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Extreme Bootstrap and Extreme VC

There are two types of startups that make investors drool all over: those who don’t need the money and those who are bigger than life.


I call them Extreme Bootstrap and Extreme VC startups.

  • Extreme Bootstrap - efficient and scalable. Small team. Makes money from day one. Gets to profitability and scale with little to no outside capital

  • Extreme VC - requires mountains of capital and people to tackle a nearly impossible mission and transform an entire industry

If you’re neither an Extreme Bootstrap nor an Extreme VC startup, then you are an extremely problematic startup.


Extreme Bootstrap


Restoke is a startup you haven’t heard of.


They are a small team in Australia. The CEO ran restaurants for many years and knows all their pain points personally. Over 3 years their tiny team with no resources built a back-of-house management system that restaurants go crazy for.


They are selling digitally, growing fast, profitable, and refusing to take money from investors because “the machine is still not ready.”


They are the canonical example of an Extreme Bootstrap startup:

  • Small team

  • Limited outside capital

  • Fast to market

  • Makes money from day one

  • Highly scalable

  • Low customer acquisition cost with a short payback period

It’s a good business that can survive forever without the help of a VC.


Extreme Bootstrap businesses are healthy and durable. You have the freedom to do things your way, and even a $10M exit can make you rich.


Extreme VC


NeuraLight is a startup you might have heard of.


NeuraLight is tackling an unbreakable frontier of biology and medicine, aka the human brain. It’s a nearly impossible mission with a world-changing potential impact.


They are the canonical example of an Extreme VC business:

  • Raised $5M+ out of the gate and another $25M within 1 year

  • Sizeable team

  • Deep technology with clinical deployment

  • Highly regulated sluggish market

  • Complex buyers

  • Massive TAM but slow revenue ramp up

It’s an inspiring mission that simply can’t be done without serious VC backing.


The benefit of being an Extreme VC business is the pursuit of something world-changing that has never been done before.


Extremely Problematic


Being somewhere in between an extreme bootstrap and extreme VC startup is a painful experience. Let me explain.


Extreme bootstrap startups are great because you don’t depend on investors. You might still raise tons of money to fuel your growth, but that’s a choice rather than a necessity. The mere fact that you don’t need investors makes investors want you that much more.


Extreme VC startups are great because every investor in the world is looking for them. They are big, inspiring, and feel different than the rest of the startup herd. An investor's biggest fear is passing on one of them.


I myself invested in Restoke and NeuraLight for these exact reasons.


But what happens if you’re somewhere in the middle?


It’s the worst of both worlds. You’re highly dependent on investors, but you’re not that appealing to them. You’re just another startup trying to make ends meet. It is questionable whether you’re a startup or just a business that builds expensive software.


Most startups can take action to become Extreme Bootstrap or Extreme VC startups. But most don’t and therefore subject themselves to the eternal struggle of keeping the lights on.


Taking the Extreme


To take one of the extremes you need to do 3 things:

  • Accept the fact that these extremes are better

  • Understand which extreme inherently fits your startup

  • Embrace that extreme and fully commit to it

Understanding which extreme inherently fits you starts with the following continuum.



On the very left we can find companies like Calendly and Mailchimp which got to significant revenues and scale with almost no capital. On the right companies like SpaceX and OpenAI who raised billions prior to revenues.


Your startup has a natural place on this continuum. Are you inherently like Restoke or NeuraLight? The closer you are to the left the more natural Extreme Bootstrap would be. As you get farther away from the left you’ll have to take the Extreme VC approach.


Once you figure out which extreme fits, fully commit to it:

  • Extreme Bootstrap - you are building an efficient and scalable business. Keep the team small. Aim to make money from day one. Get to profitability and scale with as little outside capital as possible

  • Extreme VC - make your story bigger than life and industry-changing. Work closely with VCs from day one. Force yourself to think 10x bigger than feels comfortable

Of course, bootstrap startups shouldn’t think small and VC startups shouldn’t be wasteful. But they are entirely different mindsets that grow entirely different beasts.


Conclusion


The average startup is a failed startup.


The opposite of average is extreme and we discussed two extremes that you can take:

  • Extreme Bootstrap - Make yourself efficient and scalable. Keep everything small except for your revenues. Make yourself independent of investors, and therefore much more appealing to investors

  • Extreme VC - Make yourself bigger than life. Think 10x bigger than feels comfortable. Make yourself an investor's biggest FOMO

Being neither is extremely problematic. You’re highly dependent on investors, but you’re not that appealing to them. Arguably, you’re just a regular business that happens to be selling software.


Taking one of the extremes is mostly a mindset decision:

  • Accept the fact that these extremes are better

  • Understand which extreme inherently fits your startup

  • Embrace that extreme and fully commit to it

Take the extreme. Average is boring.

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