This is awesome! I been wanting to see something like this for the last few years, and was even thinking about starting it in the future if I had the resources. I would have definitely applied last year, but I'm a bit too far along now so I don't know if it makes sense. I've also realized that I prefer being independent and having 100% control, and I don't really feel too much need for accountability or community. I think I probably have enough between Stripe Atlas, Indie Hackers, Nomad List, Hacker News, Reddit, and local meetups and events.
I haven't had a great experience with YC Startup School, to be honest. I quit when I found out that I had to be aiming for a billion dollar company in order to qualify for the $10k. The phone calls were really long and I had to get up early. I would stay on the call for over an hour every week while people talked about their startups. It wasn't very interesting and I didn't get much out of it (no offense to the people in my group.) I think it would be better if I was part of more conversations, but I was just on mute most of the time. I also watched a few talks, and they were fine, but I don't think I learned anything that I was able to put into practice.
Which subreddits are you involved in? I like the idea of those resources being a sense of community for you—but for me they feel like kind of the opposite—mostly akin to anonymously shouting into a hole hoping someone will listen. I kind of like the idea of something like TinySeed because of the lack of anonymity with the potential to forge real relationships. Would love to hear your thoughts.
Not sure what "a bit too far along" is, but TinySeed's intent seems to be to help those on the lower rungs of profitability (even no profitability) to grow revenues more quickly. I see their mentorship as invaluable to anyone who hasn't reached a point in their revenue trajectory that they're earning a full-time income, with enough extra to invest in the growth they want/need.
I was in YC Startup School too, and I agree with what you described about the calls, videos and the improbability of aiming for a billion dollar company.
Stoked to see someone finally doing this. Hugely underserved problem... couple questions:
- Are you planning on taking equity? And if so, how will you ensure your incentives are aligned with founders who don’t want to drive towards an exit? How will you make returns otherwise? (Are you looking at alt models like indie.vc or how Sparktoro set up its recent llc funding?)
- What’s your timeline starting? Are you planning on batches or rolling?
The combo is a great idea. As a founder who has contemplated both paths, pure equity would be a potential deterrent because it could require a level of dilution that might make it harder to raise capital later on. But that could be tempered by the cash flow piece.
As a bootstrapper of 6 years who's ramen profitable, the main selling point for me would be the mentoring and the community. I think these are some of the things that make YC so strong. Because of this, TinySeed would actually be more appealing to me if it did require (or at least allowed) me to relocate for 1-3 months, to spend time very close to other founders and our mentors. I feel I could both learn more and create stronger connections that way.
I don't see what precludes niche desktop apps (software companies) from applying, in principle. Are only SaaS allowed? But no, I do not plan to apply with fman.
I’ve been meaning to try out the build system, and I suspect it’s worth paying for. I shipped a PyQt based app a few years ago and definitely lost a few weeks getting it to work.
Yeah. That's exactly the motivation why I created it. It simply cannot be that in 2018 we waste weeks - if not months - on things as fundamental as packaging, creating installers, code signing and automatic updates. It's unreal.
Rob Walling also wrote a great book on the subject, called “Start small, stay small”. I recommend it even you don’t join the fund; it helped me in my current startup.
What does a "year of runway" look like? Do you mean a year of the founders' living expenses?
Is it scaled to the founders' local cost of living? Does it assume a 20-something founder with few family commitments?
Or is some of it also intended to cover operational expenditures (at least at MVP-scale)?
What if the founder has a potentially 100x idea, but still wants to go the bootstrap route because... well, let's just say they find Craig Newmark more worthy of emulation[0] than Mark Zuckerberg or the PayPal mafia, and leave it at that.
[0] Although it's worth noting that only the most recent of the competing VC-funded classified ad startups are still around, but craigslist.org is a unicorn.
Re the point about the 100x idea - there seems to be no such thing - only common ideas and 100 or 1000 decisions to grow the business 1.1x to 10x. Each of those decisions demand a cost, effort or sacrifice of some form or another - and the difference between a startup and a regular business is that these decisions are made differently.
Ideas are all the same. Social network, payments, search, e-commerce, software, hardware - none of these ideas intrinsic value. Even the iPhone wasn’t a breakthrough - I had full touchscreen phones running modded Linux before that.
