July 12, 2024

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I grew my business with no outside funding. Bootstrappers have an advantage over VC-backed startups—especially now

2 min read

Theranos is the telltale story of when VC funding goes awry. The company, which claimed it developed a revolutionary blood-testing technology, raised roughly $724 million from investors. It was valued at $9 billion before it imploded because of a fatal flaw in the company—its product didn’t work. It was all hype, no real value. Even when VC-backed founders aren’t fraudulent, there’s a tendency to prioritize funding and scaling to the detriment of the product. 

I founded my company Jotform over 18 years ago. With no outside funding, it’s been a slow climb at times, but today, we have over 25 million users worldwide. I learned a lot about bootstrapping and how it creates the right mix of pressure, thrift, and creativity for developing great, profitable products. Here’s a closer look at why VC funding can cause startups to make bad products.   

Where VC funding goes awry

People often assume “small business” and “startup” are interchangeable. But ask any founder and they’ll likely tell you their ambitions are huge. Bootstrappers are no different. In fact, according to a recent report from startup lender Capchase, bootstrapped software-as-a-service businesses are growing just as fast as their venture-backed counterparts—despite spending only a quarter of what VC-backed businesses do on acquiring each new customer.

What’s more, studies show that 64% of the top 100 unicorn startups—those valued at over $1 billion—aren’t profitable at all. 

As the Capchase report explains, before investing in growth, top-performing startups focus their efforts on nailing the product-market fit. That means finding a match between your product and the people who need it. This, in turn, creates happy customers, high demand, and organic, sustainable growth. A staggering 34% of startups fail because they don’t find the right product-market fit. A brilliant idea doesn’t always cut it.  

Let’s say you’re a VC-backed startup and…

Aytekin Tank

2024-06-21 08:33:52

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