Joseph Flaherty , Director of Content & Community In the startup world there are two dominant exit strategies: Build and sell your company for millions, or, Build your company and take it public for billions. These are the liquidity events that give the impression that startups are a great way to “get rich quick,” even though building a saleable company often takes the better part of a decade. Less often discussed, or championed, is a third option — the “get rich slow” method of building a company and making millions of dollars in profits, for years or decades. In the first option, a sale, the founders earn enough money to set their family up for generations, in an instant. But there is the possibility for regret, recently given voice by , who walked away from $850M in earnout potential because he didn’t agree with the way his creation was being monetized. WhatsApp co-founder Brian Acton In the second scenario, an initial public offering, immense financial gains are paired with the ability to continue leading your company, subject only to the pressures of the stock market. There’s an added bonus of prestige for joining the elite ranks of public company CEOs. But as Elon Musk has recently learned, no amount of money or esteem will allow you to escape the eye of regulators. The third choice, running a company at scale in perpetuity, is harder to pull off. Basecamp has been proselytizing for the approach to startups for over a decade, urging founders to create companies that are more like than internet monopolists. This summer saw a mini-wave of smaller startups, like and , buying out their early investors, essentially purchasing the freedom to go their own way. Often this class of startup is dismissed as “lifestyle businesses.” That’s a mistake. Italian restaurants Buffer Wistia There are companies that serve as a proofs of concept that this approach to building a startup can scale and rival even public companies. Epic Systems, makers of the leading Electronic Health Record system, records approximately and employs 9,000. Mathworks, creators of the science software standby MatLab earned , and most recently, has a nine-figure run rate and no plans to go public. Atlassian operated this way for years before deciding to go public. MailChimp which announced , up from . $2.5B a year in revenue $900M in revenue EclinicalWorks $600M in revenue run rate $400M in 2016 To put this in perspective, . bootstrapped a company that is 50% larger than one of the hottest SaaS startups of the last decade. In Atlanta. With a founder who studied industrial design in college and taught himself web design. Hubspot had $375M in 2017 revenue MailChimp The founders of these companies pay themselves well. They face no artificial timetables. And they’re free to run their companies the way they want, whether that’s for company meetings, or engaging in unusual marketing approaches, a MailChimp specialty. dressing up as a wizard Before becoming a meme via their infamous ad, they marketed like cereal manufacturers, rewarding fans with , , and . Their imagination was constrained more by physics than budget, as from MailChimp Director of Brand Marketing Mark DiCristina illustrates: Serial coloring books animal-theme beanies pepperoni-scented vinyl toys this anecdote “There was a time when a couple people were joking around and showed Ben an eBay listing for a tractor trailer, along with three Honda race cars, and suggested we turn them into a giant Transformers robot. Ben actually cleared the budget for it, and then he was crushed when he realized it was just a joke.” It’s hard to imagine such a stunt being looked on favorably by a board or public company analysts. While the freedom is fun, there are downsides to this approach: VC provides leverage that no other form of funding can match. Though it’s much derided by bootstrapping zealots, almost every startup of consequence has taken capital at some point in its journey. Venture capital can be a superpower. Founders no longer have the carrot of a potential six or seven figure payday to tempt talent. This kind of company needs to be more thoughtful about things like profit-sharing. Recruiting and retaining talent can be tougher. Even if you don’t plan to list on public markets, there are points at which the government will require financial reporting on par with what’s expected in financial markets. This gives competitors an insight into your business without the benefit of being able to access public capital markets. All successful startups are subject to reporting. The benefit of a sale or IPO is the opportunity to take financial risk off the table. If you sell a company and the market shifts, the gains have been realized, whereas running the company long-term creates financial risk. This can be mitigated by taking a higher salary, or profits in the form of bonuses, but it exposes the team to more variability. The market might change rapidly. It seems like MailChimp’s founders have navigated or mitigated those risks and are choosing to act like mid-century captains of industry — staying loyal to their customers and employees, serving as stewards of their community, and putting off an immediate payday for a chance at building a legacy closer to home. It’s an admirable approach and worth studying. The point of this blog post isn’t to convince you not to raise money. Founder Collective is a VC firm that wants to back companies that will sell or go public in a ten-year time period. But there is a lot to be gained by being thoughtful about the decision when to raise capital and how much. There’s , but plenty of examples of startups dying due to to capital. By limiting funds raised, . So before reflexively deciding to raise more money, or jumping at inbound interest from investors, think a bit about what made these companies work and decide how valuable optionality is to you. no evidence that raising more money leads to better outcomes toxic overexposure $100M exits become pretty darn attractive _VC is a common denominator of the most successful tech startups, but it isn’t a prerequisite, especially at the early…_hackernoon.com 50 Big Companies that Started with Little or No Money