(Founder Stories) Stack Exchange CEO Joel Spolsky On When To Take VC Cash

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Today, Stack Overflow founder Joel Spolsky announced that he raised another $12 million in venture capital and that he is changing the name of his company to Stack Exchange. He also happens to be our next guest on Founder Stories, the TCTV show where angel investor and Hunch co-founder Chris Dixon talks shop with other founders. (Disclosure: Dixon is also an investor in Stack Exchange).

The interview was taped before this announcement, but in the clip above Spolsky talks about when it’s right to bootstrap a startup versus taking venture cash. In his mind, there are Ben & Jerry’s types of businesses and Amazon types of businesses. The first one is a slog, builds slowly, and is better done as a bootstrapped startup. But if there is a land grab going on—as there is right now in Q&A and expert sites—then the venture route can help a startup get big as fast as possible.

It’s a tricky decision because most VC-backed startups don’t make it to be as big as the founders and investors hope. If your startup gets to $15 million in revenues with no venture capital, then “you are the king of New York,” notes Spolsky. But a VC-backed startup that can’t get past $15 million in revenues is nothing but a serf. Then what happens is the VCs pressure the founder to sell and “you might end up working for Conde Nast.” The horror.

In the clip below, Spolsky talks about how Stack Overflow got started and how he seeded the community of programmers with deep expertise from his popular blog, Joel On Software, and his co-founder Jeff Atwood’s Coding Horror. They turned their blog readers into rabid users, which is an excellent use of a blog.

(Watch Part II of this interview and other episdoes of Founder Stories, which is now available on iTunes)