Should Your Startup Bootstrap or Raise Venture Capital? | Dalton & Michael Podcast

**Michael** (0:00)
I would watch his life on Facebook and be like, this is amazing, he traveled the world, he got married, he had kids. I'm like, am I the idiot? And like, the evidence was like...

**Dalton** (0:10)
Quite possibly, Michael, quite possibly.

**Michael** (0:15)
This is Dalton plus Michael, and today we're going to talk about should you bootstrap or should you start a VC-backed company? This is like a confusingly controversial topic.
I'm not really sure why it's controversial.

**Dalton** (0:30)
Well, it's one of those sort of one-sided things where a lot of people don't care about the topic versus people that care a lot. Yeah.
Does that make sense? And so I think there's a lot of people that strongly identify and are really excited about bootstrapping that are very fired up about this. And there's a lot of people that, this just isn't a topic that comes up much. Yeah.

**Michael** (0:51)
The place we should start, I think, is that the vast majority of businesses should not raise venture capital.
And I'll extend that point. Venture capital is not interested in investing.

**Dalton** (1:03)
Yeah.

**Michael** (1:04)
In the vast majority of businesses. So one of the things I think founders get really screwed up on is that VCs have become a little bit more marketing-y, right? Talking to people.
And they might be confused, well, I want to start a restaurant. VCs don't want to fund your restaurant.

**Dalton** (1:18)
Yes. Well, I think another thing that's confusing is a side note, is a lot of the stuff on Shark Tank.

**Michael** (1:25)
Oh, yeah.

**Dalton** (1:25)
I would argue is not venture capital backable. You know, a lot of the stuff that I see on the television show, you would never in a million years be able to raise VC from it. And so I think you watch Shark Tank and you think that that is reality.

**Michael** (1:38)
It's not this industry. So I think that that's the first thing, is that if you're starting a business that can appear on Shark Tank, for the most part, you probably shouldn't raise venture capital.
But I think there's actually like a deeper thing here, which is that let's say you want to start a startup business. You don't have to raise venture capital either.

**Dalton** (1:58)
Correct.

**Michael** (1:59)
And I'll say the same thing.
I don't believe venture capitalists want to invest in all software businesses. And I don't believe all software founders should raise venture capital.

**Dalton** (2:11)
Yep. So yeah, let's talk about them. I think what's really going on is, I think if you looked at how many businesses are started every year, what percentage of those are venture funded? Cool. We could ask ChatGPT. But I would guess definitely single digits, if not less than 1%. And so if you just look at businesses that are started in the world, it is like a weird outlier freak occurrence that is a VC-funded business. But I think if you're just consuming content, you're watching media, you're watching YouTube, you're watching Twitter, you don't realize that, okay?
And venture capital as a product is specifically for investing in something where their investment could be worth at least 100 times more, if not 1,000 times more.
And so trying to put that jet fuel into something that isn't going to grow to be big, everyone is gonna be sad and lose. And so you shouldn't do it.

**Michael** (3:10)
The founder and the investor, no one wants that. And the user.

**Dalton** (3:13)
No one.

**Michael** (3:14)
No one wins. No one wins.

**Dalton** (3:15)
And so again, I don't think that there's this push that I can see from investors to try to convince people to raise VC money for something that has no chance of growing like that. It just doesn't make sense for anybody.

**Michael** (3:31)
I'll go a step further. I think the whole argument is fake news.
I don't think this is a real argument. I don't think that anyone thinks it's more moral or good or right to start a VC backed company or a non VC backed company. I don't think this is an actual debate. I think that starting a VC backed company, really hard.
Not the best way to get rich. Not the best way.

**Dalton** (4:00)
Relatively small number. The numbers are not huge.

**Michael** (4:04)
Not a good path. I always like to equate it to athletics. It's like getting into the NBA is really hard.
Not the best path to have a good career is to be like, oh, I'll just make the NBA.

**Dalton** (4:16)
Yeah, that's simple, right? Yeah, it's like 450 guys.

**Michael** (4:18)