The Case for Bootstrapping (to a point)
Statistically speaking, bootstrapping is better for most companies, founders, and their employees - so why isn't it celebrated more?
Supercruise is dedicated to supporting bootstrapped entrepreneurs. Since my earliest professional days, I’ve believed that the traditional venture capital model—while effective for some types of companies—is designed for very few and flawed for most. And as the VC industry has grown, so have the incentives of firms themselves.
I’m more convinced than ever that most companies should avoid getting on the venture treadmill. There is a critical tension in today’s startup ecosystem: oversized funds lead to overfunded companies, resulting in bad returns and, more crucially, poor outcomes for founders, employees, and their businesses. No wonder LPs are becoming wary of the entire asset class - while some perform well, many GPs will compete away the limited gains by overfunding and overvaluing companies. Even at the Upfront Summit this week, Vinod Khosla estimated, “More than 80% [of AI companies] will be losing money for investors five years from now”.
At the same time, AI and other technologies are making it cheaper than ever to start and scale a company. This paradox presents a compelling opportunity for bootstrapped founders—and for investors like us who back them.
Bootstrapping is hard. Watching competitors raise while you focus on business fundamentals can seem unfair or frustrating. But it’s important to understand the pitfalls of overfunding, the advantages of bootstrapping, and how technological and cultural shifts are making this approach more viable and attractive. The future of entrepreneurship lies not in raising the biggest round, but in building the best business.
The Problem with Overfunding
It’s not always wrong - Uber eventually seems to have figured it out and none of the foundational AI companies would be where they are without capital - but many markets aren’t winner take all and the warning about a “Softbank 2.0” scenario is real: companies that could be lean and profitable are instead pushed toward undisciplined and ruinous spending. This isn’t a hypothetical—it’s been the venture capital playbook for over a decade. Breakout companies are routinely offered 10x the capital they need, and most take it. Why? Simple: “how can you not turn down an endless supply of capital?” But this capital comes with hidden costs and expectations. And many unicorn zombies are canaries in the coal mine for what can happen: marginal returns and low liquidity for all involved.
Why Overfunding Hurts
Dilution: Every funding round chips away at the ownership of founders and early investors. By the time a company exits, founders often hold just a sliver of the equity they started with—sometimes less than 10%. For example, in many venture-backed IPOs, founders end up with single-digit ownership, while bootstrapped counterparts like Atlassian’s founders retained over 70% when they went public in 2015.
Wasteful Spending: Excess capital breeds inefficiency. Companies hire bloated teams, pour money into untested marketing campaigns, or chase vanity metrics—all in the name of growth. WeWork’s $47 billion valuation and subsequent collapse is a textbook case: billions in funding fueled lavish spending, but profitability remained elusive.
Misaligned Incentives: VCs need big exits to justify their funds, so they push for rapid scaling, often at the expense of sustainability. This can force founders into short-term strategies that undermine long-term value—like prioritizing user growth over revenue, as Uber did for years while hemorrhaging cash (though it has become one of the success stories as they trimmed their costs). And they want to deploy those every 2 years to raise the next fund.
Heightened Risk: Overfunded companies live or die by their burn rates. When markets tighten (as they did in 2022), those with unsustainable models face layoffs, down rounds, or outright failure. Overfunding doesn’t just hurt returns—it jeopardizes the business itself. VCs have portfolios; most founders and employees do not.
The data backs this up. According to PitchBook, venture-backed startups have a 70% failure rate, often because they’re chasing growth they can’t sustain. Funding isn’t a golden ticket—it’s a gamble that too often ends badly.
Failure happens. It’s part of the beauty of startups and the ecosystem. Attempt something bold and if it doesn’t work, try again. But the numbers don’t lie: most companies won’t exit for billions of dollars. In fact, since 2010, only 214 tech companies have realized +$1b outcomes - ~15/year. Yet there are far more unicorns on paper waiting for what they believe they were promised.
Thousands of companies raise money each year in the hopes of being 1 of 15 companies - someday. The optimism is special, but the reality is something different.
