We’ve put together a guide on the 5 most popular options for bootstrappers looking to secure investment and outside funding for their startup. The Bootstrapper’s Guide to Outside Funding will walk you through a funding stack that starts with the earliest round of capital you might consider, ending with a case for venture capital.

Guide Created In Partnership With

When we launched MicroConf in 2011, the idea that you could bootstrap a software business that was competitive with the likes of Google, Salesforce, or Slack without funding was unthinkable. 

For the MicroConf community, being the next Google was never the goal. Building a business on your own terms, using your available resources, and finding product-market fit has never required boatloads of capital to get off the ground.

A Bootstrapper’s Dilemma

The Bootstrapper’s Guide to Outside Funding. You might find the contradiction blinding, but the spirit of bootstrapping a business has evolved massively over the last decade.  Bootstrappers have historically been apprehensive (and often downright opposed) to outside funding - with good reason.  As a bootstrapped founder, you have the freedom to set your goals and when and how you achieve them. You aren't beholden to stakeholders or investors and don't have to report to boards, advisors, or the like… 

The challenge is that bootstrapping might have an upper limit.  Only 5% of bootstrapped founders reported that they were able to generate over $3M in annual recurring, with only 1% of founders reaching $1M in monthly recurring revenue.  With SaaS multiples between 3x-7x, the data shows that bootstrapped businesses have a valuation sweet spot averaging around $10M, with the outliers able to push towards an upper cap around $80M.  

Can you break through that upper cap? Absolutely. Bootstrapped wunderkind like BaseCamp and MailChimp have made that clear. But those stories are incredibly rare.  That is why the most successful bootstrappers, who often build with the goal of selling their business, are raking in low- to mid-8-figure sales prices. But what if you’ve got bigger dreams…

Outside Funding is on the Rise

In the 2022 State of Independent SaaS Survey, we found that 28% of founders had previously raised some amount of outside funding and that 30% intended to raise funding in the future. That begged the question - who is seeking funding, and at what stage of their lifecycle do they need it. 

We found that earliest-stage SaaS founders - those with less than $5K in monthly recurring revenue (MRR), were less likely to seek outside funding. That makes sense - it's rare to find institutional investment at such early stages - and without evidence of product-market fit, founders have a responsibility to keep building the product - not their pitch decks.

The Bootstrapper’s Guide to Outside Funding

As revenue grows, so does the appetite and potential need for outside funding. 

With so much competition and customers willing to churn without a second thought, innovation, optimization, and growth may need to be a step ahead of the revenue curve. That is when outside funding and liquid capital can be so appealing to many founders in it for the long haul.

The style and timing of funding matter. Patterns emerge based the growth, annual revenue, company size, and what modes of funding seem most appropriate for those seeking it. Based on survey data, there are 5 types of funding that are most popular with bootstrapped founders - and those are clearly aligned with scale and growth of the businesses seeking them. 

We've written this guide to help founders see a path from their earliest funding option through to the behemoth that is venture capital and when it might be appropriate to consider each step in between. So let’s dive in…