmist and clickbait.
As I approach year four as a founder of a bootstrapped SaaS start-up, I can’t help but reflect on the hardships that I’ve encountered myself. As I have, I’ve had an overwhelming feeling—the majority of challenges that I’ve faced are by no means unique to me, but nobody is talking about them. This article is about surfacing those common entrepreneurial challenges that are gasping for some air.
The debate over the merits of bootstrapping versus going the venture capital route when building your company rages on—I for one am guilty of fanning these flames. But it strikes me that “bootstrapper” and “hypergrowth” describe paths and decisions that shouldn’t be seen as a part of our identity, or even as something to which we ascribe a personal preference.
“I think we talk way too much about whether we prefer bootstrapping to raising venture capital, and way too little about which path is compatible with our business idea and life circumstances.”
I’d go so far as to say most entrepreneurial challenges that we hear being bemoaned are a direct result of your chosen path being incompatible with your business idea or life circumstances. When these items are in harmony, entrepreneurship becomes vastly easier.
If you’re building SpaceX, your idea dictates that you go the VC route—it’s too big, too ambitious, and too capital intensive to bootstrap such a company into existence. This is an extreme example, but this is the lens through which we should be assessing our start-up ideas as we decide how to fund them.
Generally speaking, “smaller” products are better suited to bootstrapping. Building a slack notification tool? Great! You can probably launch something like this in less than a month, give the project the opportunity to gain some traction, then make the decision to proceed or not from there. You’d be crazy not to bootstrap such a company.
But if you’re building a bigger and more ambitious piece of software you need to look closely at the reality that it could take years to bring something of value to fruition. Can you afford a year without a paycheck? How about three years, or five?
It’s worth noting that this isn’t solely a financial decision or one of product scope, but also one that will impact your day-to-day life potentially for years to come. Did you recently sign a mortgage? Do you plan on having kids? The stresses that come with entrepreneurship and how you choose to fund your business will have trickle down effects on all aspects of your life.
The question is not do you prefer bootstrapping or venture capital. The question is which path is most compatible with the product you’re building… and your life.
Bringing this full circle to Outseta, in many ways Outseta is not an idea compatible with the idea of bootstrapping. Outseta is a very large and ambitious project that we’re executing on with a small team—it’s really three or four different software products rather than one. We knew this going in and openly talked about how it would take years for us to truly be able to deliver on our value proposition and start to grow revenue in a meaningful way. It took us two years to deliver a sellable product, and four years in now we’re just starting to scale.
But we had one major advantage—the idea that we chose to build was not one that needed “validating”—the categories of software that we offer (CRM, billing, email marketing, etc) have staying power and have been validated long ago. This gave us confidence that we could play the long game and allowed us to design all aspects of our business and lives so that we could survive long enough to see Outseta blossom into what it’s become today.
We didn’t choose an easy route, but we’re now finding that Outseta is massively defensible because very few teams would commit 4+ years just to bring an idea to life. You could do it much more quickly with venture capital, sure, but you’d never be able to serve the audience that we do at our price point.
One of the most common and least talked about hardships of bootstrapping a SaaS start-up is what I’ve started describing as “the doldrums of SaaS.” This occurs when your start-up hits an inflection point in sign-ups and support requests scale up dramatically to the extent that they all but take over your ability to focus on other aspects of your business, from marketing to building new features.
Ironically enough, this stage in a bootstrapped start-up’s growth initially became apparent to me because of one of our competitors. We started getting dozens of sign-ups from founders all singing the same tune.
“I was using CompetitorX—I loved their product initially, but they’re unresponsive and haven’t released any new features in months.”
Then earlier this spring, we went through a similar stage. On the back of a new partnership with Webflow, all of a sudden the number of sign-ups for Outseta scaled up dramatically—and in tandem with that growth came an influx of support tickets from new users learning the platform.
