Bootstrap, Then Raise Funds If/When Necessary

As discussed in previous posts, BuzzPal is a bootstrapping startup. We believe it’s the best path for most modern Internet startups (definitely the best path for us):

  1. Put together a team.
  2. Develop something real.
  3. Get it out there.
  4. Get user feedback.
  5. Morph.
  6. Grow.
  7. Morph, grow, etc.

Steps 1-5 completed with the founder’s capital only. Then, if and only if, you get on an exponential growth curve and capital is required to scale, raise some money, which at this stage will be relatively cheap in terms of equity dilution (use a mix of debt, equity and vendor financing). Note: My background includes venture debt and equity investing (with a venture-finance startup that later went public).

If investing in customer acquisition models out in Excel (i.e. is a positive NPV investment), then raising capital for that is good, too. Investment in product development is best left as a function of revenue (i.e., budget as a percent of revenue).

Another benefit of bootstrapping is that…

…it forces you to be efficient with your very limited resources and it keeps the team lean and hungry, which is a very good thing (see here).

Speaking of being lean and hungry, I dumped my car when I moved to Europe and now I walk or take the bus or streetcar everywhere. That saves money and provides some additional exercise and quite time, which is essential for creativity and problem solving (both conscious and subconscious varieties).

I’ve also cut down on everything else that is consumed and costs money, including even food, beer, and going out on the town, which are three of my favorite things. I don’t buy Coca Cola anymore, except when when I succumb to a Whopper or Quarter Pounder value meal (about once or twice a month). I wear my clothes, socks and shoes until they have holes in them and beyond (my wife’s mother doesn’t like that so much). I don’t buy “stuff.” In fact, I kind of hate “stuff.” In short, I am a minimalist, which really works for me and my mind.

What do I eat and drink? This is it, about 90% of the time:

  • Breakfast: coffee, C-vitamin tablet with water, little bit of yogurt and musli.
  • Snack 1: Piece of toast (usually homemade) with butter or cream cheese. Water.
  • Lunch: Grilled sandwich with a few pieces of salami or ham and a piece of cheese. Water.
  • Power Nap: 20 minutes (not every day).
  • Snack 2: A few crackers with cheese or peanut butter. Water.
  • Dinner: We make a couple of decent meals per week and eat leftovers every other night. We have a frozen pizza one night. Except for party nights, I only have one beer or one glass of wine per night.
  • Desert: Very rarely.
  • TV: Very, very rarely. Not a food/drink question, but still important. When I do watch TV and read mainstream media publications it’s mostly to get a read on the zeitgeist, often from a contrarian perspective, especially with my investments.

Now on to the story (press release) that sparked this posting:

Sparkplay Media Closes $4.25-million Series A
Mill Valley, CA, February 13, 2008 – Sparkplay Media Inc. announced today that it has secured $4.25 million in financing from Redpoint Ventures and Prism Ventureworks. The company plans to use the capital to expand development of its browser-based massively multiplayer 3D games platform and of its first MMO, Earth Eternal.

We’ve been self-financing, and thus bootstrapping, for two years now and are incredibly excited about the chance to expand and accelerate our plans. We’re developing a different kind of game: one that combines compelling traditional MMO gameplay with new experiences that can be shared with friends on social networks and beyond,” said Matt Mihaly, CEO of Sparkplay Media.

“We’re also very happy to have the great people at Redpoint and Prism backing us up. It’s gratifying that they share our vision of where MMOs and virtual worlds are heading and are willing to give us the chance to prove that vision to the market,” continued Mihaly.

Fouad ElNaggar, who sits on Sparkplay’s board for Redpoint, said, “What Matt and his team are creating immediately sparked our interest. There are lots of teams out there trying to build the next big thing in games – we’ve met many of them! Sparkplay was rare in that they combined a proven ability to create compelling content that drives purchasing with the type of forward-looking thinking that will be required for a new gaming experience to achieve escape velocity with consumers.”

About Sparkplay Media
Sparkplay Media is a young, dynamic game developer and publisher formed by veterans of the independent games scene.

For additional information about Sparkplay Media, please visit the website at http://www.sparkplaymedia.com.

About Redpoint Ventures
Redpoint Ventures focuses on partnering with and funding innovative companies that have the potential to define, lead, and change industries. Redpoint partners have many decades of experience and success in technology investing; combined with this foundation, the firm is able to leverage a thriving network of entrepreneurs, partners, and industry experts to accelerate building market-leading companies. Redpoint (http://www.redpoint.com) was founded in 1999 by partners from two of the top firms in the venture capital industry and currently has over $2 billion under management. The firm is headquartered in Menlo Park, CA with offices in Los Angeles and Shanghai, China.

About Prism VentureWorks
Founded in 1996, Prism VentureWorks (formerly Prism Venture Partners), Westwood, MA, Santa Monica, CA, is a venture capital firm built by experienced entrepreneurs in technology and life sciences. With approximately $1.25 billion in capital under management across five funds, Prism’s primary goal is to deliver superior value to its investors. Its partners have served as the founders, CEOs and senior executives of numerous venture-backed companies. By leveraging its network of seasoned entrepreneurs, skilled executives and long-time industry contacts, Prism identifies and works closely with companies with the potential to be market leaders. For more information, visit http://www.prismventure.com.

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2 Responses to “Bootstrap, Then Raise Funds If/When Necessary”

  1. […] I’ve been meaning to post this for about a year… finally got around to it when I wrote this post. […]

  2. Hacker News: Ask PG: Correlation between frugality and startup success?
    http://news.ycombinator.com/item?id=189830

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