ROI of Bootstrapping

The interesting thing about calculating the return on an investment is that for some odd reason, despite it being the result of a two-part equation, everyone always seems to focus solely on the return portion.

VC’s are usually seeking a 10x return. That’s all fine and dandy by me, because 10x isn’t wildly crazy. That multiplier is only crazy when you’re pumping $40 million dollars into a fragile young company, and then expect $400 million to come out the other end within a few years. There’s a fair amount of unhealthy growth baked into those assumptions.

However, focusing on the investment portion of the equation – and making the math work for you at small scales – is something akin to being a trader and only buying shorts. No one seems to do it, but there’s a ton of value to capture.

Let’s take a quick example: if you took $100 bucks, and gave yourself one year, I’d bet that you could turn it into $1,000 relatively easily – all while investing much less time, energy, and sweat equity than you would have if you had shot for 10x starting with a $40M cash infusion. (Yes, I know, money scales incredibly well and the absolute amount is clearly smaller in the $100 – $1,000 case.)

So now let’s turn to your decision of how to fund your startup, briefly outlining the scenarios of:

  1. Venture Capital investment + expected ROI
  2. Simple-math bootstrap investment + ROI
  3. Realistic investment + ROI for a side-hustle.

Pretty obviously, you end up with target revenue of $3,600 in the third scenario, and are generating the same rate of return.

This may not pay your bills quite yet, but if someone were to be able to do this year over year, it will add up quickly, you’ll own 100% of the company, and you truly won’t have a boss.

Interested yet?

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