Think of every growth curve as a series of choices - YC chooses and teaches founders to make one category of choices, solo / lifestyle founders make a different, often incompatible set of choices. Ideas don’t come into play. Even YC, which invests more than this program, doesn’t care about ideas that much.
> Even YC, which invests more than this program, doesn’t care about ideas that much.
that's incorrect - YC tried a batch for founders without ideas and the results were very bad.
For someone like me, who is overwhelmed with the ideas, I can't even understand how an engineer or a power user can't have any ideas for a large or growing TAM.
EDIT: they're probably have ideas, but think that their ideas are not good enough, or afraid to sound stupid.
Yeah, I think no idea is a negative signal. Too many ideas seems more indicative of a good founder. And YC does still follow the invest in teams, ideas may change motto, I think.
My biggest problem with bootstrapping while still holding a full time job, not to mention a baby, is spreading myself thin on too many ideas, eventually not grinding enough at any of them.
YC has always sound to me like something very odd and very wrong (invest on a few to get a lottery winner). It is also so much boilerplate mumbo-jumbo startup lingo. I like to talk about business, not unicorns, valuation, lean startup, etc. This approach is much better and sounds right. Every startup counts for a healthy ecosystem. Looking forward to the next steps.
I believe it's because YC is more looking for startups in the vein of traditional silicon valley VCs and the like: high-risk high reward ventures. With general VC math, they're operating on the power law where essentially the biggest winner is going to return more than the rest of the fund combined and the high failure rate necessitates the huge winners. I definitely agree with your point and the value prop of TinySeed - those types of companies are great but it misses out on such a huge swath of companies that are important for a healthy ecosystem; I hope we see more support for the companies currently left out of the current ecosystem moving forward.
Are you really considered “bootstrapped” if you take on funding? Even if it’s a year’s runway, still seems odd to call it “bootstrapped.” But then again, maybe I just have a narrow view of what bootstrapping is. I view it as using your own money (often from the business if possible) to fund your company’s growth. Would love to hear others thoughts?
Maybe some terms need to be changed. I've watched some bootstrappers once they've reached product market fit raise a single seed round and that's it. Maybe bootstrapped+ ?
Likewise I hate the condescending term lifestyle business. That might fit a barbershop but does it also define a $100 million dollar software business?
> [...] but does it also define a $100 million dollar software business?
It depends on the type of software business.
Technically, a lifestyle business is just one that is not expected to ever go through a high growth phase. So a $100M SaaS is probably not a lifestyle business (high growth is at least potentially possible, unless the TAM is too small), but a $100M enterprise software VAR probably is a lifestyle business.
This is a common misconception. A lot of role-model bootstrap startups got a small, but crucial, investment at the beginning to focus on their endeavor without to worry about bills all the time. A famous one is Basecamp (https://m.signalvnoise.com/the-deal-jeff-bezos-got-on-baseca...).
Bravo Rob & Einar. So many founders are consuming their nights and weekends trying to get their side business off the ground with enough traction to be able to leave their day out. I'm glad to see someone finally tackling "funding for the rest of us" ;)
Would be curious to hear more about how the investors plan to get their money back for the investments. I can think of a few ways like the company selling and owning a piece of the pie, but oftentimes bootstrapped companies want to operate independently indefinitely (e.g. Basecamp, Mailchimp, etc). Is there a plan for cash dividends similar to Indie.vc to align expectations?
This seems really interesting. I was a part of several funded companies and the push for non-sustainable growth frequently contributed to a culture of lies, egos and unrealistic expectations. I'm working for a non-profit right now that has stable finances and it's an amazing difference.
Yet, I like the idea of building for-profit products too; just with sustainable and real growth. I've been kicking around an idea in the credit card space that could make for a nice revenue stream, but will never be the next Unicorn.
This sounds awesome! I just wished there is an equivalent of this for hardware. How awesome would it be if a company had a couple of PnP, CNC, and injection molding machines where they can assist you to turnaround a physical prototype and bring it to market quickly. Sadly for hardware, the downside of hardware is that it requires so much upfront investment and scaling can get stupidly difficult.
