I wrote this to challenge the common dichotomy that startups are either VC-backed money-burning machines or anti-VC/profitably bootstrapped. It doesn’t have to be that binary. There’s a spectrum, a middle ground. You can retain control by being profitable while still using funding as leverage or as a safety net if things don’t go as planned.

One of the paradoxes of fundraising is that it’s easiest when you don’t need the money—and almost impossible when you do. By keeping the company mostly profitable, you never have to need it, giving you full control over timing and the ability to choose the right deal. But having that funding can enable you some more leverage or add more risk business you could afford while being bootstrapped. In our case we raised the funding for the conservative case, but the reality turned much better than expected.

Another misconception is that sustainable growth comes from spending or hiring. In reality, many great products take off first and because they take off, any amount of hiring becomes justified. Some of these companies are even profitable before they go on a hiring spree. The problem is that the typical approach isn’t nuanced or intentional enough. You might decide to hire 100 engineers before knowing how the next 10 engineers impact your trajectory. If you cut the hiring plan in half—or even to a quarter—it might not affect growth at all. But there’s often an assumption that growing the team is also good, and maybe it comes from a time in the 90s or something when you had hire people to man the phones to take orders.

What I believe is that startup’s growth is primarily driven by product superiority and market fit, not just by headcount or marketing spend. Those things can amplify success, and in some cases, they can even mask a bad market fit through sheer force of sales and marketing.

A less cynical take on VCs is that they’re not necessarily pushing companies to burn cash they just want founders to double down when they see a company working. But whether you can truly scale depends on your market dynamics. Sometimes, you need time to learn or to land the right deals in a segment before pouring money into growth.

The problem is that the current thinking is often too simplistic. Since you're startup and have cash, the spending more is always the right move. Going all the way 100 when you could dial it down to 50 or 30 and regain control and de-risk the changes of complete flare out.

Linear has raised over $50M+ (at $400MM valuation)

You just can't grow fast enough while being profitable - to grow into & surpass that kind of valuation ... in a timeframe ok that's for your investors.

https://tracxn.com/d/companies/linear/__xC97n-jdX7VZjDBpNyRf...

If your market is having a hockey stick growth because it's new or in vogue, even underperforming teams will outgrow the best team in the world stuck in a linear growth market.

So I chuckle a bit when founders try to convince you that they are the reason for the hockey stick, or that they are the reason for the linear growth. You're riding the wave more than anything. The main difference then being if you end up being the one chosen by Softbank to aggregate the market or if you'll be one of the ones that are bought out by them.

A good recent lesson in the awesome power of network effects is X. A huge number of users on that platform hate the direction Elon -- and it -- have taken, but they still use it. Major brands still use it. Governments targeted by people Elon is amplifying use it. Journalists who hate it use it. Why? People use it because people use it, and it's hard to get everyone to migrate at once.

Network effects are a force of nature. They are the strongest possible lock-in.

Eventually for some of these companies something clicks, and they do get to something of a valuable company.

This is what ZIRP was.

Alot of people dont know that investors are okay with this, they have 20 Million to push into a company, and figure that something might pop out.

This is also something DHH has been saying for years. However, I think it is more true now than ever. With how easy it is to start and scale a software company I really struggle to understand the justification for venture funding at the earliest stage, unless you want to larp as a founder, have low conviction, or just want “the experience”.

The trick is when you're trying to take risks and innovate. It took Amazon a long time to be profitable. It took Uber a long time to be profitable. It took Facebook a long time to be profitable.

When it's a land grab - when you're racing against other companies in a new market like AI - you need to burn money fast to run fast. Can't take a year in private beta.

But it's hard to be a profitable, bootstrapped startup when rocket fueled / venture-backed startups are too busy growth hacking and venture-funded blitzscaling to capture customers at low cost to the customer, only later to screw the customer when it comes time to either flip the company to a buyer in order to return those VC dollars, or to turn the screws on the customers and enshittify the product when blitzscaling is no longer feasible.

Personally, I prefer a bootstrapped, profitable startup in markets where blitzscaling venture-backed rockets aren't raiding the customers.

Thanks for this source

You know what? Good, and hopefully Linear sets the example instead of the others just running back to VCs again for another top-up.

Once you have shown that you're profitable, then you don't need them. The moment you do, you're always having to cede control and be at their mercy after raising and burning ridiculous amounts of their money and losing parts of your business.

Of course VCs see that as an issue as they feed on startups by doing this. If you're profitable then you don't need them.

Otherwise, you'll be on your Series Z until there are no more investors left to throw money on to your unprofitable startup.