Bootstrapping

Key Questions

What is bootstrapping?
How does bootstrapping work in practice?
What are some examples of companies that have successfully bootstrapped?
What are the benefits of bootstrapping?
What are the drawbacks of bootstrapping?
How can I determine if bootstrapping is for me?
What types of financing is available to me if I bootstrap, if any?
What can go wrong if I bootstrap?
What tips should I keep in mind if I decide to bootstrap?

Start Here

Michael Seibel & Dalton Caldwell: Should Your Startup Bootstrap or Raise VC?

(14 min video.) Y Combinator partners Dalton Caldwell and Michael Siebel tackle the hotly debated topic of bootstrapping versus VC funding. To bust some of the myths surrounding VC, they note that VC firms don’t want to invest in the vast majority of startups and that bootstrapping may be the best option for many entrepreneurs. They make the point that VC backing may be the only solution when a founder needs millions of dollars upfront, which happens in the software business, and that VC should be seen as enabling incremental entrepreneurship that wouldn’t be around otherwise.

Jason Fried: Venture Scale vs. Bootstrapping

(3 min segment of 110 min video.) Jason, the co-founder and CEO of 37signals, challenges the drive for venture funding and highlights the benefits and normality of bootstrapping. The rest of the video goes into the story and success of 37signals and provides a wide-range of helpful advice.

Learn More

Melissa Kwan: Intro: Bootstrapping vs Venture Capital – Why Bootstrapping Is Better

(18 min podcast with transcript.) Kwan recounts the pressure to secure venture capital (VC) funding. She emphasizes that while venture capital is not inherently bad, it isn’t suitable for everyone and often leads founders away from their true goals. Despite trying to fit into this venture-backed narrative, Kwan was never comfortable with the inauthentic pitches and the misalignment with her personal goals for her startups. This realization led her to focus on generating revenue independently, which eventually led to profitable outcomes and the acquisition of her company. Kwan highlights the viability and fulfillment found in non-VC-backed routes, aiming to illuminate the paths of other entrepreneurs like her who choose to bootstrap their businesses.

Melissa Kwan: How to Become Profitable as a Bootstrapped SaaS

(37 min video.) Kwan discusses her journey in bootstrapping her third startup to profitability and reaching $1.5 million ARR. Kwan emphasizes the importance of profitability for bootstrapped founders, highlighting how it enables personal freedom and mental space to pursue desired lifestyles. She advocates for making revenue-driven decisions, maintaining cost efficiency, and prioritizing product quality to ensure customer retention. Kwan’s approach stresses the value of strategic pricing and customer segmentation to enhance product viability and customer satisfaction, while also fostering a work-life balance.

(12 min read.) Twelve successful entrepreneurs share their experience with bootstrapping, offering insights and valuable lessons they have learned along the way. They answer three questions: What are the benefits of bootstrapping? What’s your number one tip to get the most out of bootstrapping? What’s the biggest mistake people make when it comes to bootstrapping? Common themes in their answers include the freedom that comes with self-funding, the importance of prudent resource utilization, and the ability to identify the right move when it comes to hiring, marketing, or selecting growth opportunities.

Saba Younus: 10 Highly Successful Bootstrapped Startups

(10 min read.) Saba has compiled a list of 10 startups that have achieved remarkable success without resorting to external capital. The list features names such as GitHub, FastSpring, Litmus, Goldstar, and Carbonmade, their impressive rise indicating that a startup can climb to heady heights even when taking the bootstrap route. These success stories show that when an entrepreneur has the right idea, it sometimes takes only $800 or $1,000 to get the ball rolling.

Eddie Lou: A founder’s perspective on bootstrapping over raising venture capital

(4 min read.) CodaPet co-founder and active angel investor Eddie Lou offers his perspective on bootstrapping and VC funding, exploring the benefits and drawbacks of each option. Regarding VC, he highlights benefits such as access to capital, strategic guidance, valuable networks, and faster growth while also noting challenges such as scaling and achieving the company’s ultimate goals. With bootstrapping, entrepreneurs retain their autonomy, learn essential skills, encourage creativity, foster sustainable growth, and have a flexible exit strategy. Lou concludes that each option can be viable depending on the nature and goals of a startup.

