Bootstrapping is ideal for small businesses such as mom-pop shops, services, and the likes in a well-established and mature markets. On the other hand, bootstrapping would be the kiss of death for potentially large businesses in emerging markets. In the latter case, if any of the players raise money, the remaining players have no choice but to raise money otherwise they wouldn’t have a prayer to survive. Therefore, in emerging markets, first-to-market, market penetration, market share, mind share, and the likes become part of the metrics mix for success, which cannot be achieved with bootstrapping in such conditions.

The lesson learned is that in business, especially for entrepreneurial businesses, there are no absolutes or ultimates, everything is relative. What works in certain circumstances wouldn’t work in others. For example, bootstrapping would have never worked for MySpace, Facebook, YouTube, Google, Amazon, and eBay at the time they launched their respective ventures. Nowadays, considering the current dismal economical conditions, bootstrapping is the only option available especially for early stage companies. Thus, your post is very timely. Similarly, relativity also applies to business models – what works for some under certain circumstances wouldn’t work for others. For instance, Dell would have never succeeded if they would have adopted the traditional distribution channel. Vice versa, the direct model never worked for all other PC manufacturers who tried and failed after Dell’s success in selling direct.

Now that I have commented on the substance of your post, let me take the opportunity to give an advice from an entrepreneur to an “analyst who works for a VC”. While ideas are dime a dozen, so are advices, especially the ones who come from an inexperienced analyst who works for a VC. Unless you’ve been an entrepreneur, run a business, managed people, mortgaged your house, maxed out your credit cards, and spent sleepless nights, you are not entitled to sit at the same table as entrepreneurs, let alone advise them. A bit of humility, humbleness, and compassion towards entrepreneurs would serve you right. Thus, my advice is for you to change the tone of your writing.

Finally, the best advice is to never burn your bridges by commenting on companies that you know nothing about, such as the reference to Clupedia. You are an analyst who works for a VC in Southern California, and hence part of the eco-system. As a result, you can’t afford to take the risk to shoot yourself in the foot even for remote possibilities, never mind probabilities, of running into the entrepreneurs and companies that you are bad mouthing.

BTW, since you are an analyst who works for a VC, here is a good article for you entitled “Reforming Venture Capitalism”

Hope this helps

In terms of Mark’s comments above, I think it’s quite a statement to say that Scott is arrogant or doesn’t know what he’s talking about because he’s either young or works for a VC. Experience isn’t always about the # of years on the CV – often times, it’s the value you’ve created in a short time. Ask Zuckerberg (not that I’m a Z fan, but you can’t argue with the value created). From what I’ve seen, a “young and inexperienced analyst” might be able to teach some entrepreneurs a lot.

It’s almost like a game for me. I try to launch businesses with as little money as possible (under $100)

Like the article and love the idea behind it…..we ourselves are a startup that believe in bootstrapping strongly. Thank you for this great article, adding it to my delicious list