Bootstrapping v. Venture Capital - What is the Right Move?

And we're live. Welcome to this week's And we're live. Welcome to this week's episode of MicroCom on Air. I'm your episode of MicroCom on Air. I'm your episode of MicroCom on Air. I'm your host, Rob Walling. Every other Wednesday host, Rob Walling. Every other Wednesday host, Rob Walling. Every other Wednesday at 1 p.m. Eastern, 10 a.m. Pacific, we at 1 p.m. Eastern, 10 a.m. Pacific, we at 1 p.m. Eastern, 10 a.m. Pacific, we live stream for 30 minutes, and I cover live stream for 30 minutes, and I cover live stream for 30 minutes, and I cover topics related to building and growing topics related to building and growing topics related to building and growing ambitious SAS startups that bring us ambitious SAS startups that bring us ambitious SAS startups that bring us freedom and purpose and allow us to freedom and purpose and allow us to freedom and purpose and allow us to maintain healthy relationships. maintain healthy relationships. maintain healthy relationships. This week, we're trying a few new This week, we're trying a few new This week, we're trying a few new things. I think this is the first time things. I think this is the first time things. I think this is the first time we've ever live streamed on Twitter, so we've ever live streamed on Twitter, so we've ever live streamed on Twitter, so I'm curious to see how that pans out. As I'm curious to see how that pans out. As I'm curious to see how that pans out. As always, we are on YouTube and Facebook. always, we are on YouTube and Facebook. always, we are on YouTube and Facebook. Um, but this week it'll be on Twitter. Um, but this week it'll be on Twitter. Um, but this week it'll be on Twitter. The other thing we're trying, it's a The other thing we're trying, it's a The other thing we're trying, it's a format we're testing out. You know, format we're testing out. You know, format we're testing out. You know, we've been doing uh micro on air since we've been doing uh micro on air since we've been doing uh micro on air since fe March of 2020. So that's more than a fe March of 2020. So that's more than a fe March of 2020. So that's more than a year and a half at this point. and we year and a half at this point. and we year and a half at this point. and we have mostly done interviews and I want have mostly done interviews and I want have mostly done interviews and I want to try something out for the next few to try something out for the next few to try something out for the next few episodes where I it's a bit more episodes where I it's a bit more episodes where I it's a bit more educational on specific topics, educational on specific topics, educational on specific topics, highlevel stuff like I'm not going to highlevel stuff like I'm not going to highlevel stuff like I'm not going to dig into click on this button in dig into click on this button in dig into click on this button in Facebook to run a Facebook ad, but maybe Facebook to run a Facebook ad, but maybe Facebook to run a Facebook ad, but maybe more philosophical more philosophical more philosophical um or more directional strategic topics um or more directional strategic topics um or more directional strategic topics like today's topic of bootstrapping like today's topic of bootstrapping like today's topic of bootstrapping versus venture capital. What's the right versus venture capital. What's the right versus venture capital. What's the right move? I might sometimes bring in outside move? I might sometimes bring in outside move? I might sometimes bring in outside experts to interview or have a back and experts to interview or have a back and experts to interview or have a back and forth conversation about it. Some of forth conversation about it. Some of forth conversation about it. Some of these topics might be a little 101. They these topics might be a little 101. They these topics might be a little 101. They might be introductory stuff for folks might be introductory stuff for folks might be introductory stuff for folks who are new to the community. Um, and who are new to the community. Um, and who are new to the community. Um, and obviously some are going to be deeper obviously some are going to be deeper obviously some are going to be deeper dives. Today's topic, I think, is kind dives. Today's topic, I think, is kind dives. Today's topic, I think, is kind of going to be both. I think there'll be

of going to be both. I think there'll be of going to be both. I think there'll be aspects of it at the start as I'm aspects of it at the start as I'm aspects of it at the start as I'm talking through bootstrapping and talking through bootstrapping and talking through bootstrapping and venture capital. Um, maybe giving venture capital. Um, maybe giving venture capital. Um, maybe giving background and definitions on those that background and definitions on those that background and definitions on those that you might think this is a bit you might think this is a bit you might think this is a bit one-on-one. But as I dig in to um really one-on-one. But as I dig in to um really one-on-one. But as I dig in to um really you know the differences and how you you know the differences and how you you know the differences and how you think about them and how I would think think about them and how I would think think about them and how I would think about them and which path to go down um about them and which path to go down um about them and which path to go down um that should hopefully feel more like a that should hopefully feel more like a that should hopefully feel more like a you know a deeper dive into a thought you know a deeper dive into a thought you know a deeper dive into a thought process that that maybe you yourself has process that that maybe you yourself has process that that maybe you yourself has gone through. And I should note that gone through. And I should note that gone through. And I should note that today is not just going to be today is not just going to be today is not just going to be bootstrapping versus venture capital but bootstrapping versus venture capital but bootstrapping versus venture capital but I also want to talk about other options. I also want to talk about other options. I also want to talk about other options. You know there's debt there's this indie You know there's debt there's this indie You know there's debt there's this indie funding that has started in the past few funding that has started in the past few funding that has started in the past few years. Um, and I'll I'll put some of years. Um, and I'll I'll put some of years. Um, and I'll I'll put some of those thoughts out at the end. So, if those thoughts out at the end. So, if those thoughts out at the end. So, if you have questions as I'm rolling you have questions as I'm rolling you have questions as I'm rolling through this, um, I'd love it if you through this, um, I'd love it if you through this, um, I'd love it if you would post them in the Microcom onair would post them in the Microcom onair would post them in the Microcom onair channel in Microcom Connect. That's at channel in Microcom Connect. That's at channel in Microcom Connect. That's at microcom.com if you're not already a microcom.com if you're not already a microcom.com if you're not already a member. We are, I believe, we're north member. We are, I believe, we're north member. We are, I believe, we're north of 2500 founders and aspiring SAS of 2500 founders and aspiring SAS of 2500 founders and aspiring SAS founders in MicroCom Connect. It's a founders in MicroCom Connect. It's a founders in MicroCom Connect. It's a great community. We moderate it and great community. We moderate it and great community. We moderate it and there's a lot of positivity and there's there's a lot of positivity and there's there's a lot of positivity and there's a lot of really, you know, deep a lot of really, you know, deep a lot of really, you know, deep conversations going on there. So, conversations going on there. So, conversations going on there. So, microsoftconnect.com if you're not part microsoftconnect.com if you're not part microsoftconnect.com if you're not part of that. Obviously, if you drop of that. Obviously, if you drop of that. Obviously, if you drop questions into uh the chat of whatever questions into uh the chat of whatever questions into uh the chat of whatever platform you're watching this on, platform you're watching this on, platform you're watching this on, producer Xander is of course monitoring producer Xander is of course monitoring producer Xander is of course monitoring those and uh and pulling them in.

those and uh and pulling them in. those and uh and pulling them in. There's a chance I might keep the There's a chance I might keep the There's a chance I might keep the questions to the end. We'll just see how questions to the end. We'll just see how questions to the end. We'll just see how it goes. Um I do have an outline that it goes. Um I do have an outline that it goes. Um I do have an outline that I'm going through because I didn't want, I'm going through because I didn't want, I'm going through because I didn't want, you know, I can talk about this stuff you know, I can talk about this stuff you know, I can talk about this stuff off the cuff for literally 20 minutes. off the cuff for literally 20 minutes. off the cuff for literally 20 minutes. I'm a podcaster for crying out loud, but I'm a podcaster for crying out loud, but I'm a podcaster for crying out loud, but I wanted to outline it and kind of I wanted to outline it and kind of I wanted to outline it and kind of structure thoughts. And so depending on structure thoughts. And so depending on structure thoughts. And so depending on when questions come in um you know may when questions come in um you know may when questions come in um you know may cover them all at the end. I also have a cover them all at the end. I also have a cover them all at the end. I also have a special announcement, a sneak peek special announcement, a sneak peek special announcement, a sneak peek announcement. If you stick around till announcement. If you stick around till announcement. If you stick around till the very end um you'll get a first look the very end um you'll get a first look the very end um you'll get a first look at something that that no one else uh is at something that that no one else uh is at something that that no one else uh is seeing right now. So hopefully that's seeing right now. So hopefully that's seeing right now. So hopefully that's enough of a teaser to keep you around. enough of a teaser to keep you around. enough of a teaser to keep you around. All right. So the topic I'm covering All right. So the topic I'm covering All right. So the topic I'm covering today is bootstrapping versus venture today is bootstrapping versus venture today is bootstrapping versus venture capital. What's the right move? And for capital. What's the right move? And for capital. What's the right move? And for those in this community, you know that those in this community, you know that those in this community, you know that the right move is that it depends, the right move is that it depends, the right move is that it depends, right? It depends on your your right? It depends on your your right? It depends on your your circumstances, depends on your goals. circumstances, depends on your goals. circumstances, depends on your goals. So, first thing I'm going to do is talk So, first thing I'm going to do is talk So, first thing I'm going to do is talk about bootstrapping. What is it? Um, I'm about bootstrapping. What is it? Um, I'm about bootstrapping. What is it? Um, I'm guessing most folks watching this know guessing most folks watching this know guessing most folks watching this know know what it is, but it's using your own know what it is, but it's using your own know what it is, but it's using your own funds. It can often be called funds. It can often be called funds. It can often be called self-funding, although I would say self-funding, although I would say self-funding, although I would say there's a little bit of a nuance even there's a little bit of a nuance even there's a little bit of a nuance even with self-unding and bootstrapping, but with self-unding and bootstrapping, but with self-unding and bootstrapping, but it's you maintaining complete control of it's you maintaining complete control of it's you maintaining complete control of your company. And it's the simplest your company. And it's the simplest your company. And it's the simplest structure. If you don't take outside structure. If you don't take outside structure. If you don't take outside debt or outside investment, you're debt or outside investment, you're debt or outside investment, you're bootstrapping. And it's how most bootstrapping. And it's how most bootstrapping. And it's how most businesses, not just tech businesses, businesses, not just tech businesses, businesses, not just tech businesses, you know, because I'm going to focus you know, because I'm going to focus you know, because I'm going to focus more on SAS and startups and high more on SAS and startups and high more on SAS and startups and high growth, but just most businesses are are growth, but just most businesses are are growth, but just most businesses are are started this way. Dry cleaners, started this way. Dry cleaners, started this way. Dry cleaners, bookstores, um you know, the car wash bookstores, um you know, the car wash bookstores, um you know, the car wash down the street. And frankly, it's how down the street. And frankly, it's how down the street. And frankly, it's how most businesses should be funded. And

