How I Think Bootstrappers Should Use The Power Law To Grow Valuable Companies

I wish more bootstrapped SaaS founders would think like VCs. Not about taking on big funding, of course.

It’s how VCs play the Power Law to patiently look for an advantage and then boldly place a few bets that can create outsized results.

It’s these outsized results for bootstrappers that create ecstatic customers, rapid growth, efficient spreading, and long-term stickiness.

Each of those outliers provides more growth power than any funding fuel they could take on.

The Power Law is fundamental to venture investing. A majority of the gains in the last 30 years of VC investing have come from less than 1% of funded companies that grew and grew and grew.

The Power Law is fundamental to any other long-term game, including growing a successful software company.

The Power Law simply means that most of your positive results over time are going to come from a few things that worked extraordinarily well.

It’s the 80/20 rule multiplied on itself three times. More like 1% of your possible bets will be responsible for majority of your upside.

If you don’t know how to play this game, you’ll have a very inefficient business that won’t get big–even if you throw big funding at it.

The success stories in SaaS ALWAYS have a story that comes in this form:

  1. We had a hundred good ideas of things we COULD do.
  2. We thought about it and picked the 10 BEST ideas that could have the most impact on our growth.
  3. We didn’t really know which of these EXPERIMENTS would work well, so we tried and tested them as efficiently as we could.
  4. It took longer than we thought and there were surprises, but we finally NARROWED it down to the 3 that were getting the highest outsized returns compared to our other tests.
  5. We took the time to improve each of those over and over to get CRAZY results that fueled our growth.
  6. We STOPPED most of the good ideas than didn’t produce outsized payback. Good is the enemy of great, as they say.

The Power Law of product features: hundreds of ideas, dozens of tests, shipped ten, but one or two features created the most business impact.

The Power Law works with your target customers, marketing channels, messages, employees, business models, and partnerships.

Doubling down on the FEW things that create outsized results–to the exclusion of all or most of the other things that are possible.

Successful startups patiently run experiments to find this leverage.

Then they boldly focus and make the most of it.

Bootstrapped software companies are powered by this leverage, not by big outside funding.

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