Building a SaaS company...without investor money
Let's start off with two myths. Myth #1: You have to have a LOT of money to get your SaaS company off the ground. Myth #2: pitching venture capitalists or angel investors is the only way to raise money. Neither of these is true. In fact, it's never been more viable to bootstrap your company. You don't have to have stacks on stacks on stacks 💵💵💵to get started. In fact, many successful companies have started with very little.
The big advantages of bootstrapping
Now that we've squashed the myths, let's talk advantages. The advantages of bootstrapping (building a startup without angel investors or venture capitalists) are so compelling that more and more founders are choosing this route:
1. A focus on making money, not spending it
2. Customer delight
When making money is your priority, customers are your priority. You can't afford anything less than delighting them. With investor backing, it's easier to lose sight of this. (See the customer support edition for more thoughts on customers.)
Necessity + constraints = creative problem-solving. When you're short on cash and faced with a problem, you innovate. Not only that, you develop focused innovation - you can only afford to solve the problems worth solving.
4. Morale and Grit
Earning money from the start helps your company feel real. It's not just a name, or a domain, it's a money-making business. This boosts team morale. And the effort to keep cash flowing? That builds some serious grit.
5. Freedom to focus on your company
Any VC or VC-backed founder will tell you raising money takes an enormous amount of time. Not just the first time you do it. But every time you raise money. That's a lot of time you could be spending on your product, culture, hiring, marketing, or sales. When you bootstrap, you can focus on these things, instead of on the "raise or die" cycle.
6. Attractive to investors later
If you do decide you want to raise investment money later, you'll be more attractive. Investors will see that you're already profitable. Remember, just because you don't seek out investments now, doesn't mean you can't seek them out later.
7. Undiluted equity
With bootstrapping, you retain control of your company. This is one of the biggest reasons founders choose to bootstrap. When you actually do the math, giving away a piece of your company is a VERY expensive way to raise money (provided you're successful). And giving up equity can also mean giving up control.
The trade-off with bootstrapping is speed
These advantages are a big deal, but we need to warn you that bootstrapping isn't easy. (Then again, what part of a startup is?) It takes time, patience and endurance. A lot of time, patience and endurance.
This is because bootstrapping usually means slow growth. Slower than if you took VC money. However, not every company needs or benefits from rocketship growth (remember, rocket ships occasionally explode).
You 👏can 👏do 👏 it 👏
In case you're second guessing whether it really is possible, here are 50 companiesthat started with little to no money. Many did seek VC money but not until they became successful. There's also Basecamp, Edgar, Buffer, Teamwork, BuzzSumo, and Drip(what we used to send this email) who all crushed it without VC backing.
It'll be hard, but you can do it. And remember, you're not alone.
"You’re better off as an entrepreneur if you have more practice making money than spending money. Bootstrapping gives you a head start."- Jason Fried, Founder & CEO at Basecamp
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