Bootstrapping is a self-funded startup that makes money from real paying customers, often from Day 1, or close to it.
Bootstrapping hasn't changed.. one test to being bootstrapped is: If they didn't get funding, would they run out of money and have to shut down?
It's not uncommon for a bootstrapped startup, which has baked 'making money' into the bread from the beginning, to accept funding to grow faster once they have a business model that's already making money. They already have a repeatable and scalable _business model_. Without funding, bootstrapped startups would continue to exist, and would most probably keep growing, though.
A company that needs investment to survive is quite different than a company that's self-funded and profitable prior to funding, who decides to take funding to accelerate growth using the growth engines already discovered as a starting point.
Companies who raise funding, do so to start looking for a business model that scales, is repeatable, and generates revenue (and hopefully profit) because they don't have one already.
I think what he means is that even if the company is profitable now without making an extra push someone else could take a large portion of their market share by spending a lot of (VC) money.
Correct. I agree reading back I was a little opaque. These companies made it to profitability. But then they realize that they're a risk of not being able to stay at profitability, or even survive in the long run, without raising significant capital and thus invest ahead of revenues. I think the spirit of this post is to highlight profitable, bootstrapped, long term companies. It's questionable whether GitHub, BigCommmerce, Braintree etc are in that group.
One thing I've always been curious about is how investing in a company like 37signals makes sense for an investor. I obviously don't know everything about their future plans, but it doesn't seem to me to be a company that's focused on generating an exit for an investor - they seem committed to staying at least relatively small, and a buyout doesn't seem very realistic. How would an investor expect to get a return on their investment?
More to the point, why would 37signals ever want to take investor money, much less need it? Surely, the founders are wealthy enough now that getting more would just be bouncing the rubble (see Jason Cohen's "Rich vs King"), so money is unlikely to motivate them. And from reading Jason Fried's extensive writings, it's very clear that they're more interested in making a company that's a truly excellent place/way to work than they are with making a company big.
The only reason to take investor money is to grow the business faster than you can with cash flow alone - or to sell it in order to become wealthy and/or go on to the next big idea. The 37signals apparently don't want either of those things.
I can imagine a line of venture capitalists basically begging for them to take some investment, and them just refusing.
I would call a bootstrapped startup one that was entirely self-funded to begin with and had to operate under the bootstrapper mentality (cheap marketing, cutting costs, low employee count, etc).
To some who might have some seed funding, they might make sure the business is making money from day one.
One thing that was really attractive to me about the YC model (besides having PG as a mentor) was when there was only $10-20,000 of funding. You likely have little choice to focus on anything except making value for customers that pay. As other funding streams have come online the types of ideas have broadened.
Having no choice but to learn how to make money is how I had to learn business as a teen. I started in bootstrapping because YC didn't exist in my late teens or early 20's or I most certainly would have known it was a place for me to seek out. I had to learn to make money to pay for what I wanted to do when starting business full time in my late teens that was one valid way to make sure no one could tell me to go home because the money ran out.
In Canada, one source found that 98% of all startups across all industries are bootstrapped / self-funded. It wouldn't be surprising if this was largely true in other places too.
Yeah, this is not a good blog post. I feel like the author did some basic Google'ing for content without doing much due diligence or checking dates.
Also, I've seen Carbonmade come up in lists before [1], but I wouldn't ever list them in any current list of bootstrapped companies. Their homepage hasn't changed much in 3 years [2], their traffic appears to be headed south [3], and frankly I don't know any professional creative who uses their service for their portfolio (anecdotal I know, but I work in the industry). No offense to anyone at Carbonmade, but I think you can find much better examples of bootstrapped companies in the photo/creative world (SmugMug for example).
taking a funding round after you've done millions of dollars in revenue via bootstrapping, doesn't suddenly make your bootstrapping experience redundant.
perhaps the correct title should be "companies who bootstrapped themselves to success" but it's not quite as catchy ;)
I don't think Bezos investing in 37signals qualifies as normal VC/Angel money. He took a small personal ownership stake in the company - it's likely he can't "sell" that stock, and that he makes very little from it (compared to his other investments).
Given that 37 signals had been around for seven years when they took money from Bezos, you certainly can't conclude that they're not bootstrapped. Everything depends on how much money it was, how they used it, why they needed it, etc, but it does look like they built a sustainable business by that time.
These companies were bootstrapped for the first few years and were profitable with 7 to 8 figures revenue. The eventually raised money at growth stage, and the founders were able to take some money off the table without selling the company.
What strikes me is the geographic diversity of this list. If you look at the classic startup with young founders and big VC investments, they're almost all in Silicon Valley or San Francisco. But this list shows that you can start a business in anywhere with a reasonable tech scene.
-The culture in SV is very much centered on scaling quickly and taking a bunch of VC money to do it. If you're in Chicago or Atlanta, there's not that same sort of culture.
-Unless a company spends a ton of time in California seeking VC money, SV VC's aren't going to get to know companies outside of SV. There's already so much activity right on their doorsteps that there's little incentive or time to go elsewhere. Even ycombinator, which accepts applicants worldwide, makes applicants come to California to interview and work.