Just my 2 cents: I run a hardware side business that is ramen profitable. I started selling extra pcbs I had because I only needed one and the fab would only sell me 10. In the last 3 years it has gone from that to about 40k/yr in sales and continues to grow despite no marketing or sales efforts on my part. I simply focus on selling a good product in a really niche market.
That said, these 3 years have felt like the trenches. I hand assemble everything. It takes forever. I work full time at a successful SAAS company and it makes me ache when I see how little effort it takes to just rake in money. Everything I sell has a fixed amount of time and effort associated with it. My advice when people pitch me random hardware ideas is that hardware is hard and if it doesn't already exist you need to think long and hard about why.
But the point of my comment is that is _is_ technically possible to build a profitable hardware business without a significant amount of capital. I borrowed $50 from my checking account to order those first boards and components and since then it's been bootstrapped and profitable. I signed up for their mailing list because I'm at the point where I think this could be my full time thing, but I don't know exactly how to get there. I truly feel that 1 year runway would give me the time I need to really see how far I can take this. Additionally the mentorship and community would be absolutely critical as I have none of that now.
Excellent points. Would love to chat some more (enclosure design, CE/FCC certs, etc.). I don't see an email in your profile. If you are open to discussion, please email me (my email is in my profile).
Bootstrappers = people who haven't raised money yet, and don't wish to ever raise venture capital (i.e. institutional money). Typically it's folks who have an idea for a nice "base hit" business that can grow to $1M-$10M in ARR, but could never get traditional VC funding.
Percentage equity => We're working on that now. More info to come.
You've probably already thought the following but just in case:
"A year of runway" will vary by individual. Thus part of the infrastructure for your accelerator should be a series of locations where costs are minimized. a.k.a. We know a great hacker house in Kansas, or "we've done the numbers and if you want to work out of Mexico, you still save money even if you need to fly to California once a week."
You might also consider a structure whereby participation also offers health insurance as a bunch of individuals / tiny companies buying market rate care is usually not an efficient use of capital. This will also attract a more mature crowd who (testable hypothesis warning) might be particularly good at building this kind of business.
Offering health insurance is a great idea. It probably wouldn't even be that hard. Set up a subsidiary of TinySeed to employ all the founders on W2 and then set up that subsidiary on something like Justworks that offers cost effective group health insurance. Part of the runway could be delivered as W2 salary.
People I know who've been through YC tell me that one of the most valuable and continuing pluses is the social network for YC founders, I believe they call it BookFace? Definitely consider doing something similar. Since you don't compete maybe YC would give you the source code?
Probably a little off the beaten path: However, I know of government supported accelerators/incubators in China that will give free office space and a small stipend for foreign companies to register and work in some cities. Combine this with tinyseed and you are looking at a nice runway.
You know, it used to be that being a good VC fund meant picking out the diamonds from the rough - companies that had small ideas, but could grow into becoming big companies. Most big tech companies today pivoted into their current models from small-focus ideas, and those small-focus ideas are important because it what gets you quickly to market so you can start iterating and finding PMF.
The point being, I'm not sure how you're really differentiating yourself from any other seed/pre-seed investor. If you're really bootstrapping, then even if you're looking for resources, you're not looking for investment (and the loss of control that comes with it), at any level. Why should someone philosophically limit themselves to seed funding? Does your potential investment view seed investors as having different perspectives than VC investors, i.e. not seeking as quick an ROI as possible? Does anyone really start a company anymore seeking to give up control to VC investors as quickly as possible?
If I were you, I wouldn't say that you're focused on bootstrappers per-say, I'd say that you're focused on companies with limited growth potential, where there are profits to be eked out but not large ones. Your investment model, therefore, recognizes that successful portfolio companies will not re-invest profits back into growth, and you should therefore seek to make back your investment by capturing first future profits, rather than taking equity (which may not fly with bootstrappers).
I think you're right that a lot of big businesses grew into big ones.
However, our thesis is that if you're early stage, there really aren't a lot of places where you can pitch for funding for a business that does not have a shoot for the moon focus.
For example, I don't think ConvertKit would have gotten any kind of VC funding when it was doing $3k MRR (and he was considering shutting it down). Now it's doing $1M MRR and money is probably getting thrown at him.
