Bootstrapping is a term often used in the startup world, and it refers to starting a company with limited or no outside funding. It can be a difficult road to successful entrepreneurship, but there are several companies that have done it well. Here are seven of them.
What is Bootstrapping?
Bootstrapping is a type of self-funding, in which entrepreneurs use their own personal resources to finance their business ventures. Bootstrapping can take many forms, from using personal savings to maxing out credit cards. The key advantage of bootstrapping is that it allows entrepreneurs to retain complete control over their businesses. By avoiding outside investors, entrepreneurs can make all the decisions about their business without having to answer to anyone else.
However, bootstrapping also has its challenges. Without access to capital, businesses may have to start small and grow slowly. In addition, Bootstrappers may have to sacrifice some of their personal wealth in order to fund their business venture. But for many entrepreneurs, the advantages of bootstrapping outweigh the challenges. Bootstrapping can be a great way to turn a small idea into a successful business.
Bootstrapping Stages
There are three main stages of bootstrapping: the beginner stage, the customer-funded stage, and the credit stage.
The beginner stage is the earliest stage of bootstrapping. At this point, the company is typically launched with personal savings or loans from friends and family. The focus at this stage is on generating revenue and proving the viability of the business model.
The customer-funded stage occurs when the company has generated enough revenue to start reinvesting some of its profits back into the business. This additional funding can be used to hire more staff, expand operations, or develop new products and services.
The credit stage is the final stage of bootstrapping. At this point, the company has established a strong track record of profitability and is able to secure loans from banks or other financial institutions. The additional funding obtained through loans can be used to fuel further growth and expansion.
Bootstrapping is a common funding strategy for startup companies and can be an effective way to grow a business without giving up equity or control.
Pros and Cons of Bootstrapping
Here are some advantages and disadvantages of bootstrapping a business:
Pros of Bootstrapping
First, bootstrapping allows founders to retain complete control over their company. With no need to answer to investors, they can make decisions based on what they believe is best for the business, rather than what will generate the most return in the short term.
Additionally, bootstrapping forces founders to be frugal with their resources, which can help them to avoid wasteful spending and focus on generating revenue from day one.
Finally, bootstrapping gives entrepreneurs complete ownership of their company, meaning they will reap 100% of the rewards if the business is successful. For all these reasons, bootstrapping is an attractive option for those looking to start their own business.
Cons of Bootstrapping
One of the biggest cons of bootstrapping is that it can limit your ability to grow your business. Bootstrapping can also put a lot of financial pressure on the founder or founders of the business, which can lead to burnout.
In addition, bootstrapping can make it difficult to attract investors or other forms of funding in the future. Finally, bootstrapping can limit your ability to hire quality employees, since you may not have the resources to pay competitive salaries. While bootstrapping has its advantages, it's important to consider the potential drawbacks before making this decision.
Successful Bootstrapped Companies
Here are the top seven successful bootstrapped companies:
1. Mailchimp
MailChimp is one of the most successful bootstrapped companies in the world. Founded in 2001 by Ben Chestnut and Dan Kurzius, MailChimp has grown to become a global leader in email marketing, with over 15 million customers. MailChimp’s success is due to its focus on customer service, innovation, and constant iteration. For example, MailChimp was one of the first companies to offer a free email marketing service, which helped it to attract a large number of customers. It has also continually added new features and integrations, such as its partnership with Shopify. This commitment to innovation has helped MailChimp to stay ahead of the competition and become the go-to email marketing platform for businesses of all sizes.
2. GoPro
GoPro is a bootstrapped company that was founded in 2002 by Nick Woodman. GoPro makes cameras and accessories for action sports. GoPro was successful because it created a new market for durable, high-quality cameras that could be mounted on helmets, bikes, and other gear. GoPro's success is due to its innovation, it's marketing, and its price point. GoPro was the first to develop a small, lightweight camera that could be mounted on gear, and this allowed them to capture footage that had never been captured before. GoPro's marketing is focused on user-generated content, and this has helped them to build a passionate community of users who share their GoPro videos online. GoPro's price point is also very attractive to consumers; their cameras are priced similarly to other consumer electronics devices. As a result of these factors, GoPro has become a very successful bootstrapped company.
