Have you heard the tortoise and the hare metaphor used to compare bootstrapped startups to VC-funded companies? It’s not as true as it used to be. The tide is turning.
Grow faster with big funding! Bootstrapping takes too long!
But when you raise big VC funding, you can add 7-10 years to your successful exit timeframe (for the few that get to a successful exit).
Big funding can help you grow faster but also raises the bar for exit. You can’t exit for $25-$75 million anymore; it’s more like $250 million and up.
Bootstrapped SaaS founders keep their valuable optionality. They can grow steadily for a long time—or sell it tomorrow if the right deal comes along.
Bootstrappers don’t have to ask permission from their investors to sell their companies when it makes sense for the founders.
I interviewed Esben Friis-Jensen on the Practical Founders Podcast last year to discuss his bootstrapped journey with Userflow.
In just two years, he and his cofounder (and just 1 other employee) had grown Userflow profitably to $3 million ARR.
Last week, Userflow was acquired by Camber Partners and merged with Beamer.
This was very successful for Esben and his cofounder. Userflow had grown to $4.6 million ARR and still had three employees.
They didn’t have to sell the company. They got an offer they didn’t refuse.
Bootstrapped Userflow took just over 3 years from start to a big exit for the founders.
The previous company Esben cofounded, Cobalt, raised VC funding and is still growing after 10 years with no exit in sight.
In this case, his bootstrapped company was at least 3 times faster to a bigger founder prize than his previous VC-funded company.
It’s taking longer to exit VC-funded companies that require bigger exits and perfect market timing. And practical SaaS startups are selling earlier.
Which is the slow tortoise and which is the speedy hare now?
As Esben described it on the podcast:
“I definitely recommend to founders today, even to first-time SaaS founders, that they should bootstrap their company. They can bootstrap completely and focus on revenue. Or, if they are strapped for cash, then raise a very small round with the right investor expectations.
“Don’t raise a VC round or anything like that. I recommend that to founders today because I’ve been on both VC and bootstrapped journeys.
“From a founder perspective, I believe you can build a better, more effective, and more efficient company if you’re bootstrapped because you become more profit-focused and more customer-focused.”
Esben shares the story of their merger with Beamer and why he and his cofounder decided to join the new organization.
Check out this podcast episode here on the Practical Founders Podcast.
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