There’s a common belief among founders that venture capital is essential to success. Although VC is common for the most successful tech startups, it isn’t a requirement.
Entrepreneurs can become successful with little to no funding. Capital doesn’t make founders more insightful than their bootstrapped colleagues. If someone can’t turn $1 into $10, then why would you expect them to be able to turn $1M into $10M?
To help illustrate how companies can get started without a seed round, we’ve collected over 50 examples of businesses that started with little to no funding and went on to become what we call “efficient entrepreneurship.”
Many of these companies have earned billion-dollar valuations. Some even have billions in revenue.
Figure Something Out, Then Ask for Money
Automate Your Workflow
The easiest way to build a useful product is to automate part of your daily workflow. This ensures you’ve got demand for your product and a pre-existing funding source.
MailChimp: In the year 2000, CEO Ben Chestnut was running a design consulting business. Several of his clients wanted email newsletters created. The only problem was that he hated designing them. So, to spare his team the tedium, he decided to build a tool that would streamline the process. MailChimp, a $400M business, was born.
Lynda: In the late 1990s, Lynda Weinman was teaching web design. The technical books she assigned to her class were bland, so she produced training films for her students. She spent the next two decades building a content library and tech assets. Eventually, it had sufficiently scaled enough to attract LinkedIn and have them pay $1.5 billion to own the company.
PluralSight: Like Lynda.com, PluralSight offers remote software training. It bootstrapped for its first nine years and now offers 6,000 courses. It’s also an IPO candidate with a billion dollar valuation.
Start With a Capital Efficient Product
AdaFruit Industries: Limor Fried started her DIY electronics ecommerce empire as a student at MIT by assembling DIY kits comprised of off-the-shelf parts. Now, she has 85 employees and earns $33 million per year.
Sparkun:Nathan Seidle started Sparkfun by selling electronic kits and components to engineers who wanted to explore new sensors and systems. Now, his ecommerce empire employs 150+ and has revenues of $32 million dollars per year.
Old Problem + Existing Business Model + New Tech = $$$
Solving an old problem with a new technology or UX layer can be enough to build a multi-billion dollar business.
Shopify: Shopify’s founders were searching for a shopping cart solution when they were setting up an ecommerce site for snowboarders. Unable to find one, they decided to build a bespoke solution on the then red-hot Ruby on Rails framework. It turned out to be a perfect solution for more people. The founders ran the business independently for six years on the revenue they generated. They ultimately raised money from VCs and later IPOed, which rewarded them with a fourteen-billion dollar valuation.
Braintree Payments: Braintree built a better tech solution to serve as a tollbooth for buyers and sellers. It survived on the profits of those transactions for four years. Eventually, it raised $69 million in two rounds of venture capital which turned into an $800 million acquisition.
Scratch Your Own Itch
SimpliSafe: People scoff at the idea of trying to bootstrap a hardware business, but SimpliSafe’s Chad Laurans did it. He raised a small amount of money from friends and family and spent eight years building a self-install security business. Eight years later, the business has thousands of customers, millions in revenue, and $57M in VC from Sequoia.
Ipsy: Birchbox pioneered the idea of sending sample boxes of cosmetics to potential customers, but YouTube star Michelle Phan leveraged her online celebrity — 8M+ YouTube subscribers — to turn it into a phenomenon. Her audience and relationships with cosmetics brands allowed her to build a subscription box startup that generated $150M in revenue before raising $100M in VC.
ShutterStock: Jon Oringer was a professional software developer and an amateur photographer. He combined his skills and used 30,000 photos from his photo library to start a stock photo service. It’s currently worth $2 billion dollars. His capital efficiency paid off and ultimately turned him into a self-made billionaire.
Quizlet: Quizlet is notable because it was founded by a 15-year-old who wanted to ace his French final. By the time Quizlet raised a Series A in 2012, it had a 22-year-old CEO, 40M users and was a top 50 website in the US.
Skyscanner: The company started as a bespoke spreadsheet to help its founder find the best flight prices. It has since become Edinburgh’s leading tech company with 500+ employees. The company got off the ground under its own power in 2001. It raised $6M in 2007, and $192M in 2016, fifteen years after launching.
