Should you Start a Startup? 🚀

An opinionated take from an ex VC-backed founder, now turned bootstrapped creator.

Aug 15, 2024

As I have written other times, my professional life has been made up of three main experiences so far:

I have been co-founder and CTO of Wanderio for 8 years — I raised ~$4M in Italy, grew a 20-ish people team, and served 25M+ customers.
I have been Head of Engineering at Translated for about one year — a larger, 200-people tech company working on AI and translation services.
I am now a full-time writer at Refactoring and Hybrid Hacker — the very newsletter you are reading right now. It’s been ~2.5 years so far.

I am grateful to have seen work from different angles — co-founder / manager / creator — but there is no deny my longest and most profound experience has been as a startup founder.

It was my first job out of university (I dropped out of my PhD), and I guess it was my imprinting with the tech world. In fact, startups are still a big part of my identity today: I advise/mentor many, invest in a few, and many newsletter articles are written with them in mind.

So, people sometimes ask me whether they should start a startup. They may have an idea, sometimes a prototype already, and wonder if they should go all-in.

This question has at least two angles, which are equally important:

💼 Business — is this idea startup-worthy? Are you the right person / team to do it? Is going VC the right route vs e.g. bootstrapping it?
☀️ Personal — would you enjoy being a founder? Is it the right call for your life, and based on everything else you have going on?

These questions are hard. In most cases, answers are murky and there is a lot you can’t predict.

Not asking them, however, is worse.

I have seen far too many startups which should have stayed side-projects, founders burning out because life is not what they expected to be, or, conversely, side-projects with fantastic potential that never graduated into businesses.

So let’s try to unpack this. Here is the agenda:

💡 The Right Idea — how to figure out if your idea is worth working on.
💸 VCs vs Bootstrapping — we talk about freedom, bootstrapping, and what VC money is really for.
🏅 Founder Experience — what it is like to be a founder.

Let’s dive in!

💡 The Right Idea

You have an idea that you would like to turn into a business, and want to figure out if it is worth investing more in it — time, money, whatever.

This isn’t strictly about startups: even at side-project scale, if the goal is to make something that makes sense as a business, you should ask yourself the same question.

Now, there isn’t wide consensus on how to answer this. If you search online you will find plenty of hot takes about idea vs execution, scratching your own itch, picking the right market, and more. My personal litmus test is simple, and is based on two things:

🔍 You are an expert in the problem
🧱 You know how to build

Let’s look at both.

You are an expert in the problem 🔍

Startups, and products in general, are solutions to problems, and you should pick a problem you are an absolute expert in.

The easiest way to do so is, of course, to pick one you personally have. You take something that really bothers you, whose solution you would pay for, and create it yourself.

But that’s not the only way. You may have worked in some space for years and found a gap — something that could be done better. You may not be the one who feels the pain, but you know well the people who do, and why.

Now, there exist plenty of success stories where founders were not experts, and you may even argue that naivety can be an asset sometimes. Fair enough, but startups are a gamble already, and life is short — I wouldn’t bet many years of my life on something I don’t understand.

You know how to build 🧱

You bring something to the table that helps to create the solution. This is about one of two things (or possibly both):

🔨 Tech — you know how to build the actual product, or a big part of it. You know your way around tech and design.
📣 Distribution — you have some advantage at finding your ideal customers, vs the average Joe. Maybe you have worked with them, or you have an audience, or you are a big SEO expert and that problem is perfect for SEO.

Market vs execution risk ⚖️

The two factors above have different weights based on the kind of risk you face the most. All startups face two kinds of risks:

Market risk — you build something that nobody wants.
Execution risk — you are not able to build the solution.

The more an idea, or a problem, is obvious, the less the market risk, and the more the execution risk that you face. If your idea is to create AGI (OpenAI), or to summon cabs in 1 minute from your phone (Uber), the question is not whether people will want it, but rather if you are able to build it.

In fact we have to assume that all obvious — but unsolved — ideas are hard, otherwise somebody would have solved them already.

Conversely, there exist plenty of niche or weird ideas, for which execution is kind of trivial, but it is unclear whether you are looking at real problems, or simply nobody cares about it.

Market risk is defused by your expertise about the problem, while execution risk is defused by your build skills.

The less obvious your idea, the more you should ask yourself: is this a real problem?

Why me 🙋

So, all of this sums up in having a strong answer to the why me question. Why am I the right person to do this?

The best answer should be something like: I am an expert in this problem and I know how to create something that solves it.

Where to look for problems 🔍

At this point many of you may be thinking: I am an expert in no problem, startups are not for me. This is usually not true — it’s just that you don’t know where to look for.

I have found that, for most of us, opportunities lie at the weird interceptions of seemingly unrelated skills.

