“I think most founders also realize that you need not only money, but time.) JX Lye, founder and CEO of ACME Technology, said: “Try to figure out what your product market is right for your product market.” .
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With the rise of the modern venture capital industry, it seems that the idea of building a technology startup is inseparable from the expectation of raising institutional funds. But many founders today are challenging this assumption.
Leading practices – or starting, growing and expanding your business with your own resources – are nothing new. Famous company Spanx, Craigslist, and Gopro all started in the mid-1990s or early 2000s as ideas that took off and became multi-million dollar businesses for years.
Nowadays, Boottrapping sees new interests among founders, and among the attention, there is a new idea: “seed tape”.
What is a “seed roll”?
The concept of “seed roll” is mainly used as a public discourse to the main reaction Slump In the venture capital industry in Silicon Valley.
“There is bootstrapping, and then venture capital…seed rolls are what I call the ‘Goldilocks version’,” Josh Payne, a general partner at Opensky Ventures, told him. CNBC. The idea, he said, is to raise a round of funds from there and make money from there.
After the 2008 financial crisis, the U.S. Federal Reserve implemented Zero interest rate policywhich cuts interest rates to stimulate economic growth. This makes borrowing cheap and inspiring investors, such as venture capitalists, to deploy more money and enter more risky assets.
COVID-19 stimulation complex These impacts, venture capital peaked during the pandemic. This led to some startups getting huge valuations, while others were overvalued and eventually went bankrupt – think us.
After the pandemic, as investors retreated and venture capital began to dry, the pendulum turned in another way. This has led some founders to consider alternative options such as bootstrapping or developing seeds to fund their companies.
But some founders say this has a competitive advantage.
The short-term success of the seed
Wade Foster, co-founder and CEO of multinational software company Zapier, paves his company ahead of the term “seed trick” Even nearby. He said he started the company with his co-founders in 2011, and then they raised about $1.3 million in seed equity funding in October 2012.
Foster said they were able to completely get rid of the company’s revenue after closing the seed round. By January 2014, the startup was profitable. He added that by 2020, annual recurring revenue reached $100 million.
“I’m not familiar with anyone (seed flower rolls),” Foster said. At the time, the founders were either in bootstrapping camps or raising venture capital boot camps, and until recently, this “one-man-made” funding The idea of models has just begun to become popular.
Foster and his co-founders were initially trying to guide their company, but eventually decided to raise a round of seeds so they could grow faster.
“We started a company when we were in school, which wasn’t like we had a lot of savings,” he said. “We were pure moves… (but) progress was slower, so seed flattening means being able to be full-time and really give us All of it.”
After receiving the first round of investment, Foster and his co-founders decided not to raise funds anymore.
“For us, it’s no longer about the environment and it’s about the fact that we can make a profit,” Foster said. “Our income triples year by year.”
“More capital will only bring us more problems, and we don’t want to continue diluting if it’s not necessary,” Foster said. “We don’t want our kitchen investors to shoot the camera… (We want) let I actually sit in the driver’s seat so that I can go where to go for this matter.”
Similarly, Payne said he raised about $750,000 in seeds for his company StackCommerce in 2011. About ten years later, he Sell TPG Comprehensive Media’s commercial and content platform is not disclosed.
“When we were running for about ten years, we were basically profitable, and then we pulled out of the TPG,” Payne said. “All early investors made 10 times the investment…for investors For myself, this is a very big, successful exit.”
For both founders, seed shackles bring benefits supported by venture capital such as verification, protection, mentoring and resources, but without dilution and loss of control over startups.
“You can get all the benefits from adventure without a hangover,” Payne said.
I absolutely think that seed substitution will be more common for companies.
Wade Foster
Zapier’s Co-founder and CEO
Another factor in this transformation is the spread of artificial intelligence.
“I definitely think that seed procrastination for companies will become more common,” said Foster of Zapier. “I think AI is especially in making these companies use automation (and) technology to get a lot of leverage without having to hire a bunch of people,” said Foster of Zapier. And get a lot of leverage.”
Foster said the most expensive thing in technology is hiring people, which is “making it difficult for early-stage startups to get the flywheel running.” “(AI) makes it possible for the founder to go through a round of funding, then gain some profitability and grow meaningfully.”
Southeast Asia and the United States
Today, seed tailoring and bootstrapping are reviving globally. Although this trend has been seen in the U.S. market, industry insiders say the trend is more obvious in Southeast Asia.
“It’s more obvious here because you can say that in Southeast Asia, we’re more suitable for this bootstrapping business.”
There are several reasons. One of them is that the United States consists of a major market, while Southeast Asia has 11 different countries.
This means that the “power law” principle may apply to venture capital in the United States, but not to the region. “The power law does not work in Southeast Asia,” Jeremy Tan, co-founder and partner of Simman Capital, told CNBC. In the context of venture capital, the power law refers to the idea that most startups in the fund portfolio will even disrupt or fail, but a small percentage of companies will generate returns for most of the funds.
“It is popular in the United States, mainly the model used in Southeast Asia, although I think it is a failed model in the region,” Tan said. “Visit investments running this type of model will look for companies with amazing growth.”
Industry experts say this 100-fold increase may be difficult to achieve in Southeast Asia, as the region consists of many smaller markets with different language, culture and regulatory barriers, unlike those in the United States.
I think most founders also realize that you need not only money, but time.
JX Li
Founder and CEO of ACME Technology
In addition, Southeast Asia has been going through many years Funding drought.
The region’s startup ecosystem has experienced painful and expensive recalibration after funding peaked during the COVID-19 pandemic, which has enabled many startups to become many in the pressure cooker to deliver substantial valuations.
quit According to industry insiders, this provides investors with a way to make money and profit from investments – and there are also very few and far apart in terms of investment in the region.
A changing spirit
In addition to the current market environment, the spirit of some founders in the region has also changed.
“The founders have a huge rethink of whether they want to take (VC) currencies,” said Acme Technology’s Lye. “(VC) is basically burning for gasoline…but you have to live up to that valuation.”
The founders realized that once they make money from institutional investors, people immediately turn to growth, sometimes hurting the startup. This “at all costs” mentality will put a lot of pressure on the founders, which may lead to unsustainable business models, etc.
Make money meaninglessly, and finally, you realize you are alone.
Jeremy Tan
Co-founder and partner, Tin Man Capital
“When you start a company, it’s a nonlinear thing. You can go up, you can go down, and that really adds the pressure because you have to justify that valuation.”
“I think most founders also realize that you need not only money, but time.) Trying to figure out that your product market is right for you in the beginning,” Lye said.
“The founders are expected to work very hard, but I think it’s a beautiful line,” said Simman Capital Sepia. Why work hard for years and just to lose “everything else” like health or family? “Making money meaninglessly, and in the end, you realize you’re alone,” he said.