Everyone’s Money is Green
CoolMiniOrNot: CoolMiniOrNot started out as a website where geeks could show off their ability to paint Dungeons & Dragons figurines. Eventually, the site’s founders decided to design and distribute games of their own; leveraging Kickstarter as a channel. They have run 21 Kickstarter campaignswhich have raised $20,644,352 million dollars of non-dilutive funding. Game on.
The Wirecutter: Founded by a former Gizmodo editor, the Wirecutter promised more thorough and fair-minded reviews. Paired with Amazon affiliate feed, the self-funded startup was ultimately rewarded with a $30M exit.
The best source of capital is often a customer. Selling has two benefits. First, you make the cash register ring immediately. Second, You quickly learn what resonates with customers and can use those insights to refine your offering.
RXBar: When one of the entrepreneurs behind RXBar shared his business plan with his father, he was told to stop theorizing and start selling. That advice, plus $10K in savings, proved to be worth $600M as Kellogg’s ended up gobbling up the startup.
Scentsy: DNVBs are hip, but they are over-reliant on twee launch videos and Facebook ads to drive revenue. Scentsy sold candles at swap meets when they couldn’t afford to buy ads. Now they have more than $545 million dollars a year in revenue.
LootCrate: LootCrate had over 600,000 customers buying their pop culture sample packages and $100M in revenue before they raised institutional capital. The reason they were so efficient is because the company started charging customers from the very beginning.
Klaviyo: The co-founders of Klaviyo agreed to postpone their first hire until they had a $1MM ARR. Thanks to keen product design and a sales effort, the email marketing platform quickly blew past that number. However, they held off on raising capital for three years.
Spanx: Shark Tank judge Sara Blakely is the most famous founder on this list. She turned a $5,000 investment into an Oprah-approved garment that generates $400M in revenue annually. Her fashion sense earned her a following. But it’s her keen appreciation of the principles of capital efficiency that earned Blakely a billionaire status.
Tuft and Needle: Despite facing a competitor that raised 3,994,9% more capital, this mattress upstart has been able to grow to over $100M in sales. Their secret? They are using profits and just $6,000 in seed capital.
Grammarly: Spell checkers have been bundled with Word and Google Docs for over a decade. But Grammarly made several improvements. Because of that, they could charge over 800 universities and thousands of writers a monthly fee for the freedom from grammatical faux pas. After nearly ten years of spotting typos, the company took in a $110M Series A.
Be Miserly with Marketing
Efficient entrepreneurs need campaigns to be addictive, immediately.
ButcherBox:In a world where boxed meal kit companies are struggling, ButcherBox, the leading ecommerce provider of grass-fed beef, has thrived. They’re earning as much as a million dollars a week. How? By skipping expensive ad channels and developing ongoing, capital efficient relationships with influencers.
Cards Against Humanity: With just $15,700 in funding from Kickstarter, the Cards Against Humanity Team built a business that grossed over $12 million dollars in its first year. They’ve also sustained their brand with a series of canny marketing stunts.
GoFundMe: Viral marketing is dismissed, rightfully, when it is tacked on to a business model. However, it can be a powerful driver when properly integrated into a product. The founders of GoFundMe were able to use these forces to start a business that was valued at ~$600M.
Efficiency > Capital
The best entrepreneurs orient their businesses around a technology or business model that is intrinsically more effective at multiplying capital.
PaintNite: The idea of combining Monet and Merlot isn’t new. However, the founders of PaintNite wanted to make the model more cost-effective. PaintNite paired art teachers with existing bars that wanted to sell wine on weekdays. Together, they created a business that did $30 million in revenue the year before it raised venture capital.
Tough Mudder: Track & field entrepreneur Will Dean turned $7,000 in savings into a company with over $100 million in revenue. The secret was pre-selling registrations to races and then using the funds as working capital.
Build a Community
37 Signals/Basecamp: Founder Jason Fried said the company generates “tens of millions of annual profits.” They were also one of the earliest voices championing capital efficiency. Their series is a must-read for anyone looking for tips on how to spend every dollar wisely.
Mojang: The masons behind Minecraft never raised any venture capital. They employed only 50 people, and earned nearly a billion dollars in profit before selling to Microsoft. Minecraft grew by charging users a flat fee, resulting in a $2.5 billion dollar acquisition.