most businesses should be funded. And most businesses should be funded. And the reason for that is that once you the reason for that is that once you the reason for that is that once you take on an investor, they have an take on an investor, they have an take on an investor, they have an expectation of a return at some point, expectation of a return at some point, expectation of a return at some point, right? They they're not investing um out right? They they're not investing um out right? They they're not investing um out of the goodness of their heart. They're of the goodness of their heart. They're of the goodness of their heart. They're investing to get a return. And they may investing to get a return. And they may investing to get a return. And they may provide a ton of value to you, advice. provide a ton of value to you, advice. provide a ton of value to you, advice. You may even become friends with your You may even become friends with your You may even become friends with your investor. But, you know, most investors investor. But, you know, most investors investor. But, you know, most investors are writing checks such that they can are writing checks such that they can are writing checks such that they can get money back uh a return on the get money back uh a return on the get money back uh a return on the investment. And with bootstrap investment. And with bootstrap investment. And with bootstrap businesses, that implies that at some businesses, that implies that at some businesses, that implies that at some point you either have to, you know, pull point you either have to, you know, pull point you either have to, you know, pull profits out of the business or you have profits out of the business or you have profits out of the business or you have to sell that business for, you know, to sell that business for, you know, to sell that business for, you know, what they call a liquidity event. You what they call a liquidity event. You what they call a liquidity event. You sell it for uh a chunk of cash and then sell it for uh a chunk of cash and then sell it for uh a chunk of cash and then that would go to the founders and the that would go to the founders and the that would go to the founders and the investors. But bootstrapping really is investors. But bootstrapping really is investors. But bootstrapping really is the default. And frankly, I think the default. And frankly, I think the default. And frankly, I think bootstrapping should be the default. You bootstrapping should be the default. You bootstrapping should be the default. You know, I have this expression where I know, I have this expression where I know, I have this expression where I say, um, venture capital, you know, can say, um, venture capital, you know, can say, um, venture capital, you know, can and should, uh, fund 1% of of tech and should, uh, fund 1% of of tech and should, uh, fund 1% of of tech businesses. And, you know, bootstrapping businesses. And, you know, bootstrapping businesses. And, you know, bootstrapping and tiny seed are are it's it's the and tiny seed are are it's it's the and tiny seed are are it's it's the paths for the other 99%. You know, paths for the other 99%. You know, paths for the other 99%. You know, that's how I think of tiny seed is that's how I think of tiny seed is that's how I think of tiny seed is funding for the other 99%.

funding for the other 99%. funding for the other 99%. So, that's bootstrapping. Simple, So, that's bootstrapping. Simple, So, that's bootstrapping. Simple, complete control, using your own funds. complete control, using your own funds. complete control, using your own funds. Let's talk about venture capital. Now Let's talk about venture capital. Now Let's talk about venture capital. Now you probably know high level that you probably know high level that you probably know high level that venture capital is cash, right? It's venture capital is cash, right? It's venture capital is cash, right? It's venture cash. It's money that venture venture cash. It's money that venture venture cash. It's money that venture capitalists raise from wealthy capitalists raise from wealthy capitalists raise from wealthy individuals or institutions and they do individuals or institutions and they do individuals or institutions and they do it to invest in specifically high-risk, it to invest in specifically high-risk, it to invest in specifically high-risk, high growth companies. venture capital. high growth companies. venture capital. high growth companies. venture capital. It's not considered venture capital if It's not considered venture capital if It's not considered venture capital if someone raises a fund and uh buys a someone raises a fund and uh buys a someone raises a fund and uh buys a bunch of real estate or invests in a bunch of real estate or invests in a bunch of real estate or invests in a bunch of car washes. That can still be a bunch of car washes. That can still be a bunch of car washes. That can still be a thing, but at that point it's usually thing, but at that point it's usually thing, but at that point it's usually called well real estate might be a real called well real estate might be a real called well real estate might be a real estate investment trust or buying car estate investment trust or buying car estate investment trust or buying car washes or buying businesses is usually washes or buying businesses is usually washes or buying businesses is usually referred to as private equity, which is referred to as private equity, which is referred to as private equity, which is a less risky model. So, the idea with a less risky model. So, the idea with a less risky model. So, the idea with venture capital is that it's high risk venture capital is that it's high risk venture capital is that it's high risk and high growth and they want you to put and high growth and they want you to put and high growth and they want you to put the pedal to the metal and to go big or the pedal to the metal and to go big or the pedal to the metal and to go big or to go home. Examples of venture capital to go home. Examples of venture capital to go home. Examples of venture capital firms you've probably heard of or may firms you've probably heard of or may firms you've probably heard of or may have heard of. Most of them up until have heard of. Most of them up until have heard of. Most of them up until even the past 10 to 15 years were even the past 10 to 15 years were even the past 10 to 15 years were located in uh the Bay Area um the located in uh the Bay Area um the located in uh the Bay Area um the Silicon Valley as they call it and there Silicon Valley as they call it and there Silicon Valley as they call it and there were some in New York as well. Um but were some in New York as well. Um but were some in New York as well. Um but it's venture capitalists are they tend it's venture capitalists are they tend it's venture capitalists are they tend to be um in these larger cities where to be um in these larger cities where to be um in these larger cities where there are both founders there are uh and there are both founders there are uh and there are both founders there are uh and investors right and wealthy individuals investors right and wealthy individuals investors right and wealthy individuals some examples of those include Sequoia some examples of those include Sequoia some examples of those include Sequoia capital and Horowits uh Bessmer venture

capital and Horowits uh Bessmer venture capital and Horowits uh Bessmer venture partners those are just three there are partners those are just three there are partners those are just three there are literally hundreds of venture capital literally hundreds of venture capital literally hundreds of venture capital firms and technically you know I think I firms and technically you know I think I firms and technically you know I think I I I don't refer to tiny seed as this I I don't refer to tiny seed as this I I don't refer to tiny seed as this tiny seed is uh the fund and accelerator tiny seed is uh the fund and accelerator tiny seed is uh the fund and accelerator that branches out of you know that that branches out of you know that that branches out of you know that formed out of microcom but technically formed out of microcom but technically formed out of microcom but technically we are a venture fund and an accelerator we are a venture fund and an accelerator we are a venture fund and an accelerator but we're we don't I don't call us that but we're we don't I don't call us that but we're we don't I don't call us that because we are different you know we because we are different you know we because we are different you know we don't have that same mindset of um we don't have that same mindset of um we don't have that same mindset of um we expect one in 10 companies to be a expect one in 10 companies to be a expect one in 10 companies to be a billion dollar unicorn and expect the billion dollar unicorn and expect the billion dollar unicorn and expect the rest to fail you know much like uh rest to fail you know much like uh rest to fail you know much like uh venture capital does. So from an venture capital does. So from an venture capital does. So from an investor side, it's interesting to think investor side, it's interesting to think investor side, it's interesting to think about venture capital from an investor about venture capital from an investor about venture capital from an investor side and from the people who run the side and from the people who run the side and from the people who run the funds. So from an investor side, funds. So from an investor side, funds. So from an investor side, why would an investor write a check to a why would an investor write a check to a why would an investor write a check to a venture capital fund at all? Shouldn't venture capital fund at all? Shouldn't venture capital fund at all? Shouldn't they just couldn't they just buy stocks they just couldn't they just buy stocks they just couldn't they just buy stocks and bonds and real estate investment and bonds and real estate investment and bonds and real estate investment trusts or real estate at all? The thing trusts or real estate at all? The thing trusts or real estate at all? The thing is is some of these wealthy individuals is is some of these wealthy individuals is is some of these wealthy individuals and a lot of these large institutions and a lot of these large institutions and a lot of these large institutions like endowments, right? An endowment is like endowments, right? An endowment is like endowments, right? An endowment is a big fund that Yale or Stanford or a big fund that Yale or Stanford or a big fund that Yale or Stanford or Harvard have.