My summer was spent focused almost entirely on technical support, while my time spent marketing Outseta fell off a cliff. Likewise, my Co-founders were pushing fixes and helping out with new Outseta implementations cutting into their ability to roll out new features.
Ultimately this is a stage in a bootstrapped start-up’s growth that doesn’t get much lip service because there’s little benefit to speaking about increased support levels and decreased capacity for building new features. But that’s unfortunate because this is a “good problem” that nearly every scaling company will encounter—yet there’s very little advice out there on how to best handle this stage of the entrepreneurial journey.
If you’re a VC backed company, it’s an easy problem to fix—throw some money at hiring additional support capacity, because you have the ability to run your company at a loss. But for a bootstrapper this stage can feel like your legs are stuck in quicksand.
I don’t have a solution here, aside from taking some degree of solace in the thought that time spent helping customers is the most single important thing that you can do to build your business. And rather than hiring support capacity, using your engineering resources to solve underlying issues that result in increased support requests will always pay off in the long run.
It’s well documented that many entrepreneurs feel extreme levels of stress, anxiety, worry, and even depression—which most often is tied to financial instability and the regular peaks and valleys of building a company. But for me personally—and I suspect many others—one of the strongest psychological tolls I’ve felt is stress that comes from feeling like I’m not yet able to be “all-in” on my start-up.
Make no mistake about it—since the day we started Outseta, I’ve undoubtedly been “all-in.” I’ve rearranged almost all aspects of my life over four years in support of bringing this company into existence. But as part of our strategy to bootstrap the business, our entire team began working on Outseta in a part-time capacity while consulting or working on other projects to pay the bills. We’ve gradually ramped up the time we’ve each invested in the business as our growth has permitted, as most bootstrappers do.
For me personally, this meant that for years, literally, there was always this nagging feeling that I could be doing more. I could be doing more or doing better for Outseta, and I could be doing more in terms of the other projects I was working on as well. For me, that feeling has been tough. It feels really good to be able to say that you unequivocally, without question, are giving something your all. But most bootstrappers have to wait quite a long period of time until their business can truly support every last scrap of their attention at work. That’s a long period of time to wait to shed that nagging feeling!
The wonders of SaaS as a business model are well known—the stability and predictability of recurring revenue, products that can scale to thousands of users, high valuations—the whole nine yards. But the fact of the matter is that for bootstrapped founders, SaaS is a torture chamber and a game of delayed gratification.
Don’t misunderstand me and immediately suppose that there’s some sort of self-inflicted pain behind this comment—I’m the biggest proponent of work/life balance and generally the principles outlined in Jason Fried and DHH’s It Doesn’t Have To Be Crazy At Work that you’ll ever find. This is solely a matter of the business model.
When you’re bootstrapping, you’re going to start off without a paycheck. Most of us work towards a point where the revenue of the business can eventually start to pay us something, then we scale up our own compensation until it reaches some semblance of a normal salary. The problem with SaaS and bootstrapping is you are hugely incentivized not to pay yourself—every dollar that you pay yourself is money that isn’t being reinvested in the growth of your business, so you’re intentionally slowing down your own growth.
Of course there are human, real world circumstances to consider and your own financial and emotional needs directly correlate to your ability to work on your business successfully. But the hard reality is the longer you can delay your own gratification, the greater your advantage.
I asked my Co-founder, Dimitris, to speak to his experience of the long, slow ramp of death that’s so prevalent in SaaS. Dimitris Co-founded Buildium back in 2004.
“It took us 2.5 years to get to 50 customers,” says Dimitris. “Then it took us another year to get to 400 customers, and a year after that we reached 1,000 customers. When we had 400 customers we made a conscious decision to defer paying ourselves more than a token $1,000 per month salary and instead hired our first two full-time employees. We didn’t start making what we were making when we quit our full-time jobs until six years in.”
Buildium was acquired 15 years after it was founded for $580M, so everything worked out in the long run. But it stills begs the question…
“Are you ready to wait years to return to a “normal” salary?”