I would suggest converting to a fixed dollar amount and fixed amount of equity. It encourages people to make choices that are efficient. (i.e. $200k -> 20%)
You also probably want to organize group discounts for basically any common service you can. (i.e. Insurance...but not just health. Business related insurance products. Hosting/CDNs will often offer discounts for larger groups/dollar amounts)
It probably will be easier to get those sort of discounts if you have a fixed start/stop date for an entire group as well since you can buy in bulk up front. (i.e. Jan 2019 -> Jan 2020)
Either one. It's more about a founder who has decided they don't want VC money, or the idea is such that it could not raise VC funds (because it doesn't have the potential to be a unicorn).
Oh, Good question. Technically we will be institutional, but not by the traditional definition that implies a series A, B, C, etc. then an IPO or large liquidity event. With a valuation north of $100M, etc. The typical "Unicorn" play where 1 startup returns 100x the fund so all companies backed need to have that potential.
TinySeed will be able to back companies with smaller aspirations, but that are much more likely to succeed, and don't aspire to get on the funding treadmill of raising every 18 months.
Bootstrapped would be any self-funded, usually single-person-founded, company. You might have revenue or not, but the key component is that you are doing this on your own time or money. Not VC-funded.
Don't know what equity take they have, I'm guessing it depends on the size of the investment.
Is this going to be world-wide or US-only? The former will probably mean a lot of legal hassle, but it would be nice to be able to participate from elsewhere in the world...
I'm very curious to learn more about what kind of stake the investors get in these bootstrapped companies. For these types of companies I always thought it'd be better if investors operated more like a high risk-taking bank, just putting money in and getting money back with no equity involved. The investors can potentially lose all their money so it's not a loan, but if the company is successful the investor will be getting a 2-3x return paid back to them as interest, only payable if the company is achieving a certain level of profitability, e.g. 20+ employees.
This is a great idea. The initial runway to get a product off the ground is a huge hurdle for every start up. I've personally been doing lots of contract and side work to fund my start up and it's a big distraction. Any one have any idea when Tiny Seed applications open?
I read initial email and it hit all the issues I might have with YC. YC is fantastic program, if I was younger, I would totally go for it.
BTW I am enrolled in StartupSchool and it helped me push the product development and clarify what it should do. I think TinySeed would be ideal for us.
What I specifically like is that it addresses real problems founders have,
* provide runway for a year (more then enough in my view).
* remote, you can be anywhere, yet I assume they would be fairly involved in mentoring
That is all I need atm. I have full time job, that pays the bills, also it is not draining I can't work on my idea. I am slowly assembling elements to be successful and feel that I am making genuine progress thanks to StarupSchool.
I agree with you - I've been a fan of PG since he started writing articles back in 2001? 2002? Bought Hackers and Painters when it first came out and devoured it. And have a ton of respect for YC and the enormous value it's generated.
When YC launched I wasn't in a place to take advantage of what they had to offer (already had a spouse and child + house and couldn't relocate). And I haven't seen anything else step in to do for the rest of us what YC did for VC-backed startups.
So far it seems to be resonating, so fingers crossed.
> When YC launched I wasn't in a place to take advantage of what they had to offer (already had a spouse and child + house and couldn't relocate).
That describes my situation at the time pretty well, except I had (and have) $SPOUSE with severe asthma instead of $CHILD, which precluded relocating to the SF Bay Area, or anywhere with higher humidity than the southwestern US desert (we relocated from Las Vegas to Albuquerque 10y ago).
BTW rwalling, I hope you'll eventually see my Qs about what the "year of runway" looks like[0], and reply. I am definitely intrigued.
Exciting news, much needed and you're certainly the team to do it.
One suggestion/request: you'll be privy to an exclusive data set -- not about how to run bootstrapped businesses, but about how to support them. And also, the ways in which the common methods of support/mentoring/etc fail with this category of company. I hope you'll take the extra time to document what you're trying and learning, and share it so that others trying to help elsewhere can leverage what you're learning.
This is great to see. Pretty tired of hearing about unicorns that have used marketing and buzzwords to create a cult-like following by throwing around an epic conference to blow their own horn.
Here's the email announcement Rob Walling just sent out:
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In this email I'm going to answer the most common question I've been asked since I left Drip this past April: what are you going to do next?
The short answer: I'm doubling down on everything I've built in the bootstrapped startup space over the past 13 years.