Behance:Scott Belsky bootstrapped creative community Behance for five years before raising $6.5 million from Union Square Ventures. Eventually, they were acquired for $150 million dollars.
Thrillist:Founded in 2004, Thrillist was built email by email until the company raised $54 million dollars in 2015.
Craigslist: Craigslist parlayed an early launch in the first dot-com boom into a durable long-term advantage. Despite having only 40 employees and not updating the site for decades, Craigslist is the #17 most visited site in the US. It’s also reported to generate hundreds of millions in profits.
Plenty of Fish: Founded in 2003, the site didn’t change functionality or aesthetics much over the following decade. Plenty of Fish’s biggest asset was its reputation as a well-stocked pond. Ultimately, the company ended up selling for $575 million dollars.
You Can Always Raise Capital Later
Putting off raising capital pays off in mind blowing ways.
Wayfair: The home goods ecommerce company was profitable from its first month of operation. They grew profitably for a decade until they ultimately raised a Series A — worth $165 million dollars — shortly before going public. The company is currently worth $6 billion dollars. Since they suffered little dilution, the founders are worth a billion dollars each!
Zip Recruiter: “We started out with humble ambitions, to bootstrap a lifestyle business,” said Co-founder/CEO Ian Siegel in an interview. As the recruiting platform continued to grow, the founders decided to raise a $63M series A to tackle more ambitious plans.
Nerdwallet: The personal finance service that promises to help young people save money lived on a tight budget from the time it was founded until it a raised $64M series A. The company earned a $500M valuation based on $100M+ in annual revenue.
Blessed are the Unfundable
A benefit of starting a business outside of a startup hub is that there isn’t much VC available. Unable to daydream about deploying capital, entrepreneurs are forced to make their paying customers happy.
Atlassian: Atlassian, based in Australia, grew its way to a $13 billion market cap. However, if it had easier access to funding, the team might have chased low-quality growth. That would have made them go under before they figured out how to scale efficiently.
Campaign Monitor: A Sydney-based startup who offers superior email analytics. Some of the companies they work with include Disney, Coca-Cola, and Buzzfeed. Their first round of funding amounted to $250 million.
The Trade Desk: Founder Jeff Green started The Trade Desk late in the funding cycle for modern AdTech. Green was a consummate startup CEO. He raised only $26.4M in venture capital during the company’s first six years. He somehow managed to turn it into a billion-dollar business traded on the NASDAQ. Disclosure: Founder Collective is an investor in The Trade Desk.
AppLovin: Before selling his company for $1.4B, founder Adam Foroughi said: “I couldn’t find anyone to give us an investment at what I thought was a reasonable starting point valuation and, by the end of our first year of operations, we were profitable and doing over $1 million a month in revenue.” The rest, as they say, is history.
Scratching the Surface
What’s astonishing is that these 50+ stories represent just a small sample of capital efficient companies. More companies fit this mold that we don’t spend as much time on because of their age or idiosyncrasy.
- Mathworks and Wolfram Research are impressive companies that employ thousands. But unless you’re a Field’s Medal winner, it’s hard to replicate their success.
- Similarly, Autodesk, the leader in CAD technology, is currently worth $25B and was started with just $60K back in 1982.
- Epic was founded by Judith Faulkner in 1979; the Wisconsin-based electronic medical records provider is one of the most significant bootstrapped software company operating today.
- Likewise, CarGurus only raised a few million dollars. They went on to become the best performing tech IPO of 2017 with a market cap hovering around $3B.
- O’Reilly Media holds a legendary position in tech. They have an annual revenue north of $100M.
Don’t Design Your Business Around VC
Startups used to figure stuff out and then ask for money. Today, they ask for money to figure things out. Outside of drug discovery or aeronautical hardware, this is usually the wrong decision. Making progress without resources is the best way to pique a VCs interest.
So the next time a VC tells you they “pass,” remember these three principles:
- It’s possible to get a tech-enabled business off the ground with no capital.
- It’s feasible to scale a tech business rapidly with very little capital.
- More often then not, it’s in the founder’s best interest to limit the amount of capital they take.
If you know of other companies that self-funded their way to an extraordinary outcome, please let us know.