Very much related to the notion of SaaS being a torture chamber is perhaps the toughest topic of them all—how do you recognize and make the decision to fold your hand and call it quits?
It’s a question that almost all bootstrapped founders wrestle with that don’t find near immediate traction and growth. But how do you know if you should keep pushing? How do you know when it’s time to “dig in” versus calling it quits?
If you fold your hand too soon, you’ve invested a lot of time into building something for little more than a few lessons learned. Worse yet, you may always wonder what could have been. But if you keep building blindly on good faith, you may only end up flushing additional months, years, and lots of cash down the drain, not to mention your emotional well being. It’s a topic with serious ramifications no matter what you decide!
One year into Outseta, we hadn’t made the progress we hoped to. Four years in, that remains true! So why haven’t we given up?
"The most valuable asset a startup can buy is TIME. Everything always takes two times longer than you think." — Chris Heivly, Co-founder of Mapquest, EIR at Techstars
The answer to this question and how you come to the decision to call it quits is different for everybody. In all that I’ve read about this topic, the most common advice that I agree with is to follow your intuition. Chris Savage of Wistia and Natalie Nagele of Wildbit have a fascinating discussion on this topic in a recent podcast episode, where Natalie tells the story of how her team decided to shut down one of Wildbit’s products that they’d invested years and millions of dollars into building. Their reason? Nobody was having fun working on the product anymore.
Kevin Conti, Founder of Softwareideas.io, says that his personal experience makes him biased towards quitting early. Justin Jackson, Founder of Transistor.fm, has written a lot recently about the importance of finding a market where you feel some immediate pull.
In both cases, I think this is generally good advice—nothing is a better indicator that you’re on to something than actual traction occurring quickly. But I also think that this advice can in many instances be shortsighted—one of the most common killers of successful start-ups is simply founders that quit too soon. Dimitris’ experience at Buildium is just one proof point.
One of the key factors that I think should influence this decision is the extent to which your idea needs to be “validated.” If you’re bringing something totally new into existence, I think it is critically important that you see some traction in terms of willingness to pay fairly early on. But if you’re building products in well established, durable markets I don’t think that’s necessarily true. You know that there’s market demand for what you’re building; you just need to give yourself enough time to build a compelling product.
Bringing it full circle to Outseta, we offer CRM, subscription billing, and help desk products. These categories of software have been around forever, and they’re certainly not going anywhere. That gave us the confidence that we could play the long game without needing to see traction in the first few months—hell, it took us a couple of years to really offer a sellable product that delivered on our value proposition! It would have been a massive waste of time and we would never have made it to this point if we’d quit after a year or two.
Likewise with Buildium, it took 2.5 years to get to 50 customers—but Dimitris knew the rental market wasn’t going anywhere, and had conviction that tenants paying rent online was a better experience than landlords cashing checks at the bank each month. This gave him the confidence to continue on, and Buildium the time it needed to blossom.
If there’s a lesson here, I think it’s that the decision to call it quits should boil down to a few factors:
Any way you cut it, this is one of the hardest decisions that almost every bootstrapped founder wrestles with at some point or another.
I’ve definitely started to see this topic discussed more often, but I think the addictive nature of start-ups is worthy of further exploration. Taking a step back and an objective look at my own behavior, there’s no question that I’ve become a bit addicted to working on Outseta.
This manifests itself in ways that are both healthy and unhealthy. I genuinely enjoy the work that I’m doing so Outseta is never far from my mind—I think about it when I’m running, in the shower, and when I’m watching TV. This doesn’t bother me; in many ways I’m happy to have something I feel so invested in. But on the other hand, there are undeniably moments where I could be more present with my wife, my kids, my friends, you name it. Heck, there’s plenty of moments where I should be more present with myself—yet there I am, awake and alone replying to a tweet about Outseta at midnight on a Saturday. I know that I’ve developed some unhealthy habits.
