• Subscribe
  • Would you rather own a VC-backed unicorn 🦄 or a 1M yearly revenue bootstraped SaaS Business 🐜 ?

    Mehdi Rifai
    46 replies

    Replies

    Chikodi Chima
    It depends on what the profitability of the $1M revenue SaaS business is. With lots of employees/contractors, and low margins, it might not make much money. With a VC-backed unicorn I could sell some of shares and have millions in the bank, which would allow me to focus just on growing the company to exit.
    Mehdi Rifai
    @chikodi fair point which makes me wonder about what levers can you action to maintain your Saas margin low?
    Roberto Gómez - Scalar.so
    You would have to understand different things such as: - Valuation: In the unicorn you know the valuation, what would be the multiple to value your bootstraped SaaS? Lets say 10x, so around 10M valuation. Considering in the VC-backed you have 20% equity and in the bootstraped 100%, you have a 200M vs 10M opportunity. - Lifestyle, flexibility etc. You have to take into account this as well, and matters a lot. But I think the lifestyle would have to be very bad to compensate for the 190M gap. So, in this case, I prefer a unicorn. Another decision is what to start, and whats more doable. I think its more doable the bootstrapped option, so maybe that, but once the decision is about owning a unicorn already... no doubt in my mind.
    Mehdi Rifai
    @roberjet indeed the math is undisputed -> 🦄 wins :) Not sure that the bootstrap option is easier though. It's pretty hard to get to 1m revenue a year being completely bootstrapped. VC money helps a lot with the early stage heavy lifting while not having a focus on revenue
    Roberto Gómez - Scalar.so
    @mehdi_rifai agree, initial part is easier this way, but then scaling gets pretty hard. The thing about 1M in revenue is the gross margin and EBITDA. If you have high churn, low repetition etc. you are going to burn all your money towards keeping the business in 1M.
    Kunal Mamtura
    I think that will purely depend upon people to people and their vision, if you are working on any new category or any path breaking technology which require lot of money to start with then you will have to go for VC but you are build some lifestyle business or are very satisfied with improving some current product then you can go for bootstrapped
    Mehdi Rifai
    @kunversation yes indeed for deep tech and R&D heavy businesses VC money is necessary. The questions is more about less R&D heavy products.
    Khalif
    Who in their right mind wouldn’t pick a 1M yearly revenue bootstrapped SaaS over being controlled by VC
    Janine N
    @khaliphj I would actually... I mean it's a hypothetical question, right..?! But owning a company that has been valued at 1 Billion $ or more and being able to even raise VC money means you've got a pretty good business on your hands. I don't see why that would be so crazy :)
    Khalif
    @mehdi_rifai I think most go that route because they didn’t have that second option… I could be slightly wrong here but I just don’t see how the VC option is more feasible.
    Mehdi Rifai
    @khaliphj I prefer the bootstrap option. But I can understand the other party. Raising VC can also help you scale faster, make bigger investments and create defensibility to protect your business from future competitors and other threats. You can also derisk along the way by cashing out a bit of money during rounds.
    Mehdi Rifai
    @khaliphj 😂 many people go that route though
    Pranab Buragohain
    I think it would depend on what one is building and on the Founders' vision. If the outlook is to build a sustainable, profitable business with linear growth (mostly), bootstrapping is the best approach. If one is in an extremely competitive, high growth space (say D2C, Tech, etc), it might need external capital infusion, to scale fast and outdo competition. And in the process, build value, employment, revenue. Of course in both cases, PMF and revenue will play crucial roles.
    Aaron O'Leary
    I think the bootstrapped option, not being beholden to anyone with a 1m yearly revenue sounds nice
    Sibu Sahu
    Everyones gotta scale faster or else wait enough to find 20 duplicates of their own product, which is why i would choose a VC backed Unicorn
    Mehdi Rifai
    @sibu_sahu that's a strong point for team 🦄
    Gavriel Shaw
    A Unicorn being a billion dollar valuation company?
    Gavriel Shaw
    @mehdi_rifai owning a significant share of a billion dollars I would suggest has more value than a $1M revenue bootstrapped SaaS, unless perhaps the SaaS was entirely life purpose aligned
    Mehdi Rifai
    @cyclicshaw yes that's exactly what it means :)
    Mehdi Rifai
    @cyclicshaw you definitely have more money with the VC options but your freedom is limited
    Khasan
    No Code Hero
    No Code Hero
    I would love to have a unicorn with 100M annual revenue
    Richard Gao
    Always results over bells and whistles Some may say "but that's all revenue, not profit!". But it's a SaaS, not a manufacturing business, so margins should be acceptable even in the worst case.
    Mehdi Rifai
    @richard_gao2 indeed that's why I specified that it's a saas you don't have goods to buy/store or manufacture. You average around 80% profits.
    Charlie Kor
    Haha, I think most people in this channel would choose Ant.
    Mehdi Rifai
    @charlie_lee1 unless they want to scale fast :)
    Shailendra Singh
    Consider the issues with bootstrapping [1] Avg shelf of new technologies is no more than 5-6 years i.e. it is becoming increasingly difficult to stay relevant with any tech for very long. Disruption catches up faster than people plan for, and reinvention needs capital [2] 'If churn does not kill you distribution will' Capital is not required to understand distribution but definitely essential to ace it. Distribution is seldom won by the first or the best product (if there is one), but always by products that invest in it. [3] You are never in the loyalty business, you are in the value business. Customer will question value every 12 months, and it is very hard to be the i-phone of your category. Investing in your product (marketing, sales, R&D etc.) with a small self-funded budget can only do so much [4] $1M ARR business is harder to reach but much harder to maintain. Having said this, bootstrapping your way to $1M in ARR is a perfectly good goal to have. But it is becoming increasingly difficult to stay relevant as a tech business for that long if you are completely bootstrapped.
    Mehdi Rifai
    @shailendra_singh_ht those are indeed excellent points about not picking the 1m ARR route. Thank you! I would question number 2 while I agree with the statement "Distribution is seldom won by the first or the best product (if there is one), but always by products that invest in it." Investment doesn't necessarily mean capital deployment. Every business should have distribution built-in in its DNA. It should be a clear focus. You rarely get to 1M ARR bootstrapped without nailing and getting obsessed with your distribution (or at least there is no example I can think of)
    Shailendra Singh
    @mehdi_rifai I meant you need capital to crack distribution i.e. team, marketing dollars etc. Your closest funded competitor would have the same understanding on how your product gets to your users as you do. My submission is he might get there fast or early with the capital than you.
    Janine N
    hmm VC backed 🦄 I think. Sounds like a once in a lifetime opportunity, unless you’re very lucky.. 1 million turnover comes around more often, but is definitely also nice.
    Mehdi Rifai
    @janine_nitz unicorns are not very common indeed. They make the headlines but there are only 1200 unicorns around the world. It's extremely little! So it is a once in a lifetime opportunity.
    Stephen
    Conversa - Videos That Talk back
    Conversa - Videos That Talk back
    It's a great question which some of us learn the hard way - $1M bootstrapped any day.
    Mehdi Rifai
    @dnoriegas this one will be hard to make :)
    Rai Saroj
    prompters.dev
    prompters.dev
    @dnoriegas it might crumble trying to handle both at once.
    Rishabh R
    I will go for the Bootstrap option, If I build a business I want to built-in on my terms, so that I can pivot my business accordingly
    Césaire Jean Hubert
    Je le veux car mon pays me donne pas cette chans pour trouve une entreprise qui vous donne revenus je vais pas le garde pour le veux l inverstire pour que je veux beaucoup le l endemen