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Should you bootstrap a startup?
Bootstrapped vs VC-backed startups, how TypeForm bootstrapped to a billion, and more...
SearchVentures
October 16, 2024
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Bootstrapped vs VC-Backed Startups
Bootstrapped startups are more likely to survive a downturn with a higher chance of adapting to market volatility when compared to VC-backed startups.
What's the reason behind the resilience?
This Week’s Trends
Bootstrapped outlast VC-backed Startups
From a side-project to a billion dollars
€150 million follow-on fund and more
Read Time 4 minutes
The Startup Trend
Bootstrapped and VC-Backed Growth
Bootstrapped SaaS startups with $1-$30 million annual recurring revenue (ARR) adapt more quickly to market changes and demonstrate higher resilience compared to VC-backed startups. Based on data from over 2,500 SaaS startups.
> Bootstrapped startups are used to operating with fewer resources as they depend completely on their revenue, allowing better adaptation to market volatility.
> VC-backed startups have higher chances of rapid growth and slightly better customer retention beyond $1 million ARR.
💡The downturn hit VC-backed firms $1 million ARR the most, showing more vulnerability to capital availability while bootstrapped startups maintained higher growth rates by not relying on VC investment.
Startup Feature
How Typeform Bootstrapped to a Billion
Typeform’s rise from a side project to a billion-dollar startup is a textbook example of bootstrapping success. Founded in 2012 by David Okuniev and Robert Muñoz, the duo originally created Typeform as a side project while working in design. Starting with no external funding, they bootstrapped their idea, relying on their savings and early users to grow the product.
Focusing on Product Before Capital
For the first two years, Okuniev and Muñoz were laser-focused on product development, determined to craft a tool that people would not just use but enjoy. Instead of chasing venture capital early on, they decided to build it with $150,000 of their own savings without relying on outside investors.
“We didn’t want to rush to investors; first we wanted to make sure we were solving a problem that people cared about.”
Without the pressure of pleasing investors, it allowed the founders to focus on refining a product that was vastly different from their competitors, such as Google Forms without the pressure to scale too quickly.
“Bootstrapping allowed us to stay true to our vision. We weren’t growing for the sake of growth; we wanted people to love the product.”
This decision forced them to be resourceful, relying on word-of-mouth marketing and organic growth to attract early users, and sparking interest with a loyal customer base of designers and marketers.
Scaling Through Simplicity
By 2014, with a polished product and growing user base, Typeform introduced a premium pricing model after two years of development. The founders knew that in order to scale the startup globally, they would need external capital. However, unlike many startups that raise money prematurely, Typeform waited until they had a proven product and solid market demand.
“Bootstrapping taught us to focus on product-market fit above everything else. We waited until we understood what our users needed.”
In 2014, after reaching 100,000 users, Typeform secured $1.2 million in seed funding from Point Nine Capital. By 2022, after years of rapid user growth and product expansion, the startup raised another $135 million in a Series C round, pushing its valuation to $935 million.
“With a solid product foundation, this funding has allowed us to enhance functionality while keeping our growth organic.”
Today, with over 500 million form submissions, millions of users, and major clients like Apple and Airbnb, Typeform has proven that focusing on the product, rather than rushing to raise funds, can be the key to building a sustainable, successful startup.
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Cheers,
Odin Lund & Hari Mohandas
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