00:00 I would watch his life on Facebook and
00:02 be like this is amazing he traveled the
00:03 world he got married he had kids I'm
00:05 like am I the idiot and like evidence
00:09 was quite possibly Michael quite
00:14 possibly this is Alon plus Michael and
00:17 today we're going to talk about should
00:19 you bootstrap or should you start a VC
00:22 backed company this is like a
00:24 confusingly controversial topic yeah I'm
00:27 not really sure why it's controvers
00:30 well it's one of those sort of one-sided
00:32 things where a lot of people don't
00:35 care about the topic versus people that
00:38 care a lot yeah does that make sense and
00:41 so I think there's a lot of people that
00:42 strongly identify and are really excited
00:44 about bootstrapping yeah that are very
00:46 like fired up about this and there's a
00:48 lot of people that this just isn't a
00:49 topic that comes up much yeah the place
00:51 we should start I think is that the vast
00:55 businesses um should not raise venture
00:58 capital and I'll extend that Point
01:00 Venture Capital is not interested in
01:02 investing yeah in the vast majority of
01:05 businesses so like one of the things I
01:07 think Founders get really screwed up on
01:08 is that VCS have become a little bit
01:28 marketingyoutube lot of the stuff that I
01:30 see on the television show yeah you
01:32 would never in a million years be able
01:33 to raise VC from it and so I think you
01:35 watch Shark Tank and you think that that
01:36 is no reality not this industry so I
01:40 think that um that's the first thing is
01:42 that if you're starting a business that
01:44 can appear on Shark Tank for the most
01:46 part you probably shouldn't raise
01:48 Venture Capital um but I think there's
01:50 actually like a deeper thing here which
01:53 is that let's say you want to start a
01:54 startup business you don't have to raise
01:57 Venture Capital either correct and I'll
02:00 say the same thing I don't believe
02:03 Venture capitalists want to invest in
02:06 all software businesses and I don't
02:08 believe all software Founders should
02:10 raise Venture Capital yep so yeah let's
02:13 talk about the map I think what's really
02:14 going on um is I think if you looked at
02:18 how many businesses are started every
02:20 year yes what percentage of those are
02:23 Venture funded Co we could ask chat gbt
02:27 but I would guess definitely single
02:29 digits if not less than 1% and so if you
02:32 just look at businesses that are started
02:33 in the world yes it is like a weird
02:36 outlier freak occurrence that is a VC
02:39 funded business and so but I think if
02:41 you're just consuming content you know
02:42 you're watching media watching YouTube
02:44 Twitter you don't realize that yeah okay
02:48 and Venture Capital as a product is
02:50 specifically for investing in something
02:53 where their investment could be worth at
02:56 least a 100 times more if not a thousand
02:58 times more yes and so trying to put that
03:01 jet fuel into something that um isn't
03:05 going to grow to be big everyone is
03:07 going to be sad and lose yeah and so you
03:10 shouldn't do it and the investor win and
03:12 the user no one no one wins no one wins
03:15 and so again like I don't think that
03:17 there's this push that I can see from
03:20 from investors to try to convince people
03:23 to raise VC money um for something that
03:26 is not has like no chance of of growing
03:29 like that it just doesn't make sense for
03:30 anybody okay I'll go a step further I
03:32 think the whole argument is fake news
03:35 right I don't think this is a a real
03:39 argument right I don't think that anyone
03:42 thinks it's more moral or good or right
03:46 to start a VC pack company or a non-vc
03:48 pack company I don't think this is an
03:51 actual debate yeah I think that like
03:54 starting a VCB company really hard not
03:57 the best way to get rich not the best
04:00 way relatively small number like the
04:02 numbers are not huge not a good path
04:05 like I always like to equate it to like
04:06 Athletics it's like getting into the NBA
04:08 is really hard like not like the best
04:12 path to have a good career is to be like
04:14 oh I'll just I'll just make the NBA yeah
04:16 that's simple right it's like 4 or 50
04:18 guys I'll just be one of those guys and
04:20 then game on right right they recruit
04:22 from all around the world I live in the
04:23 world yeah very straightforward I like
04:25 that play yeah no so it's this is not
04:27 the only way to get rich Let's Take a
04:29 further step most people who are rich
04:31 did not raise Venture Capital dollars
04:33 did not start real estate investing
04:35 stock market investing being lawyers
04:37 being doctors again go num investors
04:40 yeah there's so many people right so
04:42 this is not we get rich I think the