When you hear the term startup accelerator you likely think of YCombinator, TechStars or 500 Startups. Accelerators traditionally cater to “unicorns” – companies that have the potential to be worth at least a billion dollars.
This focus has made them successful in launching startups like DropBox, AirBnB, Stripe and Instacart.
But what about founders who want to build a profitable software company with annual revenue in the $1M, $10M or $20M range? Are those companies worth a similar level of support and guidance?
These bootstrapped (or mostly bootstrapped) startups are who I come into contact with while running MicroConf, hosting Startups for the Rest of Us, writing books, speaking at conferences, etc.
I first thought of a “YC for bootstrappers” in 2011, but realized the timing wasn’t right. In 2014, after hearing an interview Colin from Customer.io, I started embracing the idea of bootstrappers raising a small funding round to get them to profitability without taking institutional money.
And as the focus of my angel investing changed from VC-eligible ideas to smaller, but higher probability “base hits,” I’ve realized there is a serious lack of startup capital and accelerator-type support in my corner of the startup ecosystem.
So I’m trying to fix it…
Partnering with Einar Vollset, I’m starting a remote accelerator designed to take bootstrapped software companies in the idea to $10k/month range, and dramatically accelerate their growth through mentorship, guidance, and a small amount of funding.
We will focus on “real” software companies. These are ideas that won’t become unicorns, but could reach $1M-$20M in annual revenue.
If you’ve been to MicroConf, think of the founders and companies you’ve encountered.
If you listen to Startups for the Rest of Us, think about the ideas and startups we mention.
Companies with real business models. Charging real money. To real customers.
It’s still early, but here are some details…
Our accelerator, called TinySeed, will provide you with a year’s worth of runway so you can quit your day job and focus on your startup full-time.
No more nights and weekends.
No more trying to navigate the startup landscape alone.
No relocation required.
You’ll receive world-class guidance and support from successful founders who have been where you are, and built highly profitable software companies. Founders like Hiten Shah, Patrick McKenzie and myself (to name a few).
You’ll be part of a small class of founders challenging and encouraging one another on weekly mentor-led calls.
I’m taking everything I’ve learned over the past 13 years and going all-in to create startup funding for the other 99%.
Our name is TinySeed. If you’re intrigued, click here and sign up for the inside track as we move towards launch.
And if you ever wanted to do me a favor, now would be the time to tweet about this announcement and help spread the word on Hacker News, Product Hunt, Reddit, etc. It's going to take a village...
I'm terrified of what comes next. But I know it's going to be a crazy ride. Wish me luck!
Judging from Rob Walling's thoughts on this topic from his book -- the equation looks different for the kind of company they're looking for. There's no "huge risk of failure"; the focus is on businesses highly likely to succeed that will have (relatively) slower, but consistent, growth. And obviously (relatively) lower final valuations.
Bingo. Instead of 1 in 20 becoming a huge success (100x) and the other 19 fail, maybe for us it's 10 in 20 are "base hits" that return 2-5x and the other 10 fail.
Those are contrived numbers for this example, but you get the idea. I expect more of them to be singles/doubles, fewer to fail than the typical VC bets, but we'll have no home runs.
Have you seen the total returns of VC money? Too lazy to link stuff now but a perfunctory search will reveal that the returns are not what you think they are. They essentially approach 0% outside of the few powerhouses.
Can’t really use the Andreessen-Horowitz / Sequoia returns as representative to the entire industry.
This shouldn't be downvoted. Changing the definition of failure is definitely what they're doing.
For a VC, anything that doesn't result in a liquidity event is a failure (in fact they might shut down an otherwise profitable company to sell off the IP and other assets for a pittance just to get it off their books).
TinySeed seems perfectly comfortable with no liquidity event ever happening, and just taking a cut of the profits.
I haven't had a great experience with YC Startup School, to be honest. I quit when I found out that I had to be aiming for a billion dollar company in order to qualify for the $10k. The phone calls were really long and I had to get up early. I would stay on the call for over an hour every week while people talked about their startups. It wasn't very interesting and I didn't get much out of it (no offense to the people in my group.) I think it would be better if I was part of more conversations, but I was just on mute most of the time. I also watched a few talks, and they were fine, but I don't think I learned anything that I was able to put into practice.