The Bootstrapping Advantage
Contrast this with bootstrapping: building a company with minimal external capital. It’s not for every business but for software, SaaS, and tech-enabled services, it’s a powerful alternative. Here’s why:
Bootstrapping Advantages
Ownership and Control: Bootstrapped founders keep more equity and call the shots. They’re not beholden to VCs demanding aggressive timelines or exits, giving them the freedom to build on their own terms. In fact, founders generally end up owning less than 50% of their companies after raising their Series A, according to recent Carta data.
Discipline and Efficiency: Limited resources force focus. Bootstrapped companies prioritize profitability and customer value over flashy growth metrics and headcount. This lean mindset often leads to better unit economics and a stronger foundation.
Long-Term Vision: Without investor pressure, founders can take the long view—investing in product quality, customer loyalty, and culture. Basecamp, profitable for over 20 years without a dime of VC, is a shining example.
Market Alignment: To survive, bootstrapped companies must generate revenue early. This means solving real customer problems and delivering products people will pay for—think Mailchimp, which bootstrapped to $700 million in revenue before its $12 billion acquisition.
Real-World Evidence
Survival Rates: The Kauffman Foundation found that bootstrapped companies outlast their venture-backed peers, thanks to sustainable revenue models. While 70% of VC-backed startups fail, bootstrapped firms are built to endure.
Profitability: A 2020 PitchBook report showed that bootstrapped SaaS companies reach profitability faster (by necessity), as they focus on customer retention and organic growth from day one.
Founder Returns: GitHub, bootstrapped until a small $100 million raise in 2012, sold to Microsoft for $7.5 billion in 2018. Its founders reaped far greater rewards than if they’d diluted early with massive VC rounds. As mentioned before, Atlassian’s founders owned 70% of the company when it went public, compared to 10% average ownership for VC-backed IPOs.
These examples and data points prove that bootstrapping isn’t just viable—it’s often superior - for the founder(s) that is.
Technology is Fueling the Bootstrap Revolution
Just as AWS decreased startup costs in 2007 and beyond, open source technologies have prevented new startups from having to reinvent the wheel at each and every turn. And now AI is further decreasing those startup costs and time to market, while also providing promise in decreasing scale up costs. This is a game-changer for bootstrapped founders.
How Tech Lowers the (Cost) Bar
Development: Open-source frameworks, no-code platforms, and AI tools like Lovable, Cursor, Replit, and GitHub Copilot have slashed the cost of building products. A solo founder can now create what once took a full engineering team.
Marketing: AI-driven ad platforms (e.g., Google Ads with Smart Bidding) and low-cost channels like social media let founders reach customers without breaking the bank. With companies like Captions and all the AI video editors, the cost to produce high quality marketing content should slash required spend to grow.
Operations: Cloud computing from AWS or Google Cloud scales infrastructure on a pay-as-you-go basis, while SaaS tools like Zapier and Workato automate workflows—all at a fraction of traditional costs. Layer in the emerging market for AI agents and the potential for <50 teams reaching +$1b of revenue skyrockets.
This means founders can bootstrap to profitability with far less capital than a decade ago. A SaaS startup that might have needed $1 million in 2010 can now launch for $10,000—or less. Technology isn’t just enabling bootstrapping; it’s supercharging it.
A Cultural Shift is Underway
There are signs that founders are seeing this opportunity and tired of being sold stories of grandeur.
Signs of Change
Founder Skepticism: High-profile scenarios like WeWork have made founders wary of overfunding’s downsides. Many now ask: Do I need VC, or can I build without it (or less of it)?
Community Momentum: Platforms like Indie Hackers and MicroConf celebrate bootstrapped success, eroding the stigma of not raising VC. Stories of founders like Pieter Levels, who built Nomad List to millions in revenue solo, inspire others. The number of solopreneurs building to millions of revenue is growing.
Investor Evolution: Firms like Supercruise are stepping in, offering capital to bootstrapped companies ready to scale but where the goal is not the next raise; the goal is great companies.
If bootstrapping does in fact become fashionable again, it could redefine entrepreneurship for the vast majority of the bold.
