Venture capital is a great resource for early-stage startups, but too many entrepreneurs hyper focus on VC and forget to look at the big picture. The truth is, venture capital isn’t all it’s cracked up to be. In fact, too much venture capital can hurt a business when it’s time to make an initial public offering (IPO).
Get it out of your head that venture capital equals success, and anything else equals failure. Stop chasing down venture capital prospects and take a page from the books of many (many!) startups that went from bootstrapped to thriving without a cent from venture capitalists.
In fact, we have 27+ examples of bootstrapped startups that went on to be wildly successful. They’ve earned billion dollar valuations after starting with almost nothing. It’s an idea that has been coined “efficient entrepreneurship,” and it’s the way of the future.
If nothing else, these examples help shift an entrepreneur’s perspective on what funding looks like. Venture capital may turn out to be the best fit for some bootstrapped businesses, but it’s important to assess every avenue and keep options open.
The Most Successful Bootstrapped Startups
- AdaFruit Industries
- Braintree Payments
- Tough Mudder
- CoolMiniOrNot (CMON)
- Cards Against Humanity
- Campaign Monitor
- Mojang (Minecraft)
- Tips for Bootstrapping Your Startup Without Venture Capital
- Key takeaway
The Most Successful Bootstrapped Startups
It was the year 2000, and Ben Chestnut and Dan Kurzius had a design consulting business. His clients were asking for e-newsletters, but at the time, creating them was a tedious process. So, he and his team worked to create a better way to design email newsletters, and MailChimp was born.
More than 20 years later, the co-founders’ bootstrapped startup business is estimated at a value of more than $10 billion. How did they do it? They worked within the restraints of their existing design firm, treating MailChimp as an expansion that eventually grew past their wildest dreams.
Lynda Weinman began her career in the late 1990s as a teacher. She was teaching future web designers, but she needed additional resources that weren’t available yet. Unimpressed with what she found in bookstores, Lynda began to create her own visuals and trainings that were customised to her students’ needs.
Over time, the videos morphed into tutorials and how-to’s, and she ended up with a rich content library and other technology assets. She ended up selling her life’s work to LinkedIn for $1.5 billion in 2015.
Limor “Ladyada” Fried was an MIT engineering student when she began to experiment with electronics by assembling parts to create DIY kits. Her goal was to make learning about electronics fun and meaningful for aspiring builders, and she established AdaFruit in 2005.
She utilised the same general foundation as electronics stores, but with her own unique twist that led to a 50,000 square foot facility, more than 100 employees, and an annual revenue that surpasses $40 million each year.
This story is very similar to that of AdaFruit founder’s, Limor Friend. Nathan Seidle was selling his own DIY electronics kits out of a dorm room in college. He saw something that piqued his interest and the interest of his peers – and he took off.
Nathan credits his success with not racing to Silicon Valley to compete with other large companies. Instead, he stayed true to his roots and scaled his business at a comfortable pace – placing emphasis on practicing social responsibility and sustainability.
In fact, he says that a venture capital investment would have taken him off track from where he is now. SparkFun boasts more than 140 employees and an 80,000 square foot warehouse space, with revenues topping $67 million each year.
Since the inception of the internet, fraudsters have been busy finding ways to scam people out of money. Braintree created a solution in which each party pays a small fee for the peace of mind that the transaction isn’t fraudulent.
For four years, the company survived on its own earnings from transactions without any venture capital. Eventually, the business owners raised $69 million in venture capital and then sold the company shortly after in 2013 to PayPal for $800 million.
The Shopify founders were starting a snowboarding e-commerce site, but they needed a shopping cart solution. When they couldn’t find one that met their needs, they created one of their own. Their business thrived on its own earnings for six years before accepting any venture capital or entering the market on an IPO. Today, Shopify has a valuation of over $166 billion.
Ipsy founder Michelle Phan got her start on YouTube doing makeup tutorials. She was a talented makeup artist who garnered a following that spans from young women to leaders with cosmetic brands. There was already a successful monthly subscription box for makeup, but Michelle knew she could offer a unique twist on the product.
Phan partnered with cosmetic brands and had less than $500,000 in seed funding to get started. Her company had $150 million per year in revenue before accepting $100 million in venture capital. In 2015, the brand even bought out a competitor, BoxyCharm, increasing its market stake.
Founder Jon Oringer got his start as a professional software developer, but he was an amateur photographer on the side. He combined his two professional experiences together to establish a stock photo website – Shutterstock – from his own library of more than 30,000 photographs. In 2012 Shutterstock had its IPO, and nearly ten years later, its valuation is $4.42 billion.
