Bootstrap Funds: Portfolio Companies, Advisor Networks, Non-Dilutive Funding

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🔍 Problem

Startup founders struggle to find smart, aligned advisors. And sometimes capital.

Venture capital funds provide capital and advice. But they expect billion dollar exits.

💡 Solution

Bootstrap funds can thrive without billion-dollar exits.

VCs depend on outliers. They are known to invest pre-revenue, pre-product or even pre-idea. Most of these investments fail or break even.

Bootstrap funds lower risk by investing in startups post-revenue. They offer an option to non-unicorns.

🏁 Players

Bootstrap Funds

Portfolio Companies


🔮 Predictions

  • Bootstrap funds will invest in newsletterscommunities and coursesPodfund invests in podcasts.
  • The quality of advisor networks will make (or break) bootstrap funds. Founders pay more (for capital) to access to these experts.
  • Funds will use APIs to vet financials and spend more time vetting teams.

☁️ Opportunities

☝️ Guest Insights

Based on insights from LATKA: Top SaaS Companies — “What VCs say about bootstrapped companies.

“You’re growing too slow!” (Growth)

PlusThis “only” grew from $1.98m in 2018 to $2.18m in 2019. VCs wanted more growth.

“You have too many big competitors.” (Fragmentation)

QuestionPro is “just” a survey tool for B2B companies. They have no real moat and major competitors like $8b Qualtrics. The founder doesn’t seem to mind. The company broke $25m in revenues and $3m in cash profits in 2019.

“You do too much professional services.” (Scalability) was passed over by the VC world because 50% of their revenue is “low margin” professional services. What folks seem to miss is that customers who pay extra for services tend to stick longer! The company is doing $2m per year, 50% pure SaaS and 50% productized services. 

😠 Haters

“Bootstrap funds?! That’s an oxymoron.”
What’s life without a little cognitive dissonance? Roll with it.

“These companies have traction. They should not give up equity.”
Some founders beg to differ. They can find cheaper, non-dilutive capital but opt for bootstrap funds instead.

“Giving founders equity in the fund is stupid.”
Is it? Investors hedge risk but founders don’t. This makes them more likely to help your portfolio companies. Syndicates may be a better option for founders. See Opportunities in angel investing.

🔗 Links

  1. General Partner of Earnest Capital — Tyler Tringas explains why bootstrap and venture models are necessary.
  2. Bootstrapping Your Startup to Acquisition — Einar Vollset explains why TinySeed is bullish on B2B SaaS.
  3. Trends #0018 — Angel Investing — A look at venture scale startups. Invert to learn.
  4. The Alternative Funding Options For SaaS Start-ups Cheat Sheet — Geoff Roberts shares non-traditional ways to raise capital.