In this month’s Breakit Leaders in SaaS event, Oxx co-founder and General Partner Mikael Johnsson led a fireside chat and Q&A with Petter Hedborg, founder and CEO of Modular Finance. The group discussed the pros and cons of bootstrapping, and how it compared to growth with the support of external funding like venture capital.
Venture funding in the US reached an all-time record high with over $288B invested in the first half of 2021, and VCs in Europe are following suit. But can you bootstrap your way to scale? Mailchimp’s $600m in annual revenue indicates it’s possible, though it may be the path less traveled.
So what are the positives of bootstrapping? Bootstrapped companies live and die by their customers. Building a company with scarce resources creates a laser focus on early customer verification of your product. Plus, it allows you to build your company on your terms, with your preferred risk/reward profile. Without the oversight of external investors, there’s no pressure to ‘always double down on red’ to maximise growth.
Bootstrapping has its challenges too. Without the cushion of external funding, companies are sometimes unable to act quickly on opportunities and can’t maximise speed in every situation. Arguably it’s also possible to miss out on achieving full growth potential without the oversight and support of an external party.
And while there are certainly exceptions, bootstrapping is often not a good fit for companies seeking to become globally competitive. It is also challenging for bootstrapped companies to play in a market requiring first mover advantage and network effects.
Mikael's key takeaway? “There’s a time and place for everything. External funding is neither good nor bad. For the right company in the right situation it works as valuable fuel to turbo charge your company building - but that only works if you’ve built the engine that can extract the power out of the extra fuel!”
Thinking of bootstrapping your business? Don't miss Oxx investor Ingrid Bonde Akerlind in conversation with Rytis Lauris, co-founder and CEO of bootstrapped SaaS company Omnisend at Arctic15.