To bootstrap or not to bootstrap?
That’s the question the New York Times raised in a piece comparing two business analytics startups located on opposite sides of the country that took different financing routes: Center City’s RJMetrics and San Francisco’s GoodData.
RJMetrics did raise $6.25 million last month, but that was after bootstrapping for five years. The startup raised a $1.2 million seed round mostly from its customers. On the other hand, GoodData has raised $75.5 million since it was founded in 2007, one year before RJMetrics got its start.
The story compares the companies’ customers, staff size and potential exit strategy. Here’s RJMetrics cofounder Robert Moore on why he feels confident about his decision to bootstrap:
Ultimately, the question is whether it is better to hold equity or trade it for growth. Mr. Moore noted that RJMetrics’ founders and employees continued to hold more than 80 percent of the company even after taking seed financing. That meant, he said, that if RJMetrics were to sell for, say, $50 million, the founders would be set for life financially.
If GoodData were to sell for $50 million, it would be a disaster. “The personal upside for someone who owns 5 percent of a company that sells for $100 million and the person who owns 50 percent of one that sells for $10 million is the same,” Mr. Moore said. “And a lot more companies sell for $10 million than for $100 million.”
It’s fitting that a Philadelphia company was chosen as the startup to represent the self-financing side of the conversation, since Philly is both bootstrapping-friendly, as entrepreneurs have said, and full of bootstrapping startups.
Find more of our coverage on bootstrapping here.
Find more of coverage on investment (whether it’s private equity, venture funding or angel investment) here.-30-