Four Types of #SaaS Bootstrappers
Before you jump in the comment section with your (Tesla) flamethrower to burn my “clickbait title”, let me share some context. Since I’m covering the rise of alternatives to VC funding in the SaaS industry, I’ve discussed with several people who are thinking about creating such financing solutions. What strikes me during these conversations (almost every time), is how bootstrappers are considered a homogenous category of founders, when in fact it’s much more nuanced than that.
I have the privilege to interact with some of them, and I definitely see very different profiles of founders who have a variety of financing needs. This is what I wanted to share in this article. I’m well aware that you cannot put people in boxes, and that categories are often more fluid than strict.
My point is to show that the term “bootstrapper” should be nuanced as it covers very different types of founders. If you want to serve their needs, you must consider this variety.
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The “incorruptible” bootstrapper
I meet many founders who know that they want to bootstrap their company and are not interested in VC money. They are well aware of the constraints of both models (very educated about this topic) and want to build profitable SaaS companies rather than hyper-growth startups. Growth speed is not their primary focus, revenue is. What they privilege, above all, is freedom and total control over their company.
Most of their financing needs won’t happen at the beginning to build their product from the ground up, but later once their company is running. At that stage, they’ll often need financing options to finance their cash flow without sacrificing equity (such as debt).
The “open” bootstrapper
These founders are the opposite of the previous ones: they are generally not against VC money and can choose either path (VC or bootstrap). Their choice will largely depend on how their company develops. If they manage to generate an impressive growth or feel the opportunity to build a “VC compatible” company at one point, they won’t hesitate to go out of the bootstrap path and raise money with VCs. If it’s not the case, they’ll continue to operate a lean / profitable business.
The VC backed founder turned bootstrapper
As the SaaS industry is getting mature, there is an increasing number of experienced founders, (who have built VC backed companies) who choose to bootstrap their next startup. They have experienced the VC model and often saw the constraints inherent to this model: less control, fewer possibilities to do “things differently”, frictions with the investors (or the other co-founders) when the company doesn’t grow fast enough, etc.
Since these founders are experienced, they often have a good network of business angels behind them ready to finance their new company. They won’t “technically” bootstrap, but instead, raise money from business angels with terms giving them more flexibility. I believe these founders will have a significant impact on the rise of alternatives to VCs (they will pave the way to new models).
These bootstrappers are often developers who want to create and sell a tool, but don’t want to build a company. What they enjoy is to focus on the product, but not to hire and manage people. I talked to several of them who value operational support, like sales or marketing, above all. For them, operational support is almost as important as the financial aspect, because it enables them to focus on what they love (building a product and not run sales & marketing).
As a conclusion, I want to insist on the fact that these categories are not strict, but fluid ones (a solopreneur can decide to build a VC backed company at one point). As you can see from my descriptions, founders have very different needs in terms of financing and operational support. This is why I don’t expect a single “alternative to VC” model to dominate, but instead, different approaches adapted to these different segments to rise.