3. Zoho
Zoho is a successful bootstrapped company that was founded in 1996 as AdventNet. The company was founded by Kumar Vembu and Shekhar Vembu, two brothers who are originally from India. The company's third founder is Sridhar Vembu, who became the CEO in 2000. Zoho has been profitable since its inception and has never taken any outside investment. The company focuses on providing software-as-a-service (SaaS) products for businesses of all sizes. Zoho's products include everything from CRM to accounting to project management. The company has over 60 million users worldwide and continues to grow rapidly. Zoho is one of the most successful bootstrapped companies in the world and is a great example of what can be accomplished without relying on VC funding.
4. GitHub
GitHub is a website that allows people to share code and work on projects together. The company was founded in 2008 by Tom Preston-Werner, Chris Wanstrath, and PJ Hyett. GitHub is now one of the most popular code-sharing websites in the world, with over 83 million users. The company has been profitable since 2012, and it has been described as "one of the most successful bootstrapped companies in history". GitHub is known for its user-friendly design and features, as well as its strong community of developers. In 2018, GitHub was acquired by Microsoft for $7.5 billion. GitHub continues to operate as an independent subsidiary of Microsoft.
5. Basecamp
Basecamp is a bootstrapped software company that was founded in 1999 by Jason Fried, Carlos Segura, and Ernest Kim. The company provides project management and collaboration platform that helps businesses and individuals to get more work done. Basecamp has been successful because it has a simple and easy-to-use interface, an excellent customer support team, and a focus on quality products. The company has also been bootstrapped since its inception, which means that it has been funded through internal growth and profitability. This has allowed Basecamp to maintain a strong focus on its customers and to avoid the distractions of seeking outside investment. As a result, Basecamp has become one of the leading project management platforms on the market.
6. SparkFun
SparkFun was founded in 2003 by Nathan Seidle. The company specializes in providing electronic components, kits, and tutorials to help people get started with electronics projects. SparkFun has been successful in bootstrapping its business, with Seidle reinvesting his profits back into the company to fuel its growth. Today, SparkFun is a major player in the Maker movement and is respected for its commitment to open-source hardware and software. The company continues to thrive under Seidle's leadership, with its innovative products and passionate community of makers.
7. Lynda
Founded in 1995 by Lynda Weinman, the online education company offers courses in a wide range of subjects, from business and technology to creative arts and design. Over the past two decades, Lynda.com has built a loyal following among students and professionals seeking to improve their skills. In May 2015, LinkedIn purchased Lynda.com for $1.5 billion in cash and stock.
FAQ
What are bootstrapped companies?
A bootstrapped company is a startup that is funded by its founders, rather than through investment from venture capitalists. Bootstrapping can be a good option for companies that are not yet ready to scale up, as it allows them to retain full control over their business. However, it can also be difficult to bootstrap a successful company, as the founders may need to invest a lot of their own money and time. In addition, bootstrapped companies may find it harder to attract top talent, as they may not be able to offer the same level of equity as VC-funded startups. Nevertheless, bootstrapping can be a great way to get a business off the ground, and many successful companies have been bootstrapped.
Why bootstrapping important for early-stage companies?
In the early stages of a company's lifecycle, bootstrapping is often the only option for financing as VCs are typically only interested in businesses that have already achieved a certain level of growth. While it can be difficult to bootstrap a company, there are several advantages to doing so. First, bootstrapping allows founders to maintain control of their business as they are not beholden to VCs or other outside investors. Second, it forces founders to be frugal with their resources, which can be beneficial in the long run. And finally, bootstrapping can help to build a stronger company culture as everyone is focused on the same goal from the start. While there are challenges to bootstrapping a company, the benefits can be essential for early-stage businesses.