Harvard have. Harvard have. They don't want to be 100% in public They don't want to be 100% in public They don't want to be 100% in public stocks and bonds because the stock stocks and bonds because the stock stocks and bonds because the stock market is very bumpy, right? It you have market is very bumpy, right? It you have market is very bumpy, right? It you have these huge drops, 50% drops uh every these huge drops, 50% drops uh every these huge drops, 50% drops uh every time there's a there's a bare market and time there's a there's a bare market and time there's a there's a bare market and they want to even that out. In addition, they want to even that out. In addition, they want to even that out. In addition, they have so much money to deploy, they have so much money to deploy, they have so much money to deploy, billions and billions of dollars that billions and billions of dollars that billions and billions of dollars that they can and should diversify, right, they can and should diversify, right, they can and should diversify, right, across many asset classes, not just across many asset classes, not just across many asset classes, not just stocks and bonds, but along metals, gold stocks and bonds, but along metals, gold stocks and bonds, but along metals, gold and silver and platinum, along and silver and platinum, along and silver and platinum, along cryptocurrency now. And venture capital, cryptocurrency now. And venture capital, cryptocurrency now. And venture capital, it itself is an asset class. Private it itself is an asset class. Private it itself is an asset class. Private equity is another asset class, different equity is another asset class, different equity is another asset class, different than venture capital, but obviously than venture capital, but obviously than venture capital, but obviously related. people raise funds and invest related. people raise funds and invest related. people raise funds and invest in companies. So venture capital and in companies. So venture capital and in companies. So venture capital and private equity are two examples of that. private equity are two examples of that. private equity are two examples of that. Um Um Um venture capital from the investor side venture capital from the investor side venture capital from the investor side is restricted to accredited investors. is restricted to accredited investors. is restricted to accredited investors. If you raise a venture fund in the US, If you raise a venture fund in the US, If you raise a venture fund in the US, you have to raise from wealthy you have to raise from wealthy you have to raise from wealthy individuals which you know arguably is a individuals which you know arguably is a individuals which you know arguably is a it's a what is that almost a it's a what is that almost a it's a what is that almost a hundred-year-old law now uh in the US hundred-year-old law now uh in the US hundred-year-old law now uh in the US and it's something that I think uh like and it's something that I think uh like and it's something that I think uh like Jason Calcanis is someone who's trying Jason Calcanis is someone who's trying Jason Calcanis is someone who's trying to change that and I actually think it to change that and I actually think it to change that and I actually think it should change. I think that crowdfunding should change. I think that crowdfunding should change. I think that crowdfunding um and being able to invest small um and being able to invest small um and being able to invest small amounts into startups and invest small amounts into startups and invest small amounts into startups and invest small amounts into investing small amounts amounts into investing small amounts amounts into investing small amounts into startups is taking place. Being into startups is taking place. Being into startups is taking place. Being able to invest small amounts into funds able to invest small amounts into funds able to invest small amounts into funds I personally I think should be able to I personally I think should be able to I personally I think should be able to take place. Um so that's what venture take place. Um so that's what venture take place. Um so that's what venture capital is. It's a fund. You start a

capital is. It's a fund. You start a capital is. It's a fund. You start a firm and you raise a fund from wealthy firm and you raise a fund from wealthy firm and you raise a fund from wealthy individuals and endowments and then you individuals and endowments and then you individuals and endowments and then you invest in startups. Last thing I want to invest in startups. Last thing I want to invest in startups. Last thing I want to cover on that is how do venture cover on that is how do venture cover on that is how do venture capitalists make money? So they make capitalists make money? So they make capitalists make money? So they make money two ways. They make a management money two ways. They make a management money two ways. They make a management fee and they have carried interest or fee and they have carried interest or fee and they have carried interest or it's also called carry. So the it's also called carry. So the it's also called carry. So the management fee comes out, it varies on management fee comes out, it varies on management fee comes out, it varies on structure, but the standard is a 2% structure, but the standard is a 2% structure, but the standard is a 2% management fee per year based on the management fee per year based on the management fee per year based on the assets managed. So, if you raise a $10 assets managed. So, if you raise a $10 assets managed. So, if you raise a $10 million venture fund, then if you're million venture fund, then if you're million venture fund, then if you're doing a 2% management fee, that's going doing a 2% management fee, that's going doing a 2% management fee, that's going to be $200,000 a year that you pull out to be $200,000 a year that you pull out to be $200,000 a year that you pull out of that money to run the firm to of that money to run the firm to of that money to run the firm to compensate you as, you know, the the compensate you as, you know, the the compensate you as, you know, the the general partner who's running it. And general partner who's running it. And general partner who's running it. And you do that for the life of the fund, you do that for the life of the fund, you do that for the life of the fund, which is usually 10 years. So, over the which is usually 10 years. So, over the which is usually 10 years. So, over the course of 10 years, you'll pull out $2 course of 10 years, you'll pull out $2 course of 10 years, you'll pull out $2 million just to run the fund dayto day. million just to run the fund dayto day. million just to run the fund dayto day. Um then there's carried interest or Um then there's carried interest or Um then there's carried interest or carry and that is the profit or the gain carry and that is the profit or the gain carry and that is the profit or the gain the net gain on the assets that you the net gain on the assets that you the net gain on the assets that you invest. So let's say you invest that $10 invest. So let's say you invest that $10 invest. So let's say you invest that $10 million that you raise into a bunch of million that you raise into a bunch of million that you raise into a bunch of startups. Some of them go out of startups. Some of them go out of startups. Some of them go out of business and usually in in venture it's business and usually in in venture it's business and usually in in venture it's like six or seven. They expect to just like six or seven. They expect to just like six or seven. They expect to just go to zero and then two or three to go to zero and then two or three to go to zero and then two or three to break even or maybe it's a two or 3x break even or maybe it's a two or 3x break even or maybe it's a two or 3x return. It's a low return for them. and return. It's a low return for them. and return. It's a low return for them. and then they want one that is like the 100x then they want one that is like the 100x then they want one that is like the 100x return, you know, that returns the fund.

return, you know, that returns the fund. return, you know, that returns the fund. But let's say blended across all that, But let's say blended across all that, But let's say blended across all that, you return um you you pay you you return you return um you you pay you you return you return um you you pay you you return $20 million. Okay? So what happens with $20 million. Okay? So what happens with $20 million. Okay? So what happens with that 20 is the first 10 goes back to the that 20 is the first 10 goes back to the that 20 is the first 10 goes back to the investors just to pay them back and make investors just to pay them back and make investors just to pay them back and make them whole. of the second 10 million them whole. of the second 10 million them whole. of the second 10 million that you made across the companies, you that you made across the companies, you that you made across the companies, you get as the venture capitalist, the firm, get as the venture capitalist, the firm, get as the venture capitalist, the firm, you get 20%. That's your carry or your you get 20%. That's your carry or your you get 20%. That's your carry or your carried interest. So, you would take $2 carried interest. So, you would take $2 carried interest. So, you would take $2 million and then you give the eight million and then you give the eight million and then you give the eight million remaining back to the investors. million remaining back to the investors. million remaining back to the investors. So, that's that's the gist. Now, there So, that's that's the gist. Now, there So, that's that's the gist. Now, there are other structures. are other structures. are other structures. There are smaller funds often take There are smaller funds often take There are smaller funds often take higher management fees or they frontload higher management fees or they frontload higher management fees or they frontload their management fees. And I I've heard their management fees. And I I've heard their management fees. And I I've heard of uh Carrie being stepped up that if of uh Carrie being stepped up that if of uh Carrie being stepped up that if you return more than 2x the fund back or you return more than 2x the fund back or you return more than 2x the fund back or 3x the fund then it goes up to 25%. 3x the fund then it goes up to 25%. 3x the fund then it goes up to 25%. There's all you know deviations of it There's all you know deviations of it There's all you know deviations of it but the standard if you just go Google but the standard if you just go Google but the standard if you just go Google it right is 2 and 20. So that's how it right is 2 and 20. So that's how it right is 2 and 20. So that's how venture capitalists are compensated.

