YOLO... so why gamble on unlikely success?
Many new founders are inspired by the digital despots of Silicon Valley and decide they’re going to pledge their 20s towards a billion-dollar moonshot that will ‘change the world’. A loathsome goal that has never made anyone happy.
Businesses that are set up with flexibility in mind and financial goals that suit the founder’s needs are - sometimes disparagingly and often patronizingly - referred to as lifestyle businesses.
I prefer the term robust business. Lifestyle suggests a stodgy and unambitious operation. On the other hand, a robust business is one that is not VC-backed and instead:
- Set up to return a decent positive cash flow from month one.
- Niche, because it’s easy to be strongly positioned in a niche without significant marketing spend and distribution costs.
- Necessarily not in a capital-intensive industry, since investors have to be involved and want ambitious returns. For this reason, ‘small tech’ is a good area to focus on as it’s easy to get off the ground as an agency, SaaS, app provider, recruiter, etc.
- Creates meaningful jobs that are not subject to the destructive intensity of a high-growth environment, where all priorities are set toward investor returns.
- Easier to manage and grow. Not ‘easy’ but you are at least in control of the pace of change and your own growth goals.
- No board to answer to, though that doesn’t mean “you don’t have a boss”.
- More chance of financial ‘success’. You’re way more likely to be a millionaire setting off down the 7 or 8-figure exit path than the 9 or 10-figure exit path.
- You're not going to be diluted/forced out of your own business.
- Easier to build around your lifestyle e.g. if you travel, have kids, etc
- You can’t hire early, so you do everything yourself for a long time.
- Normally investors speed things up, not just due to capital but also to their network.
- You’re likely investing/risking your own money.
- You don’t start out with the money to hire top talent so you’ll find it harder to delegate at first.
- Difficult to scale up quickly if you find yourself in a high-growth market.
I don’t mean to hate on the traditional VC-back/high-growth model at all, I love these businesses and have invested in and advised many. But the ‘default’ aspiration of many tech founders is set toward this path to ‘disrupt’ entire industries when in reality a better use of time and energy might be a robust business that can be built around your real goals.
Something I'm learning which is validated from the blog is that, if you're good at something start with a business that provides services. Let's not call it startup, just "business" - in which one gets cash flow into the business. From there on, three things can happen: 1. The person can solve multiple product problems. Thus, be in an exploratory phase. 2. In future, if one wishes to build a product, bootstrapping is an option now. 3. Also, niching into one is easier (which comes from the 1st point).
yes, it’s a bit risky business when you’re investing your own money and as you’re working with various clients it’s very difficult to delegate work.
I saw a Y-combinator post a while back showing that unpaid/organic customer acquisition was a key predictor of the long term success of its alumni. If you can get the marketing flywheel right (minimise customer acquisition costs, maximise lifetime value) you can go all the way without external funding.
Couldn't agree more with this Alex! There's so much wasted time & energy due to the 'ultra high-growth at all costs' mentality. I've been there and in almost all cases the only winners are the VCs. I do hope more high-impact and larger business will come from a more robust/sustainable place into the future.
Hi Alex, exactly why I set my business up. Freedom to follow the path that suits you. Hope all is well.