Scott Adams, creator of Dilbert, became one of the most successful comic artists of all times by being, in his own words — one big mediocre soup:

Recapping my skill set: I have poor art skills, mediocre business skills, good but not great writing talent, and an early knowledge of the Internet. And I have a good but not great sense of humor. I’m like one big mediocre soup. None of my skills are world-class, but when my mediocre skills are combined, they become a powerful market force.

I have another example. A good friend of mine who studied CS with me at university, went on to specialize in operational research. His uncle owned a pharmacy, and, while studying, my friend worked there occasionally to pay for tuition and rent.

To handle supplies, the store used software that was ancient to say the least — and my friend hated it. After a while, he figured out that by applying basic OR ideas, he could change how provisioning was made, change which drugs should be bought from which suppliers, and reduce costs by up to 20%!

It was an insane saving, worth tens of thousands of euros per year on that store alone, and, what’s better, most drug stores in Rome used the same software.

My friend could only spot this idea because of his weird combination of skills: he worked in a pharmacy for a long time, and was an expert in operational research.

💸 VCs vs Bootstrapping

So let’s say you are sold on your product idea — maybe you already work on it, nights and weekends, alongside your other job. Or maybe you have quit your job to do this full-time.

Should you raise money? Or should you stay bootstrapped?

There are plenty of takes about this, but to me, the simplest one is that the VC route makes sense when you are obviously and inescapably bottlenecked in a way that only money can solve, and you know exactly how.

It’s when you think: “thank god I finally have 1 million in the bank and I can do exactly this and that and here is how it all turns into 2 millions”.

You can meet this bottleneck at different stages, based on your product. It may be very early if you are doing e.g. OpenAI and need tons of money for GPUs. Or it may very well be after product-market fit — maybe people love your product but margins are low, so you need high volumes and economies of scale which only money can buy.

Generally, bottlenecks are not absolute.

Chances are you can continue to grow, just slower. VCs just put you on an accelerated growth path, so, oftentimes, the big question is how fast you want to grow. Can you grow slowly, at all? Or is slow growth an existential risk to the business? E.g. others will catch up and it’s a winner-takes-it-all market.

1) VCs and freedom 🐥

Among indie hackers and solopreneurs — like I am right now — there is also a strong bias against VCs because they supposedly take away your freedom.

In my experience, this is false. VCs, especially good ones, rarely interfere with the things you do, except for very few items like funding and M&A. Good VCs invest in you and your team before they do so on the business, and understand that you know your space better than them.

2) On bootstrapping 🎒

It’s not an absolute rule, but chances are the more you can progress in bootstrapped mode, the better. As long as your product stays on a growth trajectory, delaying fundraising means having better chances of succeeding on it, and on better terms.

Also, the increasingly high leverage you have with AI and good tooling today is completely changing expectations about what you can build even with little money. You can go far even with a scrappy team of one, which means the bar you need to clear to raise funds is higher than it was years ago.

3) On niches and small businesses 🤏

A final consideration about niches and small vs big businesses. VCs notoriously look for big wins, which, apparently, takes a lot of product ideas off of the table when it comes to funding.

I have found this to be less true than most people believe. Most small products can find ways to niche up and expand their scope over time, because that’s how the internet works: you solve a problem and then you find other 3-4 adjacent problems that you are well-positioned to solve.

However small your starting niche, your fundability rather depends on your ability to deliver a credible story about how you will go past that niche to become, eventually, a large business.

🏅 Founder experience

The final factor to consider is completely personal, about whether you would enjoy being a founder, and whether it is the right call for your life.

Being a founder is probably the most intense work experience you can go through. This is not about the long hours (as many believe) — it’s about the absolute, constant, and unrelenting ownership. It’s all on you, good and bad. No one to blame, no excuses.

I have found such pressure to be pretty much the same whether you are VC-backed or bootstrapped (as Refactoring is right now). Your business is like your baby, no one can put more pressure on yourself than you already do.

So, a lot of your success as a founder depends on being able to manage your energy.

They say the #1 factor for startup success is not giving up. That’s probably right, and the #1 factor for not giving up in my experience is not money, it is your energy. Many startups crash when their founders crash, which often happens sneakily, slowly but surely, over a long period of time.

So, overall, it’s a shitty experience most of the time. I don’t say this to humble brag or in the spirit of “we love to hate this” — it’s just what it is. Ask basically any entrepreneur: it is bad for mental health, bad for physical health, even bad for your money when you account for the odds of failure/success.

But the highs are extremely high, higher than probably anything else you can do professionally. So even if such highs are few and sparse, people get hooked, and then it’s hard to settle for anything less than that.

And that’s it for today! I wish you a great week ☀️

Sincerely
Luca