venture capitalists are compensated. venture capitalists are compensated. So you know what bootstrapping is you So you know what bootstrapping is you So you know what bootstrapping is you know what venture capital is. The know what venture capital is. The know what venture capital is. The question is bootstrapping versus venture question is bootstrapping versus venture question is bootstrapping versus venture capital. What's the right move? I'm capital. What's the right move? I'm capital. What's the right move? I'm actually going to add to that question actually going to add to that question actually going to add to that question and I'm going to say there's and I'm going to say there's and I'm going to say there's bootstrapping. I'm gonna say there's bootstrapping. I'm gonna say there's bootstrapping. I'm gonna say there's venture capital. Then there's this other venture capital. Then there's this other venture capital. Then there's this other kind of funding that I think loosely kind of funding that I think loosely kind of funding that I think loosely I'll call indie funding. And this is I'll call indie funding. And this is I'll call indie funding. And this is raising from uh places like Tiny Seed or raising from uh places like Tiny Seed or raising from uh places like Tiny Seed or angel investors who don't expect nine of angel investors who don't expect nine of angel investors who don't expect nine of the 10 to necessarily fail. Um the 10 to necessarily fail. Um the 10 to necessarily fail. Um and and so that's another type of and and so that's another type of and and so that's another type of funding I'll cover at the end. And then funding I'll cover at the end. And then funding I'll cover at the end. And then there's debt, right? There's revenue there's debt, right? There's revenue there's debt, right? There's revenue based financing that is available based financing that is available based financing that is available specifically to SAS companies. Once you specifically to SAS companies. Once you specifically to SAS companies. Once you hit about 15,000 a month, uh 15 or or hit about 15,000 a month, uh 15 or or hit about 15,000 a month, uh 15 or or 20,000 a month, um then you have the 20,000 a month, um then you have the 20,000 a month, um then you have the option of uh pulling some revenue based option of uh pulling some revenue based option of uh pulling some revenue based financing, which which can be financing, which which can be financing, which which can be interesting as well. Uh as a reminder, interesting as well. Uh as a reminder, interesting as well. Uh as a reminder, if you have questions in the chat, um if you have questions in the chat, um if you have questions in the chat, um feel free to to put them in. Okay, so feel free to to put them in. Okay, so feel free to to put them in. Okay, so when is bootstrapping right for you? when is bootstrapping right for you? when is bootstrapping right for you? Certainly, if you don't want to give up Certainly, if you don't want to give up Certainly, if you don't want to give up any control or any equity to anyone any control or any equity to anyone any control or any equity to anyone else, you have no choice but to else, you have no choice but to else, you have no choice but to bootstrap. If you want to run your bootstrap. If you want to run your bootstrap. If you want to run your company forever company forever company forever or you really want to be able to decide or you really want to be able to decide or you really want to be able to decide when to sell it on your own or for how when to sell it on your own or for how when to sell it on your own or for how much um and be full control again it much um and be full control again it much um and be full control again it comes back to control then bootstrapping comes back to control then bootstrapping comes back to control then bootstrapping is what you want to do because if you is what you want to do because if you is what you want to do because if you don't want someone looking over your don't want someone looking over your don't want someone looking over your shoulder asking questions giving advice shoulder asking questions giving advice shoulder asking questions giving advice most of the investors that I know and most of the investors that I know and most of the investors that I know and I'm an investor now most of the I'm an investor now most of the I'm an investor now most of the investors that I know are really good investors that I know are really good investors that I know are really good people they um give good advice they uh people they um give good advice they uh people they um give good advice they uh provide value you know And um often

provide value you know And um often provide value you know And um often they're able to help companies. There they're able to help companies. There they're able to help companies. There there's actually a benefit beyond the there's actually a benefit beyond the there's actually a benefit beyond the money, but there of course is that risk money, but there of course is that risk money, but there of course is that risk that you might, you know, get an that you might, you know, get an that you might, you know, get an investor who's a bad apple or someone investor who's a bad apple or someone investor who's a bad apple or someone who you don't want to work with. I've who you don't want to work with. I've who you don't want to work with. I've been on both sides. I have bootstrapped been on both sides. I have bootstrapped been on both sides. I have bootstrapped several companies. Then I sold to a several companies. Then I sold to a several companies. Then I sold to a funded company, so I saw what $38 funded company, so I saw what $38 funded company, so I saw what $38 million in venture capital could buy. Um million in venture capital could buy. Um million in venture capital could buy. Um and now I've started Tiny Seed, where and now I've started Tiny Seed, where and now I've started Tiny Seed, where we've raised we've raised we've raised we're approaching Yeah. we're north of we're approaching Yeah. we're north of we're approaching Yeah. we're north of $31 million, you know, under management $31 million, you know, under management $31 million, you know, under management that we can invest. So, I've seen both that we can invest. So, I've seen both that we can invest. So, I've seen both sides of it. And I will say sides of it. And I will say sides of it. And I will say unequivocally that bootstrapping is unequivocally that bootstrapping is unequivocally that bootstrapping is harder, that raising funding makes harder, that raising funding makes harder, that raising funding makes things easier. It can make things a things easier. It can make things a things easier. It can make things a little more complicated, but it makes little more complicated, but it makes little more complicated, but it makes things easier. So, that's that's where I things easier. So, that's that's where I things easier. So, that's that's where I am today. Back in the day, I don't know, am today. Back in the day, I don't know, am today. Back in the day, I don't know, you know, I had great little lifestyle you know, I had great little lifestyle you know, I had great little lifestyle businesses. There's no reason to raise businesses. There's no reason to raise businesses. There's no reason to raise money if you're going to build a money if you're going to build a money if you're going to build a business to a few hundred,000 in business to a few hundred,000 in business to a few hundred,000 in revenue. You know, there's there's no revenue. You know, there's there's no revenue. You know, there's there's no one I don't know of any investors who one I don't know of any investors who one I don't know of any investors who want to invest in businesses that are want to invest in businesses that are want to invest in businesses that are that small. So, you know, bootstrapping that small. So, you know, bootstrapping that small. So, you know, bootstrapping is great if you do want to build that is great if you do want to build that is great if you do want to build that great lifestyle business.

great lifestyle business. great lifestyle business. Venture capital, if you want to raise Venture capital, if you want to raise Venture capital, if you want to raise venture capital, you're going to get on venture capital, you're going to get on venture capital, you're going to get on that that track. We call it the venture that that track. We call it the venture that that track. We call it the venture track. That's if you want to go to the track. That's if you want to go to the track. That's if you want to go to the moon in essence. you know, you want to moon in essence. you know, you want to moon in essence. you know, you want to build that billion-dollar unicorn or build that billion-dollar unicorn or build that billion-dollar unicorn or bust because VCs, bust because VCs, bust because VCs, they are motivated to have they're they are motivated to have they're they are motivated to have they're trying to find that one out of 10 that trying to find that one out of 10 that trying to find that one out of 10 that goes to 100x. And so it isn't in their goes to 100x. And so it isn't in their goes to 100x. And so it isn't in their benefit to find companies that can two, benefit to find companies that can two, benefit to find companies that can two, three, 4x. Usually that's not on the three, 4x. Usually that's not on the three, 4x. Usually that's not on the radar. That's an abysmal failure. Okay. radar. That's an abysmal failure. Okay. radar. That's an abysmal failure. Okay. Now, it is different with indie funding Now, it is different with indie funding Now, it is different with indie funding like Tiny Seed. We love we love those like Tiny Seed. We love we love those like Tiny Seed. We love we love those base hits, but the goal of venture base hits, but the goal of venture base hits, but the goal of venture capital is to find startups that can capital is to find startups that can capital is to find startups that can become billion or 10 billion dollar become billion or 10 billion dollar become billion or 10 billion dollar companies or the effectively just go out companies or the effectively just go out companies or the effectively just go out of business. You know, it's go big or go of business. You know, it's go big or go of business. You know, it's go big or go home is is kind of the mentality there. home is is kind of the mentality there. home is is kind of the mentality there. So, when you raise money, when you raise So, when you raise money, when you raise So, when you raise money, when you raise venture, you're going to hire fast. venture, you're going to hire fast. venture, you're going to hire fast. They're going to want you to burn money. They're going to want you to burn money. They're going to want you to burn money. Um the game is to burn money and to Um the game is to burn money and to Um the game is to burn money and to raise new funding every 18 months at a raise new funding every 18 months at a raise new funding every 18 months at a higher valuation. You will have a board higher valuation. You will have a board higher valuation. You will have a board of directors. You'll have board of directors. You'll have board of directors. You'll have board meetings. Um so this is where it gets meetings. Um so this is where it gets meetings. Um so this is where it gets more complicated. It can be easier more complicated. It can be easier more complicated. It can be easier because you have all this money to do because you have all this money to do because you have all this money to do stuff, but the complexity creeps in.

stuff, but the complexity creeps in. stuff, but the complexity creeps in. Venture capitalists Venture capitalists Venture capitalists sometimes and I would say often are able sometimes and I would say often are able sometimes and I would say often are able to block a sale of your company and to block a sale of your company and to block a sale of your company and especially at low valuations. So it's especially at low valuations. So it's especially at low valuations. So it's that thing of they want you to go big. that thing of they want you to go big. that thing of they want you to go big. If you raise venture at a five or 10 If you raise venture at a five or 10 If you raise venture at a five or 10 million or $20 million valuation and million or $20 million valuation and million or $20 million valuation and then someone comes in and even if you then someone comes in and even if you then someone comes in and even if you still own 80% 90% of the company and still own 80% 90% of the company and still own 80% 90% of the company and someone says I want to pay you $40 someone says I want to pay you $40 someone says I want to pay you $40 million for this company, million for this company, million for this company, usually a venture capitalist does not usually a venture capitalist does not usually a venture capitalist does not want you to do that. Even though you'll want you to do that. Even though you'll want you to do that. Even though you'll have a great outcome, they don't want have a great outcome, they don't want have a great outcome, they don't want you to do that because they want you to you to do that because they want you to you to do that because they want you to go to that that billion dollar valuation go to that that billion dollar valuation go to that that billion dollar valuation um because it's you know it's it's a um because it's you know it's it's a um because it's you know it's it's a failure to sell less than that. So keep failure to sell less than that. So keep failure to sell less than that. So keep that in mind as as you're thinking about that in mind as as you're thinking about that in mind as as you're thinking about it. In addition, venture capital funds it. In addition, venture capital funds it. In addition, venture capital funds are have a 10-year duration and so they are have a 10-year duration and so they are have a 10-year duration and so they want their companies to sell or to go want their companies to sell or to go want their companies to sell or to go public to provide liquidity um within 10 public to provide liquidity um within 10 public to provide liquidity um within 10 years usually. That's that's the that's years usually. That's that's the that's years usually. That's that's the that's kind of the rule. And usually it's like kind of the rule. And usually it's like kind of the rule. And usually it's like five to seven a lot of things start to five to seven a lot of things start to five to seven a lot of things start to happen. Companies start to sell and go happen. Companies start to sell and go happen. Companies start to sell and go public. So um public. So um public. So um that's the trade-off I I think about is that's the trade-off I I think about is that's the trade-off I I think about is that I do think that raising money is is that I do think that raising money is is that I do think that raising money is is easier. It's uh you can hire more easier. It's uh you can hire more easier. It's uh you can hire more support. Um you can move faster. It can support. Um you can move faster. It can support. Um you can move faster. It can be more interesting and more fun, but be more interesting and more fun, but be more interesting and more fun, but it's also more complex and it comes with it's also more complex and it comes with it's also more complex and it comes with some expectations. I you I used to say some expectations. I you I used to say some expectations. I you I used to say it comes with strings attached, but I it comes with strings attached, but I it comes with strings attached, but I don't even think they're string. It's don't even think they're string. It's don't even think they're string. It's not like they're hidden. That implies not like they're hidden. That implies not like they're hidden. That implies that they're hidden. It just comes with that they're hidden. It just comes with that they're hidden. It just comes with some expectations.

