Article How we paid the hidden costs of bootstrapping Tideways

Justin Jackson started an extremely interesting discussion about the Bootstrappers paradox and the hidden costs of bootstrapping with replies from many others.

In this series of posts (there are more) he is discussing how hard bootstrapping a SaaS business is in the first few years, when you are essentially investing a lot of personal time and money until you can finally get a return on this investment and pay yourself a decent salary.

All bootstrappers have to deal with the same tension: can I get this to
scale, while paying my bills, without burning out?

This is something I am thinking about a lot to understand the journey and history of Tideways and by writing about my thoughts I can share my unconventional route for "bootstrapping" a SaaS.

In his post Jason projects the growth to sustainable $ 20.000 Monthly Reccurring Revenue (MRR) to take 5 years, which is much too long for my taste. We projected to reach 20.000€ MRR (  $23.000) after three years, and missing this target would probably have meant a re-evaluation, maybe even shutdown or sale of Tideways.

We reached this goal this summer, after almost exactly three years.

What went into funding Tideways instead of money?

  • I was able to invest 50+ hours/week and live on 50-75% of my previous salary for two years only because I don't have credits to pay; my wife and I don't have kids, no cars and no other large monthly expenses. We saved up a lot of money that we partially invested into the company and partially used for personal expenses during the first two years. Trading your own personal time for bootstrapping a business is probably the largest, most hidden cost and I for myself am pretty sure that I am never going to do this again.
  • My then employer Qafoo allowed me to work on Tideways a few days per month and invested a lot of their own time after we decided to found a company together and test product market fit. In return they now own shares of the business.
  • We struck a deal with our first business partner SysEleven to trade hosting for Tideways in return for highly discounted licenses for almost all their customers. This helped us with the large four-digit monthly hosting costs that we had from day one, because as a monitoring company you need more servers than other SaaS, In return for investing in us, they now have us as a happy paying customer and they still get a good deal on licenses for their customers.
  • With over 7000 Twitter followers from my Doctrine open source project days and my reach within the European and German PHP community I accidentily already built a large audience that would be potential customers for Tideways. We didn't need to invest more time into building an audience and we luckily never had to pay for customer acquisition. However realistically I invested hundreds of unpaid hours into my open source work since 2009 that allowed me to build this audience.

I consider points 2 & 3 "unconventional" ways for bootstrapping Tideways and already having an audience (4) as a very long term investment that I didn't plan and got lucky with.

Roughly summing up these investments now, they amount to costs of around 400.000-500.000€ that Tideways would have required funding for.

Maybe raising 500.000€ would be possible in hindsight, but without previous founding experience and no connections to investors, I don't know if I would have succeeded.

I consider our approach similar to Fundstrapping but instead of money you raise freedom, time and resources from your investors.

Most specifically my advice is to find strategic early business parterns that either become your first large customer from day one, or make your product available to their large customer base.

Published: 2018-10-20 Tags: #Bootstrapping