Chad Laurans saw a need for home security and accepted small amounts of money from his friends and family to get started. He prototyped his own equipment and spent eight years growing his business – SimpliSafe – to have hundreds of thousands of customers. He then accepted $57 million in venture capital to further grow the company. Today, Simplisafe is estimated to be worth $1 billion.
Will Dean had $7,000 in his savings account when he came up with the idea of a Tough Mudder competition. He started out by pre-selling registrations for his events and then using the money to invest in the tools and supplies he needed to make each event happen. Today the Tough Mudder brand brings in more than $100 million in annual revenue.
Dungeons & Dragons is an increasingly popular game for many, and the CMON site began as a way to show off collectible figurines from the brand. The founders saw growth potential and began to design their own games and comics for collectors.
They used Kickstarter as a way to raise the money needed to create and manufacture their various projects. Over the course of 27 Kickstarter campaigns, they raised nearly $36 million to fund ideas – no venture capital required.
Selling directly to the consumer is an increasingly popular business model, bypassing the need to partner with physical store locations for sales. The Scentsy founders started out by selling candles at local swap meets before they could afford to advertise online. Through this process, they learned more about their customers and improved their product offerings as a result. Today the company has an annual revenue of more than $472 million.
The CarGurus app uses computer algorithms to search and sort data, finding customers the best deal on a used car. The company currently has 350 employees, and almost half are busy making sales calls to promote the brand.
Founder Langley Steinert says that the CarGurus success stemmed from making smart business decisions early on. It raised $150 million during its IPO in 2017. Today the company boasts more than $150 million in revenue annually.
First, they charged customers for the boxes they planned to ship. Then, he and his co-founder used the money to purchase items, fill boxes, and ship them. Now they have more than 200,000 monthly subscribers, and they’ve raised a total of $56.5 million in venture capital to keep going strong.
Wayfair founders Niraj Shah and Steve Conine took a unique approach to launch their home goods website. Instead of advertising their brand, they bought domain names that matched common search terms and routed the links back to the Wayfair site for purchasing.
Their very first month Wayfair turned a profit and didn’t accept any venture capital until they reached $500 million in sales independently – more than six years later. Wayfair now has a $6.9 billion valuation and is considered one of the most successful bootstrapped startups.
Cards Against Humanity
With a vision for an inventive new game, the founders of Cards Against Humanity raised a little over $15,000 that they turned into $12 million in the first year. They also garnered free media attention for the brand through several out-of-the-box marketing campaigns that caught everyone’s attention. It now makes a variety of themed add-on card decks for its game and brings in between $40-$50 million each year.
The idea that a business model can thrive solely on viral marketing is often met with laughter and eye rolls. But that’s just what the GoFundMe founders based their entire business on. They were already working to crowd fund events for budding artists and entrepreneurs when they decided to expand the offering. Today GoFundMe is generating $22.6 million in revenue each year.
Ryan and Jared Smith started Qualtrics in their home basement in 2002. It began as a survey tool for schools and businesses and has exploded into success, employing more than 1,000 people and making $763 million in revenue last year.
The founders sold Qualtrics in 2018 for an impressive $8 billion – and they still oversee operations for the company.
Ben Richardson and David Greiner founded Campaign Monitor in 2004. They started out as a web design firm but quickly realised that there wasn’t an email tool that met their needs. So they created one.
In 2014 they received $250 million to grow the business, and by 2019, Campaign Monitor showed an impressive revenue of $153.7 million per year. Over the course of the business’s existence, they’ve offered email analytics to household brand names like Disney and Coca Cola.
Founder and creator Nick Woodman originally came up with GoPro as a way to record his surfing adventures with friends. He tried and failed to launch another business previously, and that gave him the drive to make GoPro successful. He even moved back home with his parents to save money and make it work.
When cameras transitioned from film to digital, Woodman realised that everything was changing for his design. He found different ways to mount the GoPro camera so it could be used across all types of adventures and sports. The company went public in 2014 and raised more than $427 million. Today it has a valuation at $1.33 billion.
Minecraft is a household name among gaming fans. Creator Markus Persson had a background in gaming, but he saw room for improvement. He had a passion for creativity and worked on his idea for Minecraft on the side of his regular job. Persson’s company Mojang officially launched in 2009. He turned nearly $1 billion in profits before selling to Microsoft in 2014 for $2.5 billion.
SurveyMonkey is unique in the digital realm because it was founded when the internet experienced a boom in the 1990s. There was a crash following the boom, and not many companies survived – but SurveyMonkey did. It grew to make $100 million within 11 years. Today it is valued at $3.67 billion.
