The Bootstrap Austin website talks about Plato's "Necessity, who is the mother of invention" and its bootstrap corollary "Constraint creates innovation". I don't think I appreciated how important the constraints are in helping a business find itself until now. Constraints are so amazingly important in helping businesses focus on the essence of what matters. Constraints force a bootstrap venture to communicate with customers and prospects to ensure that whatever is being delivered is something that is needed. The money that venture capital brings removes the constraints and my experience has been that when the constraint is removed, the focus on the customers' needs is replaced with either a shotgun approach ("lets see what sticks") or a focus on a perception of their needs.
There is a cultural shift that takes places after you raise venture money. First, it changes the mindset of employees who were part of the company before the venture money arrived. It's human nature that when money is scarce you are going to value it differently than when it is plentiful. Second, you begin to hire people who never knew the company as a bootstrap organization but only as a venture-backed one. The overall risk profile of the employee base shifts. Third, one of the benefits of taking venture capital is access to the resources of the venture capitalist who invested in the company. Among those resources are senior executives that will help you round out your team. Generally, the culture of those individuals are even further away from the culture of the company pre-VC.
When you add Silicon Valley to the mix, I believe all of these points blow up even more. The cost of living, the importance of speed often perceived as impatience, the sometimes incestuous relationships that maintain the cycle, and the search for the next Google are all factors that are magnified in Silicon Valley but are in no way exclusive to Silicon Valley.
Intellectually, I still believe you can apply bootstrap principals to venture backed companies but practically speaking, I believe it is very difficult to do so. Here are some random ideas, none of which have any proof of working, that I believe that would allow bootstrap companies to maintain some of the things that made them successful while still leveraging the catalyst that is money that venture capital provides.
- Don't announce internally or externally how much you raised or that you raised money at all. Reducing the number of people that are aware of your the company's bank balance is one way of artificially maintaining a culture. Of course, this is not realistic and comes with other consequences that I feel would outweigh the positives.
- Use budgets and targets to create artificial constraints. Controlling how much your sales team travels (e.g., 3 weeks per quarter) can create constraints that drives the right behavior. A sales person knowing that they have to make every travel day count will make sure that they prioritize the right customers (e.g., balancing the size of the deal with the likelyhood of closing the deal).
- Create a culture of capital efficiency. One such tactic is to be a hawk on expense reports (esp. the first 1-2 that a new employee submits).
- Lead by example. Employees will look to their leaders to determine acceptable behavior patterns. If their leaders are eating at Tavern on the Green and ordering $100 bottles of wine, the employees will think that is acceptable behavior.
- I'll reiterate the leadership point. If the founders and leaders of the company test their ideas by talking to customers, it will create a culture that the "Customer is #1". If the founders and leaders answer support questions regularly or at a minimum on occasion, it will create a culture that support is important.
- Use lore. I can not underestimate the power of stories in creating a company's culture. Every company has some stories the define it. Those stories course through the veins of the organization and every employee in the company knows those stories. When in an ambiguous situation, the employee will have the lore to fall back on to know how to handle that situation.
Neelan Choksi is currently enjoying a 4-6 month break from his efforts on the SpringSource management team, spending time with his pregnant wife and daughter, trying to get in shape, and knocking of the items on his "honey, to do" list.