I’ve been reading up on the philosophy of bootstrapping.
So let’s say I create something that is taking off at a rapid rate. Not massive traction, but rather steady traction. I decide I don’t want funding due to the fact that investors may try and weasel their ideas into my platform, so I reject offers and stick with bootstrapping.
Now that I’ve made this decision, can a competitor or eavesdropper with funding copy everything I’ve been doing and totally squash me from existence?
Although logically possible, startups seldom die from competition in reality.
This is happening to us. Our skill in tapping a new segment of the market has awoken the sleeping giant. The market leader is coming after us aggressively in our home state where we have the most customers (even though it is a rather small market compared to other states). My channel partners have all been contacted by our competitor. If this happens to you it is HUGE validation. The reality is that you'll also have to be ready to raise money because you may be forced to grow faster to stay competitive. So no, I don't think you are at a disadvantage bootstrapping as long as you are open to raising capital if the business requires it. And in some ways, bootstrapping can be an advantage. No one took us seriously at first because bootstrapping kept us focused on building a business not getting press or hype. Our growth was slow and organic so competitors didn't pay much attention at first. Bootstrapping has a way of keeping you focused on the next sale or making payroll next week instead of the long run. So just make sure that if your cash runway is short you keep your eyes up on the horizon so you don't miss big opportunities.
The above comment is really valuable, for sure. But the way you said it let me think you are more afraid about the risk of being copied by someone bigger than you. And due to the beginning (the "So let's say..."), I wonder if you are a startup founder evaluating current funding opportunity, or a future founder thinking about different ways...
I want to focus on the risk of being copied. First, in a general manner, you can't know if another human being would like to copy what you do. Probably yes. The interesting questions are more: can they do it ? and is it financially rewarding for them ?
First question: can they do it: often, it is only a question of money. If you have really deep pockets, you can copy any startup and kill it. But is it economically reasonable ? That is the question. It is directly in relationship with your activity. If you do something highly technological, long, hard and expensive to replicate, and if the currently visible market is relatively small, nobody will throw large amounts of money to this problem, even if you can make profit on this market. You do because you are small and talented, but being rich won't help.
If you do something based on network effect (think Twitter or Facebook), you become untouchable when you have a critical mass. With exponential growth, each day passing without competitor makes you stronger, and increases the entry ticket. It diminishes the potential profits and increases the risks for a potential competitor.
If you have no technology and no network effect, and you are solely based on an innovative business model or a new way to market something, there are chances somebody will think he/she/they can do it better than you. So you will need exceptional operational execution at all times to discourage competitors. In this case, well... good luck !
In my view, the biggest risk of bootstrapping is the "hall of mirrors" effect. Without reasoned outside feedback, it is really easy for solo founders to lose perspective.
Who mentioned solo founders ?
Perhaps the exclusive use of I in the post...
Equally the implicit assumption that all decisions are to be made by the poster.
If there is a co-founder and I were he/she, I'd certainly feel slighted by such commentary style.
Most investors aren't going to invest in something that you aren't doing full time. That's awesome that you are 'rejecting' investors but if your product is so great than why aren't you making money off of it yet?
raise a friends and family round or a crowd funding campaign and then get customers if you are afraid of VC. in my experience they really aren't that scary or meddling.
"Most investors aren’t going to invest in something that you aren’t doing full time. That’s awesome that you are ‘rejecting’ investors but if your product is so great than why aren’t you making money off of it yet?"
Well said... I also asked CEO who said, I prefer slow growth and doing something for community rather than $$$$$$$$$.
Clash - I had to feed my family and decided to leave.
Afterwards he did took money of VCs but continued with extreme slow growth. I still wonder why Investors put their money in.
Time will tell...
"Now that I’ve made this decision, can a competitor or eavesdropper with funding copy everything I’ve been doing and totally squash me from existence?", Uhhh, yes. But, it's likely that your as yet to be implemented idea isn't that compelling to a third party that is already making/doing/servicing their own clients. Just get on with it and worry about all the issues that come with creating something, not how its going to be taken from you.