“Netstrapping” — bootstrapping a net-based venture without venture capital — is alive and well. From Net Startups Tell VCs: ‘We Don’t Need You’:
Internet start-ups and venture capitalists are back in vogue in Silicon Valley. But now the two don’t necessarily go together.Consider Flickr, the innovative online-photo service launched by a small Canadian company early last year. Like many Web start-ups today, it was built on a dime: Husband-and-wife founders Stewart Butterfield and Caterina Fake used cheap software to construct the Flickr site, eschewing pricey computers. Some gear, such as computer storage, was ‘about 100 times cheaper’ than it would have been even five years ago, says Mr. Butterfield. It cost only about $200,000 to pay salaries and get the site up and running, he says.
By last year, several top venture-capital firms were clamoring to invest in Flickr through its parent company, Ludicorp Research & Development Ltd. In December, Mr. Butterfield had a funding offer from Accel Partners of Palo Alto, Calif. But the entrepreneur decided instead to sell to Internet giant Yahoo Inc. for what people familiar with the matter say was about $25 million, significantly higher than the value Accel had put on the company and Accel’s proposed investment.