Thoughts on Spanish bootstrapped companies from a VC perspective

In the tech sector, bootstrap companies are those that grow and scale without the need of external funding, thus not giving out equity to investors.

Despite the fact that there are some very well known companies that have grown this way, such as Basecamp, Mailchimp and many other ones, the industry (press, founders, investors and other stakeholders) often focuses on VC-backed companies instead of these different creatures.

I don’t have any data to support this, but I think this is slowly changing and bootstrap or semi-bootstrap (companies that raise €500k approx to begin with, and continue growing without raising more capital) companies are increasing all over the place, including Spain.

Why is this happening? In my opinion, for a variety of reasons.

Co-founders, C-level and employees that have first hand experience in VC-backed startups that went the wrong way.

Capital from VCs is needed under some circumstances and for some types of startups, but I believe the worst thing you can do as a founder (and investor) is to raise funding when your company probably doesn’t need it.

It will add more pressure, push you to grow faster when perhaps you don’t feel that’s the best way to do it, it might lead to changes in leadership or the employee base, the company’s board will have a say in certain decisions, etc.

In Spain, I’ve recently seen an increase in the number of former founders or employees that, after leaving a VC-backed company, are more eager to launch a bootstrap project than to try to raise funding to get started.

Cash is king

Some people might not agree with this -especially those that are quite pessimistic about the current state of the tech market-, but I do think founders are more aware than ever before about the need of creating businesses that make -or will in the future- money with positive unit economics.

SaaS is on the rise

Even in Spain we’ve seen a significant increase in the number of B2B SaaS companies (and B2C ones running subscription-based businesses) in recent times, which tend to generate revenues from the beginning.

You might decide to raise a seed round of around €500,000 to start, but seeing cash from the very beginning gives founders a sense of optionality that in many cases was not there before.

Consultancy is not the devil

Many founders often see consultancy or services as the devil: it doesn’t scale, it will make it harder to transition to a product-based business, etc. While sometimes true, providing consultancy services to clients in your target market is also a very good way of understanding their main pain points and also to assess if the product you’re building can meet those needs.

On top of that, these types of services provide cash upfront that can be used to finance the development of the product or hire the first employees.

Creating an MVP is probably easier than ever before

I know, it depends on what kind of project you’re trying to build. If it’s a complex one (and you’re selling to the enterprise), putting together an MVP that can cater to clients it’s not that easy.

However, these days with a combinations of tools and APIs you can create some pretty decent working prototypes (hello Makerpad, Zapier, Integromat et al.) that can be super helpful in testing the market. The increasing number of low-code or no-code products also favours this.

The bootstrap community is growing and with a louder voice

Communities such as Indie Hackers, events like Microconf and many other meetups, sites and podcasts are raising awareness of the bootstrap way of doing things and providing founders with an opportunity to share their experiences.

As is often the case, this helps spread the word and create role models that are then followed by up-and-coming companies and founders.

Funding for bootstrap companies

Most bootstrap founders tend to stay away from VCs because they believe their interests are not aligned. This meant that financing options for founders were limited to business angels, FFFs or lines of credit, but the latter are only available for those with significant revenues.

This is slowly changing. There are now funds such as TinySeed, Indie.vc or Earnest Capital that want to back companies that generate cash from their very early days. These funds, instead of taking equity in the companies, often receive a share of monthly recurring revenue until a certain point (often a cap on the amount invested).

What are K Fund’s views on this?

We love that more and more bootstrap companies are coming to market, growing and also getting more attention from the ecosystem in general.

My colleague Iñaki Arrola built coches.com as a bootstrap company, only raising funds from one individual business angel and a small institutional investor, which means that we’ve seen the model first hand. We’ve also backed companies that have reached break even or generate sufficient cash to grow on their own instead of needing more funding rounds.

We also believe that two things will happen more in the near future:

• Startups will raise some funding to begin with (build product, hire people, etc) and then reach a point of optionality to continue raising more or growing bootstrap, skipping multiple rounds of funding or all of them altogether. Jason Calacanis recently wrote about this phenomenon.
• Bootstrap startups might realise at some point that the market and business opportunity they have in front of them is relevant enough to go all in and raise some funding.

We’re happy with both scenarios and if you’re in that situation, we’d love to talk to you. And even if my predictions end up not happening, we’re also happy to see more and more people creating money-making businesses online :)

If you’re interested in meeting other Spanish bootstrap founders and companies, take a look at this long Twitter thread/conversation on the topic.

And here’s a list of some Spanish bootstrapped startups that have been around for a while and that we believe -or know- that are doing quite well:

• Acumbamail (acquired by MailUp)
• Beamer
• Besoccer (company data here)
• Colectivia (company data here)
• Docuten
• Freepik (company data here)
• Indemnizame
• Kimovil
• Mailtrack
• Manfred
• Marketgoo
• Metricool (company data here)
• Micolet (company data here)
• Milanuncios (acquired by Segundamano for +€100m)
• Minderest
• Minimalism
• Quaderno
• Slides Carnival (company data here)
• SumaCRM (company data here)
• Teimas
• Tenvinilo
• Tinybird
• Todotaladros
• Wame.chat (company data here)
• Witei (company data here)