9 ways startups are funded without institutional VC capital

There’s an assumption there that “funding” means big VC funding from outside investors.

But all startups are funded in some way. They are never not funded.

Here are 9 ways startups fund starting up without venture capital or institutional investors:

1) Funded with personal savings.

They worked hard at their job for years and saved. Or they sold a previous business, cashed in stock options, made money in crypto or stocks. Whatever.

Now they are funding their product dev and startup team with their own money. Self-funded with their hard-earned cash to quit their day job and start up.

2) Funded from profits from an existing business.

They grew up a services business and are investing their profits to build a new product and a new team.

3) Funded with team members from an existing business.

Deploying existing paid employees to build and sell their new product thing from inside an existing business.

4) Funded with time as a “second” job.

A developer works by day and codes in at night to build a sellable product. Or anyone with a side gig that could grow up. Didn’t quit their day job.

5) Funded with time while a spouse works.

Many new founders have taken the last year to get their startup running while their spouses worked to pay the bills.

6) Funded with time as a student or living with parents.

I know several students who are going to school and growing businesses in between classes. Living at home or in a dorm.

7) Funding from cash flow from “passive income.”

Slightly different than funding out of an existing business, founders have created revenue streams that don’t require time that they can invest in a new thing.

8) Funded with time by flexible gig work.

Uber driver by night, startup creator by day. Or contract coder or freelance copywriter or part-time web developer to survive with flexible hours while they build something.

9) Customer funding to start their business.

A “big” customer pays them to build a solution for them that can be sold to other customers later. Sometimes this is a strategic customer that buys something big upfront, but it’s mostly like a friendly first customer. Living lean on first revenues.

Customer funding is usually “growth capital” that allows companies to invest more as their revenues grow, but it can be used to start up too.

They aren’t “unfunded.” They are self-funded.

Started by investing their own money and time, not someone else’s.

None of this is “free money” or “cost-free time” for these resourceful startup founders.

Their own time and money could have been invested in or spent on something else.

Most software companies actually start this way.

Only about 25% of software companies ever get any institutional VC funding.

And most VC-funded companies don’t get big and win big for founders.

Think about that.

What other ways are founders funding companies without “getting big investors” first?

How are you doing it now?

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