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Bootstrap vs VC for SaaS?
I personally agree with Patrick Campbell, CEO of ProfitWell, who said: "Before reaching series A, live as much as possible on your own and your customers' money. Otherwise, you'll have more dilution and find yourself in a less advantageous position in negotiations."
Which side are you on?
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I agree that if you have the chance to skip the seed round and grow with your own funds, it's better not to bring in early investors
We're VC funded but I really respect bootstrapped businesses!
Also if you guys love an underdog story, please support Graphite today - we spent most of the day in #3 and are currently on track to overtake #1 :)
@carissajansen all the best, will go vote not. We launch in two hours and it's a fundraising game. Will appreciate if you can take a look at it :)
VC sounds fairly interesting when you create a successful product and your investors are not looking for results from day one of their investments!
If any calculations go wrong, the founder will find him/herself raising the very next round they close their round number 'x'! Keep the control in your hands, try to go frugal, and plan out to go bootstrap.
Launching soon!
@bhargav5394 I think it also depends on the competition in the space - If you need to get to scale to sustain or attain market share - being VC backed might allow you to get to those targets faster.
I've selected bootstrap, that has been my journey over the past 3 years but I believe the correct answer lies somewhere between bootstrap and VC
There are few, very few software businesses that can break even without funding
Ideally, those funds should come from other sources and not VC but it's not accurate to advise everyone to bootstrap
It is damn painful
By the way, we are tackling this issue at Caena and launch Who Wants to Be a Unicorn, a fundraising game in a few hours, take a look, try the game and support us :)
@kayovin1 True! Even some beneficial products fail being dissolved between other VC-funded startup marketing campaigns.
I'd say bootstrap to learn things the hard way, and I'd say VC if you want to then get into the rat race of chasing valuations and fund raising
@shushant_lakhyani unless the product isn't something pricey and involves hi-tech scientists to prepare MVP, you have to keep VC in mind only for some future growth steps (maybe)
There is always a fine balance before deciding to let a VC inside your company. I personally believe in bootstrapping until reaching a point where VC money can accelerate sales for a battle-tested product.
Never raising money can potentially be detrimental on how fast you capture market share, as your competition is most-likely backed by VC money.
For us at Moveo, this was one of the hardest decisions so far! There is definitely no right or wrong approach.
I agree! Don’t choose VC at first, especially at this time, it can let you find true PMF and make money and Day 1
I think there is no silver bullet here; it depends on how you want to run the business but most of the times raising on favorable terms is a better choice.
Especially in tech there a temporal aspect and the ability to move fast and grab your first few lighthouse customers is important. More often than not, having enough capital to execute on a business plan (by hiring sellers, marketing, expand to new markets etc.) is crucial so you might need to raise capital from a VC.
Also there is the opportunity cost aspect; if you are building your startup then you are not doing other things that can help you career, so in my opinion you need to "fail fast".
Running a healthy/cashflow positive business is great at the beginning because it will definitely give you a lot of leverage when raising but I also think raising capital is needed when you have to move fast and scale the business.
I'd say it depends on many factors, like your market and funding of competitors. In general, I think the best practice should be staying bootstrapped until you haven't validated product-market fit. Once you have that, bringing capital is the best way to start scaling fast.
@jacopo_proietti good point! Though I have some examples how companies with full pockets of VC funds didn't compete well. When VC means money+competence+network it can worth a part of control.
@arbonum Yes agreed. Plenty of well-funded teams that ended up not competing successfully. Indeed, it can be that the investor support wasn't the right one, or also that the company was raising without a clear way to execute their investment. I think one should look at VC or investors as a way to execute quicker on their strategy, but as a founder, if this is not clear yet, there's not much a VC can do for you.
It depends on your goals and risk tolerance. Bootstrap for control and slow growth, VC for rapid expansion with diluted ownership.
Embrace the bootstrap journey until it's absolutely necessary to pivot. This advice isn't limited to just SaaS; it applies to nearly any product.
Venture capital funding doesn't just dilute your ownership significantly; it often imposes unrealistic revenue targets on early-stage companies that are still navigating uncharted waters.
Moreover, countless ventures stumble because they haven't experienced the invaluable lessons of acquiring and retaining customers the hard way. There's something special about growing organically and adapting your strategies as you gain wisdom along the path.
The best way is not to wait investors and their money and build and promote your product yourself.
If the goal is to scale and increase company valuation, VC is the way to go.
VCs aim for rapid growth and scaling to achieve higher valuations and successful exits. This often comes with significant funding, fast expansion, and immense pressure on the founding team, potentially affecting company strategy and culture.
However, if you're just looking for a steady income, bootstrapping is a great choice.
This approach emphasizes steady growth and profitability, allowing founders to maintain full control without external investor pressures, operating at their own pace
For me, I prefer Bootstrap.
Wonderful topic Roman and one I'm passionate about, in fact, we are launching Who Wants to be a Unicorn, a fundraising game later this morning to shed light on how venture capital really works. Check it out:)
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