Three friends founded GitHub in 2008 as a way to crowd share coding techniques and strategies for programming. The idea of this type of collaboration was successful, and the company raised venture capital of $100 million in 2012.
GitHub provided a coding solution that helped the entire technology ecosystem by improving the way people code. The co-founders then sold their company to Microsoft for $7.5 billion in 2018 – only a decade after it all started.
Founders Scott Farquhar and Mike Cannon-Brookes began Atlassian in 2002. The company’s foundation began on a $10,000 credit card, and the risk paid off. They earned profits in 40 consecutive quarters on top of a 43% average growth rate for five years. In 2010 they accepted $60 million in venture capital to grow the company. They then raised $462 million during the 2015 IPO.
Founders Mike Russell and Mike Scharf established a cleaning service for homes, apartments, and businesses. They loaned a total of $267,000 from friends and family to kick start the idea instead of pursuing venture capital.
They did pursue a venture capital investment in 2020 that totaled $270,000 to help bolster their company. To this day, they’ve cleaned more than 400,000 homes and offices, boasting $9 million in annual revenue. Although they started out in New York, they’ve also expanded to Chicago and Washington, D.C.
Joshua Dorkin launched BiggerPockets in 2004 as a way for more people to invest in real estate. He did it without venture capital, even when things seemed impossible. Today the site boasts more than two million members and has expanded to run a successful business podcast. The company brings in over $9 million in revenue each year.
In 1998, Sara Blakely came up with the idea for Spanx and funded her idea with $5,000 of her own money. Her products launched two years later in Neiman Marcus and the success didn’t slow down from there.
After 14 years in business, Blakely became a billionaire and to this day she still runs her own company. She says that she has no plans to pursue taking her business public. Her business is proof that having a unique idea in an already saturated market can be successful.
Zoho is a multi-billion dollar b2b software company that started life in 1996 as AdventNet. It was founded by Kumar Vembu and Shekhar Vembu, two brothers from Chennai, India.
It was the third brother, Sridhar Vembu, who became CEO in 2000, that played a pivotal role in Zoho’s journey from bootstrapped startup to hugely profitable company with over $600m in revenue (2021) and 10,000+ employees worldwide.
Tips for Bootstrapping Your Startup Without Venture Capital
Automate as Much as Possible
Introducing automation into a business system is easier to do sooner rather than later, especially with the no-code platforms available today. When entrepreneurs automate workflows early in their business, it sets them up for success in the future because business processes begin efficiently and can grow efficiently.
Success takes time. It’s easy to look at other businesses that began with little or no budget and see overnight success. People rarely see the years of hard work and failed projects that go into the thriving new business that makes headlines.
Don’t reinvent the wheel
Sure, someone else is already doing it…but can you do it better? If so, make it happen. There’s no reason to force a completely unique business model when another one is already working for other people. Instead, entrepreneurs can do what they already know works and improve it.
Selling is a power move
The best way to make money for a new business is to sell the product or service. There’s a learning curve to selling that requires entrepreneurs to listen to their customers and make appropriate adjustments to refine what’s being offered.
Stop dreaming and start doing
Too many entrepreneurs get caught up in trying to plan for the future. They create charts showing future success, complete with organisational charts and expanded offerings. But how do entrepreneurs get there? Dreaming is great, but it’s also important to put in the work necessary to make it happen. Focus on what’s going on in your business now so that the future can be wildly successful.
Understand that money is money
Entrepreneurs can get funding from a variety of sources, including friends, family, incubators, pre-sales, grants, and more. A little money can go a long way with smart business practices. A diversified business strategy can go a long way to making a new startup successful.
Many times the public and the media judge a company based on the amount of money raised in those early days. Unfortunately, having a lot of money doesn’t mean much if a business isn’t efficient. The goal is not to receive a lot of capital from investors, but to multiply capital through smart business decisions.
There are pros and cons to pursuing venture capital investments early on in a business’s life. Some entrepreneurs choose to forego venture capital, while others struggle to find interested investors. Either way, it’s important to understand that venture capital isn’t a requirement to launch a new business.
Many entrepreneurs don’t get investors onboard to provide venture capital; yet, they prove their success after a few months or years. It’s always possible to seek out venture capital later on in a company’s life when entrepreneurs need money to expand and grow at a higher rate.
Entrepreneurs must keep open minds and look for other paths to success. Is it easy? No. There will be days that you want to throw in the towel and give up, but that’s not how successful businesses thrive. It takes problem solving, starting over, and constantly looking for ways to improve your processes.