some expectations. some expectations. Lastly, I'll touch on uh this indie Lastly, I'll touch on uh this indie Lastly, I'll touch on uh this indie funding, which funding, which funding, which you know is the in between bootstrapping you know is the in between bootstrapping you know is the in between bootstrapping and and venture funding. Um, this is and and venture funding. Um, this is and and venture funding. Um, this is like what tiny seed is and it's if you like what tiny seed is and it's if you like what tiny seed is and it's if you can find a group of angels who don't can find a group of angels who don't can find a group of angels who don't necessarily need that unicorn outcome, necessarily need that unicorn outcome, necessarily need that unicorn outcome, the billion dollar or $10 billion the billion dollar or $10 billion the billion dollar or $10 billion outcome and have all the expectations I outcome and have all the expectations I outcome and have all the expectations I just outlined that they maybe you just just outlined that they maybe you just just outlined that they maybe you just want to raise one round of$ 250,000 or want to raise one round of$ 250,000 or want to raise one round of$ 250,000 or 500,000 to make it easier to get to 500,000 to make it easier to get to 500,000 to make it easier to get to escape velocity and then you want to escape velocity and then you want to escape velocity and then you want to become a profitable company or you want become a profitable company or you want become a profitable company or you want to grow to the point where you sell for to grow to the point where you sell for to grow to the point where you sell for 20 million. Um, that these are the types 20 million. Um, that these are the types 20 million. Um, that these are the types of things that you know some angels and of things that you know some angels and of things that you know some angels and tiny seed uh will do. you're going to tiny seed uh will do. you're going to tiny seed uh will do. you're going to raise a smaller amount of funding than raise a smaller amount of funding than raise a smaller amount of funding than you would from a venture firm, right? you would from a venture firm, right? you would from a venture firm, right? Most venture firms are looking one even Most venture firms are looking one even Most venture firms are looking one even at a like a preed seed round or like a at a like a preed seed round or like a at a like a preed seed round or like a million bucks, two million bucks and up million bucks, two million bucks and up million bucks, two million bucks and up at a higher valuation versus tiny seed at a higher valuation versus tiny seed at a higher valuation versus tiny seed and angels are, you know, in that lower and angels are, you know, in that lower and angels are, you know, in that lower range, usually in the low six figures. range, usually in the low six figures. range, usually in the low six figures. Um, I would say that the this route of Um, I would say that the this route of Um, I would say that the this route of indie funding is simpler than venture indie funding is simpler than venture indie funding is simpler than venture capital in terms of um you're pro you're capital in terms of um you're pro you're capital in terms of um you're pro you're not going to have a board, you're not not going to have a board, you're not not going to have a board, you're not going to have, you know, uh someone going to have, you know, uh someone going to have, you know, uh someone breathing down your neck. Um, not all VC breathing down your neck. Um, not all VC breathing down your neck. Um, not all VC is like that either, but I I would say is like that either, but I I would say is like that either, but I I would say the structures uh are usually going to the structures uh are usually going to the structures uh are usually going to be simpler. [snorts] And usually you be simpler. [snorts] And usually you be simpler. [snorts] And usually you don't have to give up control because, don't have to give up control because, don't have to give up control because, you know, that's not what you're you know, that's not what you're you know, that's not what you're agreeing to do. Um, and if you certainly agreeing to do. Um, and if you certainly agreeing to do. Um, and if you certainly with Tiny Seed and other indie funding with Tiny Seed and other indie funding with Tiny Seed and other indie funding sources, um, you can run your business sources, um, you can run your business sources, um, you can run your business and pull profits out of it, which is not and pull profits out of it, which is not and pull profits out of it, which is not an option with venture funding, right?

an option with venture funding, right? an option with venture funding, right? They don't want you to pull profits out. They don't want you to pull profits out. They don't want you to pull profits out. They want you to grow, grow, grow, and They want you to grow, grow, grow, and They want you to grow, grow, grow, and then sell or IPO. very very unusual then sell or IPO. very very unusual then sell or IPO. very very unusual almost unheard of for a ventureback almost unheard of for a ventureback almost unheard of for a ventureback business to become profitable to the business to become profitable to the business to become profitable to the point that they pull it out and point that they pull it out and point that they pull it out and distribute it to shareholders. So that's distribute it to shareholders. So that's distribute it to shareholders. So that's that's the third option and that's that's the third option and that's that's the third option and that's something that I you know I've seen something that I you know I've seen something that I you know I've seen emerging over the past I mean really emerging over the past I mean really emerging over the past I mean really it's been over 10 nine or 10 years and I it's been over 10 nine or 10 years and I it's been over 10 nine or 10 years and I started writing some angel investment started writing some angel investment started writing some angel investment checks myself and then realized that checks myself and then realized that checks myself and then realized that that that that there were more companies that really there were more companies that really there were more companies that really wanted to go that third route than wanted to go that third route than wanted to go that third route than anything else. um or or there were more anything else. um or or there were more anything else. um or or there were more companies than I had money to fund is companies than I had money to fund is companies than I had money to fund is really what it became and that was why really what it became and that was why really what it became and that was why we decided to raise that that tiny seed we decided to raise that that tiny seed we decided to raise that that tiny seed fund. Um, lastly, there is debt and fund. Um, lastly, there is debt and fund. Um, lastly, there is debt and revenue based financing is super revenue based financing is super revenue based financing is super interesting. And then I do see there's a interesting. And then I do see there's a interesting. And then I do see there's a couple questions uh that I'll get to, couple questions uh that I'll get to, couple questions uh that I'll get to, but debt financing used to be out of the but debt financing used to be out of the but debt financing used to be out of the question, but specifically with SAS question, but specifically with SAS question, but specifically with SAS because the revenue and the growth is so because the revenue and the growth is so because the revenue and the growth is so predictable, there's something called predictable, there's something called predictable, there's something called revenue based financing. And usually, revenue based financing. And usually, revenue based financing. And usually, like I said, it's about when you hit 15 like I said, it's about when you hit 15 like I said, it's about when you hit 15 grand, 20 grand a month, you can start grand, 20 grand a month, you can start grand, 20 grand a month, you can start finding some providers who um who can do finding some providers who um who can do finding some providers who um who can do that. There's there's several out there that. There's there's several out there that. There's there's several out there is like SAS Capital, Lighter Capital, is like SAS Capital, Lighter Capital, is like SAS Capital, Lighter Capital, Bigfoot Capital, Pipe.com is is a new Bigfoot Capital, Pipe.com is is a new Bigfoot Capital, Pipe.com is is a new and interesting one. And what I've and interesting one. And what I've and interesting one. And what I've heard, I have not done that myself, but heard, I have not done that myself, but heard, I have not done that myself, but um we have funded some companies who've um we have funded some companies who've um we have funded some companies who've done it. And I think you can borrow done it. And I think you can borrow done it. And I think you can borrow about four times your MR. That's kind of about four times your MR. That's kind of about four times your MR. That's kind of the low end. Maybe that's the max. It's the low end. Maybe that's the max. It's the low end. Maybe that's the max. It's like four to six times your MR. And then like four to six times your MR. And then like four to six times your MR. And then they take a certain percentage of your they take a certain percentage of your they take a certain percentage of your topline revenue for two or three years.