-The VC's that exist in other places don't usually focus on software/internet space like SV VC's do.
So founders outside of SV, NY, and Boston act more like they're starting a restaurant or a clothing store. They expect that they'll have to quickly build a profitable business before expanding too much. Nobody is going to say to a first-time restaurant owner, "We'll expect that your first 20 locations won't make any money, but once you get to 100 we'll all be rich."
(The economies of scale in software are different than restaurants, of course, so there's often valid reasons for software companies to expand as quickly as possible, that's just not an option without lots of outside money.)
Adrian Holovaty (of Django fame) recently caused a stir here when he argued in front of a group of investors that Chicago is an ideal place for bootstrappers:
But they've also got this on many of their pages: "Braintree is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA". I'm not sure if this location refers to Braintree or to Wells Fargo.
13. Pardot, Atlanta (Bought by ExactTarget for 95 m, ET was subsequently bought by Salesforce.com)
14. AirWatch, Atlanta ( Recently bought by Vmware for 1.54 B dollars, AW did raise a huge VC growth round but it was much later its lifetime)
For anyone looking for some inspiration across the pond in the UK, we're a bootstrapped company that started with just the two of us (OpenRent - Launched in 2012 [1]).
We're currently letting in the thousands of properties each month, saving tenants and landlords huge amounts of money - and we're certainly still growing (both in raw properties let each month, and revenue)!
Clearly there are avenues to success for VC backed companies, as well as those going it alone, so not sure what can be drawn from this article other than a bit of inspiration...
Most seem to be B2B with a focus on independent workers and small companies. Is that a bias of the author, or a lesson for anyone trying to bootstrap their own company? My hunch is that its the latter: if you target small companies and independents, you're hitting a sweet spot of buyers who don't expect a sales/support team but also have dollars to fork over for good products.
There's likely also far-less bureaucracy involved with subscribing for a service. Larger companies sometimes require competitive bidding before integrating a service, whereas a smaller organization may be willing to adopt a service after a much shorter review.
Not a very good or well researched article. They left out many popular bootstrapped companies such as Imgur, one of the most popular image sharing services on the net or the fact that Github has VC money now.
imgur is a great service, but theirs is not really the kind of example an aspiring bootstrapper can follow.
"become the defacto image platform for reddit" makes you an outlier in the bootstrapping world I think. I think it's just much more useful to look at examples where the model is reusable - make B2B software for a specific market, and charge money for it.
The article is about "Startups that have bootstrapped their way to profitability", not "startups that are bootstrapping", so Github does belong on the list.
But I do agree with your Imgur suggestion, that would've been an excellent addition.
Companies aren't even bothering trying to make their blog articles relevant anymore. 'Here's 10 Ways To Drive Pageviews To Your App' might have been the better article.
Adding to this list is EventMobi[1]. We help over 4000+ events & conferences in 25+ countries create cross-platform apps for their attendees.
We've grown our team to about 35 people across our Toronto (HQ), Berlin and Virginia offices and are planning to grow to about 60 people by years end.
We just hit our 4th birthday a week ago, and are now expanding to providing the complete toolset for event planners to help make planning, running, and gather data about events easier.
"Pretty impressive for an application that was built in a dorm room by founder Paul Farnell, with just a used computer and a few hundred bucks (and over a single weekend at that)"
Not to take anything away from Litmus, but I highly doubt the entire Litmus app was written in 1 weekend. This is something I'd expect Techcrunch to write.
Not particularly noteworthy compared to the listed companies, but my brother's company Appstem has taken $0 of funding now grosses in the range of $1-3 million annually (I don't know what their books say, I only have a general idea of how much they take in per contract and pay out). They don't make a single given product like most software startups (though they do have at least one in the pipeline that I know of) - I guess they are sort of like the early version of 37 Signals in that respect.
It's all a matter of degree: virtually all successful companies take convertible debt, venture debt and other options along the way. We call ourselves bootstrapped but the founders took no salaries, put in $100+K and took $200+K from angels to hit profitability with a team of 30 and signing up 12,000 companies.
37Signals has been interviewing profitable bootstrapped companies for years now. There are indepth articles about each one available here: http://37signals.com/bootstrapped
> Github is a web-based hosting service for software development projects that use the Git revision control system. Say what? Think of it as the Wikipedia for programmers.
Wow, what a tremendously poor description of Github.
Squarespace is a great example: they raised a round only after many years of building a solid customer base (started by a lone designer/dev in his dorm room).
> FreshBooks, which now has 110 employees, is part of a rare breed of technology companies that has achieved success without the help of venture capitalists
Because many of the companies on the list have taken VC/Angel money.
The following have taken VC/Angel money:
- Github [1]
- 37signals [2]
- BigCommerce [3]
- BrainTree [4]
[1] http://www.crunchbase.com/company/github [2] http://www.crunchbase.com/company/37signals [3] https://angel.co/bigcommerce [4] http://www.crunchbase.com/company/braintree-payment-solution...