04:43 other thing that's funny is like there
04:45 is no one trying to force you or cadol
04:48 you into starting a VC backed company
04:51 like if you don't want to do it don't
04:54 don't do it correct it's also a decision
04:56 that you can revisit if you don't want
04:59 to start a VCB company now but like your
05:02 bootstrap product starts doing well and
05:04 you want to do it in the future great
05:07 you can there's no one who is going to
05:09 say no you said you were bootstrapped on
05:10 Twitter I will not give you money like
05:12 no I'll get another truth empirically
05:16 none of the trillion dollar software
05:18 companies um are bootstrapped with no VC
05:21 dollars ever yeah so if you if someone's
05:25 telling you you can make a trillion
05:26 dollar company maybe you can just no
05:29 one's ever done it yeah I'll say fact
05:32 based and again like to look at the
05:34 numbers even if you look at software
05:37 companies yeah even if you look at
05:39 iPhone apps if you actually did an audit
05:41 of the App Store and you said what
05:42 percentage of the apps in the App Store
05:44 are VC backed it is Tiny tin but if you
05:48 said what percentage of dollars that are
05:50 spent in mobile apps go into VC backed
05:53 companies I think that that's right
05:55 because dollars are going into Amazon
05:58 and eBay and like all that kind of stuff
06:00 right yes and by the way I don't I want
06:02 to be clear neither of us are saying you
06:04 should want to make one of those
06:06 companies yes like or you that should
06:09 come from inside of you not from YouTube
06:12 no no right like I actually kind of try
06:16 to convince people not do it well if it
06:19 is because if you need to be talked into
06:20 it that's a bad bad so I like to talk
06:23 about why it sucks yeah so um I think
06:26 the other thing is that no one is trying
06:28 to say in our industry that if you make
06:31 a great software product that allows you
06:33 to make enough money to live a good life
06:35 and it's not PC back that you haven't
06:37 won you won yep like I had a friend who
06:41 made one of these companies um you might
06:43 have used his product his product
06:45 generated about $30 to $50,000 a month
06:49 and took about 7 to 10 hours a month of
06:51 Maintenance the entire time I was
06:53 working on my startup he was living life
06:58 like I would watch his life on Facebook
07:00 and be like this is amazing he traveled
07:01 the world he got married he had kids I'm
07:04 like he won like that's like like good
07:07 for him like there's no again this is
07:09 the one-sided thing is that we're like
07:12 great like we're like high-fiving that
07:16 versus that there's this um two-sided
07:19 battle 97% of the time I was watching
07:21 that Facebook I was like am I the idiot
07:26 was quite possibly possibly yes um and
07:31 he's still doing great right and so like
07:33 this is really clear it's like building
07:35 a great small business software small
07:37 soft even the term small bothers people
07:39 it's just non-venture back non it could
07:41 be big non Venture back you making
07:43 millions and millions of dollars yes
07:44 totally fine I think the other thing
07:46 that's kind of maybe a dirt dirty kind
07:48 of underbelly here is who is spurning
07:53 this argument like who who is who who's
07:56 incentivized for this to be a big issue
07:59 yeah think that this has been just like
08:01 a topic that gets a lot of Engagement
08:04 online yeah and so yeah you know if you
08:07 want to get people agitated about
08:10 something this is a pretty good topic
08:11 and then you can use it to
08:13 promote stuff and so yeah I'm not going
08:16 of name any names but I can think of
08:17 folks over the years yeah that are like
08:20 kind of um built a following around
08:24 encouraging people to do this and to the
08:25 extent it is helpful and more people are
08:28 improving their lives it that's great
08:30 yes but there's a little bit of like
08:32 creating a fake controversy and then and
08:35 then monetizing it little bit and so
08:38 maybe maybe people may have this
08:39 question watching this video Michael why
08:41 should I apply to YC like why should I
08:44 do a v you guys just did a great job of
08:45 explaining why not to do it well why why
08:47 should I do Venture so I think that um
08:51 there are some businesses where you
08:54 actually need money
08:57 upfront yes and if you you need money up
09:00 front and you're building a software
09:01 business The Venture Capital industry
09:03 can help you get money up front if you
09:05 don't need it they'll take it yes I
09:08 think that what's so interesting about
09:10 this is that um there aren't many other
09:14 good mechanisms if you need millions of
09:17 dollars or 10 million dollars to get