topline revenue for two or three years. topline revenue for two or three years. Um, and that that's usually five to 10% Um, and that that's usually five to 10% Um, and that that's usually five to 10% depending on the amount borrowed and the depending on the amount borrowed and the depending on the amount borrowed and the term of the loan. And [snorts] then they term of the loan. And [snorts] then they term of the loan. And [snorts] then they make back whatever it is two or three make back whatever it is two or three make back whatever it is two or three times their money and it's pretty times their money and it's pretty times their money and it's pretty predictable and that's it. And the the predictable and that's it. And the the predictable and that's it. And the the nice part about that if you decide to do nice part about that if you decide to do nice part about that if you decide to do it is you don't have to give up you it is you don't have to give up you it is you don't have to give up you don't have to give up equity, right? don't have to give up equity, right? don't have to give up equity, right? It's it's uh non-dilutive It's it's uh non-dilutive It's it's uh non-dilutive um funding. So it's it's another option um funding. So it's it's another option um funding. So it's it's another option to think about. Have some great to think about. Have some great to think about. Have some great questions coming in. First one is from questions coming in. First one is from questions coming in. First one is from Jason Polara from YouTube. He says, Jason Polara from YouTube. He says, Jason Polara from YouTube. He says, "Does it have to be bootstrapping versus "Does it have to be bootstrapping versus "Does it have to be bootstrapping versus venture capital? the more I work on my venture capital? the more I work on my venture capital? the more I work on my SAS, it seems like bootstrapping is SAS, it seems like bootstrapping is SAS, it seems like bootstrapping is increasingly the required first step increasingly the required first step increasingly the required first step before you can get other forms of before you can get other forms of before you can get other forms of funding. That's a great question funding. That's a great question funding. That's a great question actually. So obviously it doesn't have actually. So obviously it doesn't have actually. So obviously it doesn't have to be one versus the other. I think I've to be one versus the other. I think I've to be one versus the other. I think I've just on on you know in this 20 minutes just on on you know in this 20 minutes just on on you know in this 20 minutes here um I've shown four different here um I've shown four different here um I've shown four different options. But to your point is options. But to your point is options. But to your point is bootstrapping always what you have to do bootstrapping always what you have to do bootstrapping always what you have to do in the early days because you can't go in the early days because you can't go in the early days because you can't go to uh uh an usually you can't go to to uh uh an usually you can't go to to uh uh an usually you can't go to angels or venture capital and say I have angels or venture capital and say I have angels or venture capital and say I have an idea fund me right that was 25 years an idea fund me right that was 25 years an idea fund me right that was 25 years ago that doesn't happen anymore for the ago that doesn't happen anymore for the ago that doesn't happen anymore for the most part the only time that happens is most part the only time that happens is most part the only time that happens is if you're a proven founder um you've had if you're a proven founder um you've had if you're a proven founder um you've had an exit or you know a bunch of venture an exit or you know a bunch of venture an exit or you know a bunch of venture capitalists and they they are willing to capitalists and they they are willing to capitalists and they they are willing to invest in you to be able to um uh you invest in you to be able to um uh you invest in you to be able to um uh you just ha you have something more than I just ha you have something more than I just ha you have something more than I did when I started out. You have a did when I started out. You have a did when I started out. You have a networker, you have you know you know networker, you have you know you know networker, you have you know you know the right people and I think most of us the right people and I think most of us the right people and I think most of us don't do that. So the answer to that is don't do that. So the answer to that is don't do that. So the answer to that is yeah most people do have to bootstrap in yeah most people do have to bootstrap in yeah most people do have to bootstrap in the early days and then the question is the early days and then the question is the early days and then the question is do you continue bootstrapping or do you

do you continue bootstrapping or do you do you continue bootstrapping or do you then consider raising you know venture then consider raising you know venture then consider raising you know venture indie funding or debt um to to do it you indie funding or debt um to to do it you indie funding or debt um to to do it you know to to keep growing. know to to keep growing. know to to keep growing. There is an there's a fifth one and it's There is an there's a fifth one and it's There is an there's a fifth one and it's self-funding which is something that I self-funding which is something that I self-funding which is something that I did with Drip. I had a prior startup did with Drip. I had a prior startup did with Drip. I had a prior startup called Hitale that was thrown off 20 to called Hitale that was thrown off 20 to called Hitale that was thrown off 20 to $30,000 a month and um that is what I $30,000 a month and um that is what I $30,000 a month and um that is what I used to fund Drip. I was like my own used to fund Drip. I was like my own used to fund Drip. I was like my own angel investor angel investor angel investor and that um I is different than and that um I is different than and that um I is different than bootstrapping because bootstrapping I bootstrapping because bootstrapping I bootstrapping because bootstrapping I think is when you really have almost no think is when you really have almost no think is when you really have almost no money, you know, but selfunding I mean I money, you know, but selfunding I mean I money, you know, but selfunding I mean I spent $1500 to $200,000 on Drip before spent $1500 to $200,000 on Drip before spent $1500 to $200,000 on Drip before we we were profitable. So that's not I we we were profitable. So that's not I we we were profitable. So that's not I don't know. It's not that I'm cutting don't know. It's not that I'm cutting don't know. It's not that I'm cutting hairs and I'm not or splitting hairs and hairs and I'm not or splitting hairs and hairs and I'm not or splitting hairs and I'm not religious about you know this I'm not religious about you know this I'm not religious about you know this topic of bootstrapping and what I was topic of bootstrapping and what I was topic of bootstrapping and what I was defined as or whatever. But I do think defined as or whatever. But I do think defined as or whatever. But I do think there's a subtle difference between there's a subtle difference between there's a subtle difference between having zero dollars which I started many having zero dollars which I started many having zero dollars which I started many startups with zero dollars. Some worked startups with zero dollars. Some worked startups with zero dollars. Some worked some didn't and then I started several some didn't and then I started several some didn't and then I started several that or I started Drip with self-unding that or I started Drip with self-unding that or I started Drip with self-unding and and that was an easier easier road. and and that was an easier easier road. and and that was an easier easier road. Um, Um, Um, it would be great if you're enjoying it would be great if you're enjoying it would be great if you're enjoying this video, if you'd like the video and this video, if you'd like the video and this video, if you'd like the video and subscribe. YouTube.commicroconf if subscribe. YouTube.commicroconf if subscribe. YouTube.commicroconf if you're not already on YouTube. Um, but you're not already on YouTube. Um, but you're not already on YouTube. Um, but subscribe and smash that like and subscribe and smash that like and subscribe and smash that like and subscribe button. That's the phrase I subscribe button. That's the phrase I subscribe button. That's the phrase I was looking for. That's what my kids was looking for. That's what my kids was looking for. That's what my kids always say, but you that'd be great. I always say, but you that'd be great. I always say, but you that'd be great. I mean, we put out content like this every mean, we put out content like this every mean, we put out content like this every couple weeks. And as I said, it's an couple weeks. And as I said, it's an couple weeks. And as I said, it's an experiment for this one, but we're going experiment for this one, but we're going experiment for this one, but we're going to pick just a bunch of topics and run to pick just a bunch of topics and run to pick just a bunch of topics and run through them. Question from Hunter.

through them. Question from Hunter. through them. Question from Hunter. What's the typical compensation for What's the typical compensation for What's the typical compensation for funds like tiny seed or indie funding funds like tiny seed or indie funding funds like tiny seed or indie funding for the angel investors? Uh that's good. for the angel investors? Uh that's good. for the angel investors? Uh that's good. So angel investors will they don't get So angel investors will they don't get So angel investors will they don't get any management fee. So if you raise 250 any management fee. So if you raise 250 any management fee. So if you raise 250 300,000 $400,000 angel investors just 300,000 $400,000 angel investors just 300,000 $400,000 angel investors just put a pool of uh money into your company put a pool of uh money into your company put a pool of uh money into your company and they are investing directly in you. and they are investing directly in you. and they are investing directly in you. So they just own a portion of your So they just own a portion of your So they just own a portion of your company. They own a few percentage company. They own a few percentage company. They own a few percentage points of equity, right? So, it's like, points of equity, right? So, it's like, points of equity, right? So, it's like, let's say you raise $300,000 from angel let's say you raise $300,000 from angel let's say you raise $300,000 from angel investors at a $3 million valuation, investors at a $3 million valuation, investors at a $3 million valuation, they would own together 10% um of your they would own together 10% um of your they would own together 10% um of your company. And if they, depending on, company. And if they, depending on, company. And if they, depending on, let's say it was one angel investor that let's say it was one angel investor that let's say it was one angel investor that did that for simplicity, then if you did that for simplicity, then if you did that for simplicity, then if you pulled a dividend out at some point, you pulled a dividend out at some point, you pulled a dividend out at some point, you would get 90 and they would get 10%. Or would get 90 and they would get 10%. Or would get 90 and they would get 10%. Or if you sold the company, then they if you sold the company, then they if you sold the company, then they should get 10% and you would get 90. should get 10% and you would get 90. should get 10% and you would get 90. It's just prata based on equity. Um, It's just prata based on equity. Um, It's just prata based on equity. Um, same thing with tiny seed like we buy same thing with tiny seed like we buy same thing with tiny seed like we buy equity in your company. uh you our equity in your company. uh you our equity in your company. uh you our standard range is 10 to 12%. And that is standard range is 10 to 12%. And that is standard range is 10 to 12%. And that is for a single founder it's 120,000 for for a single founder it's 120,000 for for a single founder it's 120,000 for two founders it's 180 and for three it's two founders it's 180 and for three it's two founders it's 180 and for three it's 220,000 and we own that percentage and 220,000 and we own that percentage and 220,000 and we own that percentage and then we share pro praa is the phrase but then we share pro praa is the phrase but then we share pro praa is the phrase but whatever percentage of a company we own whatever percentage of a company we own whatever percentage of a company we own um then if you pull dividends out or you um then if you pull dividends out or you um then if you pull dividends out or you know you get a salary right you can take know you get a salary right you can take know you get a salary right you can take up to a4 million dollars in salary that up to a4 million dollars in salary that up to a4 million dollars in salary that that isn't impacted by the dividends that isn't impacted by the dividends that isn't impacted by the dividends then if you pull a dividend out or you then if you pull a dividend out or you then if you pull a dividend out or you sell um tiny seed much like angel sell um tiny seed much like angel sell um tiny seed much like angel investors would still be compensated and investors would still be compensated and investors would still be compensated and of course tiny seed is a fund so to run of course tiny seed is a fund so to run of course tiny seed is a fund so to run the accelerator, you know, we have the accelerator, you know, we have the accelerator, you know, we have staff. We're hiring a program manager in staff. We're hiring a program manager in staff. We're hiring a program manager in Europe right now, for example. Um, then

