Dharmesh Shah has been contemplating failure lately. No, not like that. But he is forming an opinion about the tradeoffs between bootstrapping and venture funding. I think he’s onto something in a post called Why Startups Fail: Run Out of Cash, Run Out of Commitment. What he was actually contemplating was what constitutes failure. It’s worth thinking about. He says,
The more I thought about it, the more I realized that a definitive failure is when the startup simply stops trying. And, the only reasons to stop trying are that you run out of cash, or you run out of commitment — or both.
Let me elaborate a bit. Lets say your startup had an unlimited amount of cash (hypothetically). Whenever you needed money, you’d go to the money tree, pick some more cash, and go back to your business. If this were the case, it’s likely the number of startup “failures” would be vanishingly small. Why? Because you haven’t failed yet, you simply haven’t figured out the model that works. As long as you still had commitment, you could keep going indefinitely. Of course, there’s no such thing as unlimited cash.
He goes on to tell about his first startup which was bootstrapped:
We did things the old-fashioned way. We charged people money, and spent less than we made. We were profitable from our first year of existence (and remained that way for 9+ straight years). We were profitable, because we had no choice.
His point is, commitment trumps cash in a startup. Sure, you’ve got to have cash, but it can make you careless if it’s too easy. Better you should struggle for cash and have lots of commitment.