Let's talk about bootstrapping versus raising venture capital. This has been such a topic of discussion in my comment section across so many videos, given everything we've been through with VCs over the last 10 years.
What Is Venture Scale?
First, let's get a few things straight.
If you are raising venture capital, then by definition, you're aiming to build a venture scale company. Venture scale companies are defined as those that have outsized exit valuations - for example, upwards of $300-$400 million.
So if you are aiming for anything less than that, you're not qualified to raise VC money, period.
A $50 million exit will be life-changing for you as a founder, but it is not going to make a difference to the VC. When they invest in you, they're really looking for: are you building something that could have the potential to become a unicorn down the road?
Venture scale companies are hard to build. It's a very high-risk, high-reward situation. So unless you're ready for it, you should find a way to bootstrap.
When You Need Venture Capital
On the flip side, if you are building a venture scale company, and if your idea requires venture scale to be truly successful, then it is likely that you will need venture capital to build it. And telling those people to go bootstrap is a bad idea because it's just not possible.
Before somebody mentions Zoho for the nth time in my comment section as an example of a venture scale business that was built without raising funding, it is an exception. It is very, very, very rare to find those types of companies that have reached billions of dollars in valuation and yet haven't raised venture capital. They're just single-digit numbers of those companies.
When Your Business Requires Scale
But we should talk about what I meant when I said if you're building in a space that requires venture scale to be successful. Some companies will need to operate at that scale - otherwise, you'll be bulldozed out of the market.
For example, let's take a Lovable or a Bolt, which are highly successful coding platforms right now. If they said, "I'm happy with $30 million in revenue, I'm getting enough paid users, I don't need venture scale, so I'm not going to raise money" - those companies, especially since they're consumer companies, would simply not succeed if they targeted a flattening growth rate like that. They will bleed out their users to other platforms that will continue to evolve faster.
Especially more often in the consumer business, you will likely need venture scale to succeed.
Can You Afford to Bootstrap?
And then of course, there's this question of can you afford to bootstrap? What kind of financial situation are you in?
- Can you work without pay?
- Do you need a team to work on your idea?
- If so, do you need to pay the team?
- And if so, can you pay them?
There are all these other considerations. So it's not a black and white question.
The Decision Framework
To sum it up: If you can bootstrap, and if you're working on an idea that doesn't really require venture scale, at least in the beginning, in order to be truly successful, by all means bootstrap away.
This is obviously less hassle - you don't have anyone else to answer to, and you can operate your company peacefully. There's no reason to panic.
It's not that all VC money is bad. You just have to know how to be careful.
Key Takeaways
- Venture scale means $300-400M+ exits - anything less doesn't interest VCs
- Consumer companies often need venture scale - to avoid being bulldozed by competition
- Bootstrapping isn't always possible - some ideas require capital to succeed
- Your financial situation matters - can you work without pay and fund a team?
- It's not ideological - the decision should be based on what your business needs
At FinalLayer, we understand both paths because we've lived through the VC journey. Whether you bootstrap or raise capital, the key is making the right choice for your specific situation and business model.