Europe right now, for example. Um, then Europe right now, for example. Um, then that's where we are actually taking that's where we are actually taking that's where we are actually taking money out of the funds that the money out of the funds that the money out of the funds that the investors gave us, the management fees investors gave us, the management fees investors gave us, the management fees in order to fund the employees to in order to fund the employees to in order to fund the employees to compensate myself, my co-founder, and compensate myself, my co-founder, and compensate myself, my co-founder, and such. So, good question from uh Jason. such. So, good question from uh Jason. such. So, good question from uh Jason. He says, 'In the VC world, if you raise He says, 'In the VC world, if you raise He says, 'In the VC world, if you raise and become a failure, so if you're a and become a failure, so if you're a and become a failure, so if you're a startup that raises and fails, so you go startup that raises and fails, so you go startup that raises and fails, so you go to zero or you 2x, how do you start to zero or you 2x, how do you start to zero or you 2x, how do you start another company and raise money again? another company and raise money again? another company and raise money again? It sounds like you'll have burned your It sounds like you'll have burned your It sounds like you'll have burned your one chance as a unicorn. That's such a one chance as a unicorn. That's such a one chance as a unicorn. That's such a good question. You know what's good question. You know what's good question. You know what's interesting is founders who go to zero interesting is founders who go to zero interesting is founders who go to zero if they've often have the battle scars if they've often have the battle scars if they've often have the battle scars and they've learned so much that they're and they've learned so much that they're and they've learned so much that they're actually better the next time. And you actually better the next time. And you actually better the next time. And you can have folks, especially if you can have folks, especially if you can have folks, especially if you maintain a good relationship with your maintain a good relationship with your maintain a good relationship with your investors. I've had folks who I've angel investors. I've had folks who I've angel investors. I've had folks who I've angel invested in who either go to zero or invested in who either go to zero or invested in who either go to zero or just return my money after, you know, just return my money after, you know, just return my money after, you know, six years or they returned 50% of my six years or they returned 50% of my six years or they returned 50% of my money because they failed. But I will money because they failed. But I will money because they failed. But I will back them again because I know that they back them again because I know that they back them again because I know that they didn't fail on purpose and I know it didn't fail on purpose and I know it didn't fail on purpose and I know it wasn't because of incompetence. Um it wasn't because of incompetence. Um it wasn't because of incompetence. Um it was because of market forces or they was because of market forces or they was because of market forces or they whatever. You know, there were other whatever. You know, there were other whatever. You know, there were other reasons about it and they have reasons about it and they have reasons about it and they have relationships now with a bunch of um relationships now with a bunch of um relationships now with a bunch of um angel investors. Now, there are some angel investors. Now, there are some angel investors. Now, there are some founders that I've invested in that I'm founders that I've invested in that I'm founders that I've invested in that I'm going to be honest that I won't invest going to be honest that I won't invest going to be honest that I won't invest in again. And but it's not because in again. And but it's not because in again. And but it's not because they've failed. It's because of how they they've failed. It's because of how they they've failed. It's because of how they failed because I watched them not focus failed because I watched them not focus failed because I watched them not focus on the right things and make, you know, on the right things and make, you know, on the right things and make, you know, questionable decisions and and that not questionable decisions and and that not questionable decisions and and that not questionable ethically, but just questionable ethically, but just questionable ethically, but just decisions that weren't good for the for decisions that weren't good for the for decisions that weren't good for the for growing the startup. All right, we're growing the startup. All right, we're growing the startup. All right, we're coming up on time, but I have two more coming up on time, but I have two more coming up on time, but I have two more questions I'd love to cover. Uh Mike Q

questions I'd love to cover. Uh Mike Q questions I'd love to cover. Uh Mike Q says that example where you mentioned says that example where you mentioned says that example where you mentioned about a VC a venture capitalist blocking about a VC a venture capitalist blocking about a VC a venture capitalist blocking a smaller exit of $40 million. Can the a smaller exit of $40 million. Can the a smaller exit of $40 million. Can the owner force the issue if at some point owner force the issue if at some point owner force the issue if at some point there is something a bit larger? Like there is something a bit larger? Like there is something a bit larger? Like using that example, what happens at 80 using that example, what happens at 80 using that example, what happens at 80 million? So, you know, it's not black million? So, you know, it's not black million? So, you know, it's not black and white. I I'm going to be honest. Um and white. I I'm going to be honest. Um and white. I I'm going to be honest. Um I think it I think it depends on how I think it I think it depends on how I think it I think it depends on how long you've been in business. If the long you've been in business. If the long you've been in business. If the venture capitalist if you're still venture capitalist if you're still venture capitalist if you're still growing fast, a venture firm is going to growing fast, a venture firm is going to growing fast, a venture firm is going to want you to keep growing. If you've want you to keep growing. If you've want you to keep growing. If you've flatlined and you're kind of a zombie in flatlined and you're kind of a zombie in flatlined and you're kind of a zombie in their portfolio and and you're just their portfolio and and you're just their portfolio and and you're just flailing at $10 million or 15 million flailing at $10 million or 15 million flailing at $10 million or 15 million and it's been years and the fund's and it's been years and the fund's and it's been years and the fund's getting later and they've already getting later and they've already getting later and they've already returned, you know, most of the fund or returned, you know, most of the fund or returned, you know, most of the fund or whatever, then there's flexibility whatever, then there's flexibility whatever, then there's flexibility there. There's no one-sizefits-all there. There's no one-sizefits-all there. There's no one-sizefits-all answer. Um, but in general, if you talk, answer. Um, but in general, if you talk, answer. Um, but in general, if you talk, especially the big venture firms I named especially the big venture firms I named especially the big venture firms I named earlier, like they they don't want these earlier, like they they don't want these earlier, like they they don't want these eight figure exits. And in fact, a nine eight figure exits. And in fact, a nine eight figure exits. And in fact, a nine figure exit. I mean, they're raising figure exit. I mean, they're raising figure exit. I mean, they're raising they're raising funds that are literally they're raising funds that are literally they're raising funds that are literally billions of dollars large. And they want billions of dollars large. And they want billions of dollars large. And they want to find an investment that will return to find an investment that will return to find an investment that will return the fund, right? That produces that the fund, right? That produces that the fund, right? That produces that amount like an Uber or Facebook or a amount like an Uber or Facebook or a amount like an Uber or Facebook or a Google. That's the general I'm Google. That's the general I'm Google. That's the general I'm generalizing here, right? But most generalizing here, right? But most generalizing here, right? But most firms, that's that's the goal. That's firms, that's that's the goal. That's firms, that's that's the goal. That's how they get really big funds versus how they get really big funds versus how they get really big funds versus someone who raises a smaller fund I someone who raises a smaller fund I someone who raises a smaller fund I think has more flexibility. Last think has more flexibility. Last think has more flexibility. Last question before we wrap today. These are question before we wrap today. These are question before we wrap today. These are good questions. Thank thanks for asking good questions. Thank thanks for asking good questions. Thank thanks for asking them. Jason says, "Does age play a part them. Jason says, "Does age play a part them. Jason says, "Does age play a part in an angel or a firm's decision in in an angel or a firm's decision in in an angel or a firm's decision in investing in a founder? When you see investing in a founder? When you see investing in a founder? When you see funds like YC, the popular image seems