As I consider this, I think this is more of a symptom than a disease itself. I feel the psychological, financial, and other stresses outlined in this article and they fuel my addiction. My addiction to my start-up is a coping mechanism—I’m throwing myself at my problems in an attempt to “fix” them by making Outseta that much more successful, that much faster.
From my conversations with other founders, I think this phenomenon is incredibly common.
Far and away the hardest part of entrepreneurship for me has been this—I’m primarily motivated by the opportunity to build a truly people-first company, but customers generally don’t treat businesses with humanity. Your interactions with businesses are too often transactional instead of personal, which for me has made growing a bootstrapped start-up very emotionally taxing.
For example, when we started building Outseta we were all focused on the business part-time, but customers simply don’t care about that—they expect full-time responsiveness, especially considering we’re building a mission critical business application. As a consumer myself I can absolutely understand and appreciate that.
As you bootstrap, there’s inevitably going to be a period where you can’t provide the level of responsive support that you want to—or that your VC-backed competitors can.
“The hard truth that no one wants to give lip service is that early on, bootstrapping your company may be the best decision for you but it’s not the best decision for your customers.”
There’s an opportunity cost here for your early customers, but it’s worth noting that they’ll reap the benefits later on as the business matures and can afford to offer lower prices. Bootstrapping is a game of delayed gratification for your customers, too.
I’ve tried to navigate this challenge primarily by setting appropriate expectations with our customers—we may not always be immediately available, but we respond to every customer service email, support ticket, or chat within 24 hours. I’m proud that we’ve upheld that standard. But without question this has led to some customer complaints that even if largely unfounded or ridiculous are hard to shake.
For example, I received the email below from a woman who otherwise seemed very nice and professional shortly after she signed up for Outseta. She reached out via chat at 7:00am on a Thursday—I wasn’t working yet, because I was busy feeding my sons breakfast. I saw her message at 9:00am that morning, but was jumping on another customer call so I didn’t get back to her with the resolution to her question until 10:56am.
While I understand that no one wants to wait a few hours for a response to their question, if you’re bootstrapping with a small team you’re likely not going to be available 24 hours per day.
I wish I had been able to respond to her sooner, but when I reached out offering to jump on a video call with her she had blocked my ability to send her email messages with no explanation. I’ve had a few interactions like this with users, and every one feels like a knife to the gut.
There was a week late this summer where one of my Co-founders was on vacation, another’s mother had just passed away, and I was left to tend to our customer base solo. I fought hard to get back to each and every customer within 24 hours and I did, but still my response times were a bit slower than normal.
As much as I wanted to say, “Hey, I’m a human being, there’s been a death in the family, and we’re dealing with some unforeseen circumstances that have left us stretched a bit thin,” users like the woman from the example above clearly don’t care. I have a pretty thick skin and I can see when people are being unreasonable, but I also empathize with needing help and not having immediate access to it. For me, this has been one of the most challenging aspects of bootstrapping because I want every customer to leave feeling wowed.
One of the most commonly cited reasons for having Co-founders is the benefit of having someone to share the entrepreneurial journey with you—the highs and lows, the wins and the losses. Without question this is a major benefit to having Co-founders.
“But just because you have Co-founders doesn’t mean you’re sharing the same experience as you build your company—far from it.”
In any group of Co-founders you’re likely to have people with different financial situations, life circumstances, and emotional needs. One founder could be going through marital stress, another could be closer to the end of their career, and one could be dead broke while another has already realized financial freedom.
Whatever the differences, they result in your entrepreneurial experience feeling quite different and they certainly impact your work on your start-up. As with any relationship, I think the key here is to proactively acknowledge and discuss those differences rather than swallowing them as “your problem.”
While transparency has long permeated the start-up world, I think too often it’s been in the context of shared performance metrics and glorified tales of entrepreneurial catastrophe. I’d like to see more bootstrappers sharing stories of their own entrepreneurial strife, even when doing so may seem counterproductive or isn’t glamorous. The real benefit may be to another entrepreneur, or it might just be cathartic for yourself.
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