Ben Chestnut & Kathryn Petralia: How to decide between boostrapping and raising venture capital

(39 min video.) Mailchimp co-founder and CEO Ben Chestnut and Kabbage co-founder and president Kathryn Petralia share their experience with startup funding, offering their perspectives as two entrepreneurs who chose different options. Petralia, who went the VC route, notes that sometimes the nature of a business makes it impossible to get a startup going without VC money. Chestnut, who has built a massive company entirely by bootstrapping, explains why he opted for self-funding. The two also discuss challenges facing small businesses and offer advice on building a company.

Jason Cohen: Designing the Ideal Bootstrapped Business with Jason Cohen

(65 min video.) WP Engine founder Jason Cohen talks about designing the ideal bootstrapped business, advocating for taking stock of your natural advantages, disadvantages, goals, and needs and tying them into your business model, pricing, market, product, approach, and advertising. He focuses on strategies for building recurring revenue and shares various hacks for achieving it, such as betting on the concept of “boutique” and offering a money-back guarantee. According to Cohen, predictable acquisition of recurring revenue with annual prepay in a good market creates a cash machine.

Rob Walling: Start Small, Stay Small – A Developer’s Guide to Launching a Startup. Chapter 1

(Short eBook.) Serial entrepreneur and startup mentor Rob Walling offers a roadmap for software developers looking to launch a business without external capital. His book dives into the key stages of the process: developing the proper mindset for a self-funded startup; understanding the market-first approach; finding and testing a niche market; choosing the optimal platform, price, and revenue model; building a killer sales website; understanding the primary purpose of the sales website; building the right kind of interest to drive the right kind of traffic to the company’s website; learning how to outsource; working with virtual assistants, and determining what to do after launch.

Rob Walling: How to start a SaaS business with no money

(12 min video.) Rob, a startup founder with multiple exits, talks about building a SaaS company on a shoestring budget. One of the key points he makes is that there is no business without customers, so the first thing a founder should focus on is finding customers. He suggests ways of minimizing costs, among them securing a co-founder and opting for free or cheap resources when marketing and website building. Walling touches on the stair-step approach to bootstrapping, which involves starting with something small (for example, consulting or building an app) to gain the confidence, skills, and revenue that will ensure success post-launch.

Dorie Clark: Go ahead and start a business – but don’t quit your day job.

(3 min read.) Dorie argues the case for aspiring entrepreneurs keeping their day jobs when starting a business venture. She outlines the risks of having no safety net while pursuing a side hustle, noting that an “all or nothing” strategy is very likely to backfire. Through examples of successful entrepreneurs, she emphasizes the benefits of retaining a day job, among them financial security in the difficult early days of a startup, time to validate the business idea, and the opportunity to be selective when accepting gigs.

Daniel Wikberg: Bootstrapping a B2B SaaS to $13 Million ARR

(40 min video.) Daniel, founder of Upsales, a B2B SaaS company that provides CRM and marketing automation tools, shares his journey of bootstrapping the business to $13 million in annual recurring revenue (ARR). Daniel emphasizes the importance of focusing on solving specific problems, qualifying potential customers, carefully managing senior hires and the value of finding mentors.

Sophia Amoruso: How Sophia Amoruso Lost $85,000,000 from Nasty Gal

(56 min video.) Sophia Amoruso, founder of Nasty Gal, shares her entrepreneurial journey, from bootstrapping a vintage clothing business on eBay to becoming a Forbes cover girl and ultimately facing bankruptcy. She describes the challenges of scaling a business from a small, profitable operation to a venture-backed company, where the focus shifted from profitability to growth. She discusses how the pressure and rapid expansion disconnected her from the core of her business, leading to a loss of intuition and a feeling of being out of control. The influx of venture capital and rapid growth created a stark contrast between the early days of bootstrapping and the subsequent complexities of managing a larger organization.

Jason Fried: Bootstrap First – VC Later

(6 min video.) Jason expresses his strong opinion against taking VC funding early on in a startup’s journey. He argues that bootstrapping, or self-funding, fosters a more sustainable mindset focused on generating revenue and building long-term value. He contrasts the mindset of a bootstrapped company, driven by the necessity to make money, with that of a VC-backed company, which often prioritizes spending money on expansion and marketing. Jason believes that the habits formed during the early stages of a company’s life have a profound impact on its future success.