funds like YC, the popular image seems funds like YC, the popular image seems to be the fresh out of college MIT to be the fresh out of college MIT to be the fresh out of college MIT grad." Yeah, Harvard as well, right? grad." Yeah, Harvard as well, right? grad." Yeah, Harvard as well, right? Yale. I think Y Cominator has Yale. I think Y Cominator has Yale. I think Y Cominator has specifically targeted, I mean, they specifically targeted, I mean, they specifically targeted, I mean, they originally started targeting like grad originally started targeting like grad originally started targeting like grad students because Paul Graham was big in students because Paul Graham was big in students because Paul Graham was big in that scene and they were located in that scene and they were located in that scene and they were located in Boston at the time. Um, and I think Boston at the time. Um, and I think Boston at the time. Um, and I think that's why there are the traditional one that's why there are the traditional one that's why there are the traditional one is the 20somes. is the 20somes. is the 20somes. What I I'll say that venture capital um What I I'll say that venture capital um What I I'll say that venture capital um I have seen data that suggested that I have seen data that suggested that I have seen data that suggested that like more funding goes to people in like more funding goes to people in like more funding goes to people in their I think it was 30s and 40s uh their I think it was 30s and 40s uh their I think it was 30s and 40s uh because of the maturity and perhaps the because of the maturity and perhaps the because of the maturity and perhaps the experience and wins they've had under experience and wins they've had under experience and wins they've had under their belt. Um but I can't unequivocally their belt. Um but I can't unequivocally their belt. Um but I can't unequivocally quote a source but I remember seeing quote a source but I remember seeing quote a source but I remember seeing that. I will say that in the microcom that. I will say that in the microcom that. I will say that in the microcom community, tens of thousands of people community, tens of thousands of people community, tens of thousands of people strong, we definitely steer more towards strong, we definitely steer more towards strong, we definitely steer more towards that. There there are a lot of folks in that. There there are a lot of folks in that. There there are a lot of folks in their early 20s, but it's the bulk is in their early 20s, but it's the bulk is in their early 20s, but it's the bulk is in that it's late 20s, 30s, 40s. And we that it's late 20s, 30s, 40s. And we that it's late 20s, 30s, 40s. And we tend to be bootstrapped, mostly tend to be bootstrapped, mostly tend to be bootstrapped, mostly bootstrapped. And um we do it does tend bootstrapped. And um we do it does tend bootstrapped. And um we do it does tend to be people who are a little more to be people who are a little more to be people who are a little more mature in their career, a little deeper mature in their career, a little deeper mature in their career, a little deeper into it, and have more skill sets uh into it, and have more skill sets uh into it, and have more skill sets uh built up to be able to grow startups. So built up to be able to grow startups. So built up to be able to grow startups. So I I have to imagine I mean the question I I have to imagine I mean the question I I have to imagine I mean the question of does age play a part in a firm's of does age play a part in a firm's of does age play a part in a firm's decision. I have to imagine it does but decision. I have to imagine it does but decision. I have to imagine it does but I will say that I will say that I will say that you know certain you'll talk to a you know certain you'll talk to a you know certain you'll talk to a certain venture capitalist and they say certain venture capitalist and they say certain venture capitalist and they say I invest based on the founder. I make a I invest based on the founder. I make a I invest based on the founder. I make a bet on the founder and they have bet on the founder and they have bet on the founder and they have something in their mind of what the something in their mind of what the something in their mind of what the founder should be right and so I don't founder should be right and so I don't founder should be right and so I don't know if that venture capitalist thinks know if that venture capitalist thinks know if that venture capitalist thinks age is a part of that equation. Some may

age is a part of that equation. Some may age is a part of that equation. Some may some may not. I do know that like when some may not. I do know that like when some may not. I do know that like when people ask me how do you make decisions people ask me how do you make decisions people ask me how do you make decisions at tiny seed it's three Ps right it's at tiny seed it's three Ps right it's at tiny seed it's three Ps right it's the people so it's the founding team the people so it's the founding team the people so it's the founding team it's uh whether they have product market it's uh whether they have product market it's uh whether they have product market fit or how much of that we think they fit or how much of that we think they fit or how much of that we think they have based on their average revenue per have based on their average revenue per have based on their average revenue per user and churn and all that and then um user and churn and all that and then um user and churn and all that and then um the pricing right price sensitivity or the pricing right price sensitivity or the pricing right price sensitivity or the pricing power they have because if the pricing power they have because if the pricing power they have because if you if your average revenue per user is you if your average revenue per user is you if your average revenue per user is only $10 a month that's very hard to only $10 a month that's very hard to only $10 a month that's very hard to grow a seven or eight figure business grow a seven or eight figure business grow a seven or eight figure business which is the goal you know when we which is the goal you know when we which is the goal you know when we invest in a tiny sea company so it's not invest in a tiny sea company so it's not invest in a tiny sea company so it's not these are not disqualifiers these are not disqualifiers these are not disqualifiers Um, but they are, it is a question I ask Um, but they are, it is a question I ask Um, but they are, it is a question I ask in the interview of like, hey, you only in the interview of like, hey, you only in the interview of like, hey, you only have 10 bucks a month coming in per have 10 bucks a month coming in per have 10 bucks a month coming in per customer. How do you how do you raise customer. How do you how do you raise customer. How do you how do you raise that or how do you think about still that or how do you think about still that or how do you think about still building an amazing business? And with building an amazing business? And with building an amazing business? And with that, we're going to wrap this up. I that, we're going to wrap this up. I that, we're going to wrap this up. I think that went that went pretty well. I think that went that went pretty well. I think that went that went pretty well. I am interested in hearing your feedback am interested in hearing your feedback am interested in hearing your feedback um on this format of episode. And um um on this format of episode. And um um on this format of episode. And um take us out from here. I had a good time take us out from here. I had a good time take us out from here. I had a good time doing that and great questions. Thanks doing that and great questions. Thanks doing that and great questions. Thanks everybody for participating. If you want everybody for participating. If you want everybody for participating. If you want to learn more about designing a to learn more about designing a to learn more about designing a bootstrapped business, check out the bootstrapped business, check out the bootstrapped business, check out the video uh in the description of this video uh in the description of this video uh in the description of this video. So, it's called Designing the video. So, it's called Designing the video. So, it's called Designing the Ideal Bootstrap Business by Jason Cohen, Ideal Bootstrap Business by Jason Cohen, Ideal Bootstrap Business by Jason Cohen, who was given at MicroM several years who was given at MicroM several years who was given at MicroM several years ago. If you're ready to take the leap ago. If you're ready to take the leap ago. If you're ready to take the leap into building a bootstrap business, uh into building a bootstrap business, uh into building a bootstrap business, uh check out the playlist building your check out the playlist building your check out the playlist building your first bootstrap SAS, the ultimate crash first bootstrap SAS, the ultimate crash first bootstrap SAS, the ultimate crash course, and that's compiled from talks course, and that's compiled from talks course, and that's compiled from talks from the micro stage. Thank you so much from the micro stage. Thank you so much from the micro stage. Thank you so much to Hey, and Stripe. They are headline to Hey, and Stripe. They are headline to Hey, and Stripe. They are headline partners. um they were last year, they partners. um they were last year, they partners. um they were last year, they are this year. It's great to have them are this year. It's great to have them are this year. It's great to have them on board supporting this bootstrapped

on board supporting this bootstrapped on board supporting this bootstrapped and mostly bootstrapped community. And and mostly bootstrapped community. And and mostly bootstrapped community. And finally, the big reveal. I hope you finally, the big reveal. I hope you finally, the big reveal. I hope you stuck around. The state of independent stuck around. The state of independent stuck around. The state of independent SAS survey for 2022 for the 2022 report SAS survey for 2022 for the 2022 report SAS survey for 2022 for the 2022 report is live. We have not sent out an email. is live. We have not sent out an email. is live. We have not sent out an email. We have not let anyone know. There's no We have not let anyone know. There's no We have not let anyone know. There's no tweets. So, you can be the first to hear tweets. So, you can be the first to hear tweets. So, you can be the first to hear about it. It's stateofindsas.com to head to that report. um and that to head to that report. um and that you'll be one of the first to take it you'll be one of the first to take it you'll be one of the first to take it this year. And we put this report this year. And we put this report this year. And we put this report together to help the bootstrap the together to help the bootstrap the together to help the bootstrap the mostly bootstrap the independent SAS mostly bootstrap the independent SAS mostly bootstrap the independent SAS community. So we have some numbers and community. So we have some numbers and community. So we have some numbers and and some um and some um and some um trends to be able to look at and build trends to be able to look at and build trends to be able to look at and build our businesses on. And this year we our businesses on. And this year we our businesses on. And this year we mixed it up. I think we swapped out at mixed it up. I think we swapped out at mixed it up. I think we swapped out at least a fifth of 20% of the questions, least a fifth of 20% of the questions, least a fifth of 20% of the questions, maybe 25% with new things about maybe 25% with new things about maybe 25% with new things about sentiment, about hiring, about um how sentiment, about hiring, about um how sentiment, about hiring, about um how did the last year, how do you feel did the last year, how do you feel did the last year, how do you feel looking ahead? Like we we swapped it looking ahead? Like we we swapped it looking ahead? Like we we swapped it out. So, we're going to have some new out. So, we're going to have some new out. So, we're going to have some new and interesting things. If you've seen and interesting things. If you've seen and interesting things. If you've seen the report before, it's going to be the report before, it's going to be the report before, it's going to be different this year. I'd love for you to different this year. I'd love for you to different this year. I'd love for you to participate. It takes about 8 to 10 participate. It takes about 8 to 10 participate. It takes about 8 to 10 minutes. If you haven't seen the report, minutes. If you haven't seen the report, minutes. If you haven't seen the report, you should head over stateofindies.com you should head over stateofindies.com you should head over stateofindies.com and we're going to compile that all and we're going to compile that all and we're going to compile that all anonymously and produce this beautiful anonymously and produce this beautiful anonymously and produce this beautiful report that you'll be able to download report that you'll be able to download report that you'll be able to download for free. And we'll be doing actually a for free. And we'll be doing actually a for free. And we'll be doing actually a live stream of that in January. So, live stream of that in January. So, live stream of that in January. So, thanks so much for joining me today.

thanks so much for joining me today. thanks so much for joining me today. Really appreciate it. And uh I'll see Really appreciate it. And uh I'll see Really appreciate it. And uh I'll see you again, same time, same place in two you again, same time, same place in two you again, same time, same place in two weeks.