Insightful takes on scaling your business

3 reasons why bootstrapping my business was better than relying on VC

Bootstrapping makes me sleep better at night

bootstrapping
Phil Alves
Story by
Phil Alves

Founder & CEO, DevSquadPhil began his entrepreneurial journey when he was 17, starting and exiting his own SaaS business. From there he worked in senior positions in the e-commerce industry before founding DevSquad, a softw… (show all) Phil began his entrepreneurial journey when he was 17, starting and exiting his own SaaS business. From there he worked in senior positions in the e-commerce industry before founding DevSquad, a software development firm that helps entrepreneurs launch new SaaS products and growing companies plug in a ready-to-go dev team. In 12 years, he has led the build of more than 75 SaaS products.

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Looking back, it wasn’t until I left Brazil in 2011 and moved to the US that I realized not bootstrapping your startup was even an option. Growing up in a business-focused family, it seemed the only way to start your own company was, in fact, to do it yourself. 

Fast-forward to founding my startup in the States and I soon found out that raising money from external investors was actually the norm among my entrepreneur peers. But I stood my ground — I wanted to build my business the way I knew how, without the pressure of venture capitalists (VCs) that I saw others struggling with. If GitHub and Craigslist could make it without investment, why couldn’t we?

In the end, bootstrapping was the best decision I ever made — and lets me sleep a lot better than I would with VCs breathing down my neck. Here’s why.

1. It allows us to grow at our own pace 

Many VCs won’t rest unless they see that you’re scaling fast. By not having any VC commitments, we have been able to grow at our own pace. We knew it was important to prioritize cashflow ahead of fast growth, especially as 70% of startups fail because of premature scaling.

[Read: Coronavirus threatens flow of US capital into European tech startups]

This means saying no to clients when we want to and focusing on nailing the quality of our products. After becoming financially sound, we even went eight whole months without accepting a new client, so we could take a step back, pause, and make sure we were delivering the absolute best service we could. Had we been forced to answer to VCs who are only interested in returns, there’s no way they would have sat by and allowed us to reject all new clients for the better part of a year.

Those eight months not only allowed us to focus on the quality of our work, but also on the quality of our lives. I have always prioritized well-being and balance for myself and my teams, without the external pressure to continuously grow. By bootstrapping, we are able to achieve that.

Better yet, while starting out, bootstrapping meant that I was able to get going fast without waiting to raise funds. It’s helped us both speed up and slow down when we needed to — on our own terms.

2. It helps us solve problems with a laser-focus

There’s no denying that having spare cash lying around as a growing startup can be handy. You can hire the top talent, pay for swanky offices, and explore new ideas without worrying about the costs of them failing. 

However, having extra investment money can inadvertently be bad for your business in the long run, in a number of ways. Not having a safety net meant that we were forced to solve problems and overcome hurdles efficiently, quickly, and with laser focus.

For example, when starting out, we drastically needed to upgrade our marketing game and generate conversions, and we didn’t have time to waste. That pressure to move quickly and stay adaptable meant we developed a successful marketing strategy that is still in use today. We relentlessly A/B tested our brand messaging, changed our website every 6 months until we found the design that works, and pivoted to leverage YouTube ads after we saw that many of our clients were likely to find us there.

3. We’re able to get the best talent

While it may seem counterintuitive, not having excess time and money to spend on your recruitment strategy could actually be a blessing in disguise when it comes to supercharging your hiring process.

For example, it’s notoriously hard to find quality developers — especially in the numbers that we need them. In fact, 23.8% of tech businesses say that finding quality developer talent is the biggest challenge they face. As a bootstrapped company, we didn’t have the money to endlessly throw at our hiring process, nor did we have the time to waste on finding great candidates.

To solve this, we developed an efficient and streamlined hiring process to help us find the best applicants. We quickly learned from our experiences searching for the kinds of candidates that fit our company. We held weekly team meetings about hiring and implemented personality tests and live coding tests as part of the application.

After the three-week interview process, we gave the candidates real work and real challenges to find out if they were right for the company. This helped us weed out anyone who wasn’t the very best fit.

Now that we’ve refined our hiring process, we have a greater understanding of what makes an excellent candidate for our team. Had we been able to spend the money on taking a while to find the top developers we have, there’s no way we would have created such an efficient hiring funnel.

Bootstrapping my business hasn’t been easy, but it’s been worth it. That’s not to say I’m ruling out investment forever — if the right person comes along in the future, we might consider an offer. But getting to this point without external investment shows that we know what we’re doing, and any potential investors would have to understand that we would continue to do things on our own terms. Until then, we’ll keep doing what we’re doing, and doing it well.

Published April 20, 2020 — 11:39 UTC

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