Why Growth Equity Fits the Bootstrap Model
Growth Equity focuses on companies that have reached sustainable operations. Historically, most GE funds believed this was at $10m revenue (but we think the same level of proof happens much earlier). These businesses have validated their markets, honed their products, and often achieved profitability. When they’re ready to accelerate—whether to expand globally, hire top talent, or expand product offerings—growth equity provides the capital and partnership to make it happen.
We’ve seen firsthand how bootstrapped companies, unburdened by early dilution, wasteful spending, or the pressure for the next markup can scale smarter.
Here are some high profile bootstrapped success stories that come to mind (Author’s Note: it really feels like my friends at Accel Growth outperform here):
Atlassian, founded in 2002 by Mike Cannon-Brookes and Scott Farquhar, provides collaboration, development, and issue-tracking software for teams, including Jira and Confluence. After initial bootstrapping, it raised external funding and had an IPO in 2015, now boasting a market capitalization of over $80 billion
Qualtrics, founded in 2002, provides experience management software, including survey and data collection tools. After raising external funding, it was acquired by SAP in 2019 for $8 billion and later sold to Silver Lake in 2023 for $12.5 billion
Browserstack, founded in 2011, provides a cloud-based testing platform for web and mobile applications. After raising external funding, it has grown to serve over 25,000 customers and is valued at $4 billion
GoFundMe, founded in 2010, is the world's largest crowdfunding platform, allowing people to raise money for various causes. After raising external funding, it acquired Classy in 2019 for $100 million and has facilitated over $30 billion in donations
Laravel, founded in 2011 by Taylor Otwell, provides an open-source PHP web framework. After initial bootstrapping, it raised $57 million in Series A funding from Accel in 2024, suggesting strong growth in web development
37Signals, founded in 1999 and now known as Basecamp, provides project management software, notably Basecamp. Initially bootstrapped, it later received investment from Jeff Bezos and was rebranded to Basecamp in 2014
Jetbrains, founded in 2000, provides integrated development environments (IDEs) for various programming languages and created the Kotlin programming language. After initial seed funding, it has grown to be a leading provider of developer tools
GitHub, founded in 2007, provides a web-based Git repository and hosting service for software development. Initially bootstrapped, it raised $100 million in 2012 and was acquired by Microsoft in 2018 for $7.5 billion
Steam, launched in 2003 by Valve Corporation, is a digital distribution platform for video games and has become the leading PC gaming platform, with over 132 million monthly active users, an unexpected detail given its focus on game distribution
Mojang, founded in 2009, is best known for creating Minecraft. After being acquired by Microsoft in 2014 for $2.5 billion
Lynda.com, founded in 1995 by Lynda Weinman and Bruce Heavin, provides online learning courses in various subjects. After raising venture capital funding, it was acquired by LinkedIn in 2015 for $1.5 billion
Galileo, founded in 2000 by Clay Wilkes in Salt Lake City, Utah, provided a financial technology platform specializing in card issuing, payment processing, and digital banking APIs. Initially bootstrapped for nearly two decades, it raised $77 million from Accel in 2019 and was acquired by SoFi in 2020 for $1.2 billion.
Braintree, founded in 2007 by Bryan Johnson in Chicago, offered a payment processing platform for online and mobile transactions, serving e-commerce businesses like Uber and Airbnb. After raising $34 million from Accel in 2011, it acquired Venmo in 2012 for $26.2 million and was bought by PayPal in 2013 for $800 million.
I’m sure I missed many and would love to hear about them!
The Future is Bootstrapped
Overfunding pushes most companies toward ruin, while technology makes lean growth more attainable. For too long, the VC model has dominated, equating big rounds with success. But the tide is turning.
Bootstrapping offers founders control, discipline, and a path to sustainable value. Backed by data—higher survival rates, faster profitability, better founder outcomes—and enabled by AI and tech, it’s a strategy whose time has come. The best businesses aren’t the ones with the most cash; they’re the ones built to last. And that’s a thesis worth believing in.
Interested in reading more like this? Come cruise with us!