The heyday of VC funding has come to an end and the impact is a pretty bleak picture for aspiring entrepreneurs. Reports show that global venture capital funding declined 30% in the first quarter of 2024—the second-lowest quarter on record for global startup funding since early 2018.
As a result, many entrepreneurs are reverting to a reliable, but undeniably challenging, route to launching a successful startup that doesn’t require funding: bootstrapping. It may be a slower climb, but in my experience, the autonomy and sustainability have been well worth it. Not only that, a recent report from startup lender Capchase found that today, bootstrapped businesses are growing as fast as venture-backed startups. They’re also spending a quarter of what their VC-backed counterparts spend on user acquisition. As any entrepreneur will tell you: keeping the costs of acquiring customers down is a major factor in long-term sustainable growth.
I am by no means saying that bootstrapping is easy. And many entrepreneurs are not in a financial position to use their own funds to start a business. But if you’re wondering whether to toss your hat in the startup ring, despite the state of VC funding, here are three reasons why bootstrapping can be an asset, not a liability, for your business.
LESS VULNERABLE TO ECONOMIC UPS AND DOWNS
There’s a reason startups host hack weeks and design sprints: constraints mandate efficiency and efficiency breeds innovation. Bootstrappers are schooled in efficiency from day one. Without the luxury of outside funding, bootstrappers don’t spend on necessities. They focus on the essential—why rent a fancy office space if you can develop your first product from home? When you are bootstrapping a business, there is no room for excess. Bootstrappers have to choose which expenditures of money and time will move the needle. As the Capchase report explains, growth and profitability don’t come from spending unlimited capital on acquisition. Instead, it’s from “knowing which levers drive the biggest impact.”
The last couple of decades have seen economic ups and downs. And if the most recent downturn had any takeaways, one is that bootstrappers are more stable in tough times. Bootstrapped startups are often less worried about funding drying up and having to make huge slashes to marketing budgets and hiring. Bootstrapping entrepreneurs are already accustomed to concentrating on the bottom line and how to increase revenue. We’re used to living within our means because we don’t know any other way.
REASSURANCE FOR EMPLOYEES
When I launched my company, I was the only employee. I wore all the hats, from marketing and HR to product design and troubleshooting. Taking a page from one of my mentors, I made a rule for myself. I would only hire additional employees when one of the hats became too heavy (meaning I couldn’t perform the role and continue growing the company) and only when I had a year’s salary for the new hire in the bank.
Nearly two decades later, we have 660 employees and counting. But growth was slow. There were no hiring frenzies. On the other hand, we also avoided firing frenzies. That is a major selling point for our company when interviewing top talent. We attract employees interested in staying (and growing) with the company, a salient consideration when tech companies are bleeding talented employees. Slow, careful growth prevents spikes and drops in your team.
Another often overlooked benefit of growing slowly is that you can organically build an authentic team culture. There’s space to make mistakes and correct courses as you go. You can learn what you value and what your people care about. While ping-pong tables and bottomless snacks don’t hurt, I’ve found that people are more interested in working for companies that value them as multifaceted people and are invested in their development.
LASER-FOCUS ON THE MOST IMPORTANT STAKEHOLDERS
When business gets tough, be it a harsh economic climate or a competitor like Google entering your niche, the initial feeling can be panic. As a founder, your instinct might be to scramble to do something big, like a flashy marketing campaign or a bold new product. If you have the budget, then why not?
But with limited resources, you can’t necessarily take those dramatic (and often reactive) steps. I’ve learned that there’s great value in doing nothing at all—except listening.
Listening to users and understanding their needs is the most impactful, least expensive initiative. It enables you to dig into the data, tease out meaning, and understand your true value proposition.
There is no shortcut, not even an AI tool, for developing a profound understanding of your company and your users. Bootstrapping ensures that you earn your entrepreneurial stripes. Consider it the scenic route versus the freeway. It’s a longer road but I believe it guarantees a more enriching experience.