09:19 your company to break even yeah there
09:21 aren't other mechanisms in our economy
09:25 to give that to you if bu an example of
09:27 Google I don't know just cuz famous B
09:29 companies the world you know I don't
09:31 know how you could have bootstrapped
09:33 that and so again maybe the audience is
09:34 saying well I don't want to build Google
09:36 great you no one is saying you have to
09:37 build Google but if Google wants to
09:39 build Google but if the founders of
09:41 Google wanted to build Google yeah it
09:43 doesn't seem mathematically possible
09:45 there's no route they could have done it
09:47 without raising money there's no loans
09:49 they could have gotten to buy the
09:50 servers and do the things they did no no
09:53 and so we should just be thinking about
09:54 VC as enabling incremental
09:57 entrepreneurship that wouldn't to be
09:59 around otherwise yep not as
10:01 cannibalizing anything like it's just
10:03 enabling that incremental founder and
10:06 the other thing is you have to
10:08 remember if you want to raise a lot of
10:11 money but you can't explain to the
10:15 investor why you might IPO and give them
10:19 back then you you can't raise VC we want
10:23 to be explicit like it is a business
10:25 transaction it's not a faith transaction
10:28 correct it it is I give you money now
10:31 you give me a lot more money later or at
10:34 least you try really hard to and if you
10:36 can try really hard but the result can't
10:39 be a lot of money I shouldn't logically
10:42 give you money now not because I don't
10:44 like you or because yeah you're not a
10:46 great person or these users you're
10:48 trying to serve aren't great it's just
10:49 because it's not a good business
10:51 transaction it's literally nothing
10:53 personal and I think sometimes Founders
10:55 kind of are very confused when VC say no
11:00 well it's because again if we're we're
11:02 trying to stoke outrage you let's Stoke
11:05 some outrage you point at something
11:07 silly that raised a lot of money yes the
11:10 most extreme silly thing in the world
11:13 you always pointed youo that' be one
11:17 right or we were whatever like you point
11:18 to something that is like on face silly
11:22 and then you say well if they funded
11:25 that why won't they fund my social
11:27 network for dogs yes and so it causes a
11:32 yeah um and I understand I relate but
11:35 it's don't fall for the rage pillar
11:38 don't let yourself get enraged by
11:40 obvious engagement bait yes which is to
11:43 cherry-pick the craziest silliest thing
11:45 yes and use that to get all worked up
11:49 and take that personally like that
11:50 somehow hurt you like like you were hurt
11:53 by that thing over there happening well
11:55 and what's so funny is like you are
11:57 actually cluded on the real Troop real
11:59 truth which is that they screwed up
12:02 someone someone messed up like you're
12:05 right they shouldn't got there that
12:08 money like you you you nailed it that
12:12 person who funded that company is an
12:15 idiot you're exactly right but like hey
12:18 that doesn't mean we should all bets are
12:20 all yeah it's like okay this dumb thing
12:23 happened therefore Up Is Down black like
12:25 like forget everything we know those are
12:27 those that doesn't follow that logic
12:29 doesn't make sense that person should
12:31 probably be uh spoken to about their
12:34 investment strategy so yeah so just
12:37 understand that game and I have to be
12:39 honest like I like games like this like
12:42 I don't like games where you have to
12:44 like convince people to like you or to
12:47 align with your views those are games
12:50 that are way harder to play I like games
12:51 where it's like hey if I want to serve
12:54 this customer and you can be a good
12:56 legal partner to me and I I give you
12:59 money and you give me Legal Services you
13:00 can be a good funding partner for me I
13:02 give you a check of my company you give
13:03 me cash right if you can be a good
13:06 partner to me a simple to understand
13:09 partner to me so that I can spend my
13:12 customer that's what I want yeah the
13:15 customer complicated
13:18 enough Jesus customers complicated
13:21 enough I like the idea that the money
13:23 people are like so if I give you this
13:25 money maybe give me a lot of money back
13:26 yes yes okay okay we're good okay
13:29 all right end of conversation I give you
13:31 money you don't give me any money back
13:34 good come back when I come back when
13:38 this is all that way
13:40 hopefully this helps clear up the debate
13:44 but I secretly hope this like I don't
13:47 know like doesn't at all cuz this this
13:50 is like so silly uh I hope we get
13:53 somehow flame word for this anyways
13:55 great good chat love it okay sounds good
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