I grew my business without outside funding. Startups have an advantage over VC-backed startups—especially today

Theranos is a story about when VC funding hit a snag. The company claims to have developed a revolutionary blood testing technology and has raised about $724 million from investors. It was valued at $9 billion before it imploded because of a serious mistake within the company – its product didn’t work. It’s all just hype, with no real value. Even when VC-backed founders aren’t committing fraud, there is still a tendency to prioritize funding and scaling to the detriment of the product.

I founded my company Jotform over 18 years ago. Without external funding, growth was slow at times, but today, we have more than 25 million users worldwide. I learned a lot about bootstrapping and how it creates the right combination of pressure, frugality, and creativity to develop great, profitable products. Here’s a closer look at why VC funding can cause startups to create bad products.

The case for VC funding goes awry

People often think that “small business” and “startup” are interchangeable. But ask any founder and they’ll probably tell you that their ambitions are lofty. Bootstrappers are no different. Actually, according to a recent report from startup lender Capchasebootstrapped software-as-a-service businesses are growing as fast as their venture-backed counterparts—despite spending only a quarter of what VC-backed businesses do to attract every new customer.

Furthermore, learn found that 64% of the top 100 unicorn startups—companies valued at over $1 billion—were completely unprofitable.

As Capchase’s report explains, before investing in growth, the highest-performing startups focus their efforts on creating product-market fit. That means finding the right fit between your product and the people who need it. This, in turn, will create happy customers, high demand, and sustainable, organic growth. An amazing thing 34% of startups failed because they couldn’t find the right product for the market. A great idea does not always succeed.

Let’s say you’re a VC-backed startup and you’re not seeing the growth you expected. You’ll probably increase spending on sales and marketing campaigns, leaving you with a shorter runway (the amount of time your business can stay afloat with just cash reserves). And maybe you will achieve the desired effect (attracting customers), but that entails many risks and long-term profits are uncertain. If you’re a starter, you don’t have that option.

So what will you do instead?

What bootstrappers do differently

Warming up may sound messy, but in many respects, it’s a luxury. As a startup, you have the right to be obsessively focused on your product and answer to no one.

When I started the company, I loved our first product, online forms, because I saw its potential to make people’s lives easier. That element—ease of use—was my main concern, hence our original tagline “Easiest Form Builder.” I loved this product so much and was so happy to see people using it that I gave it away for free (while working a 9am to 5pm day). From February 2006 to March 2007, we had no paid versions of our products. However, this is an important period for the company.

Why? Because I listened to early users and received invaluable feedback on how they used our product and how I could improve it. I refined and iterated before releasing the paid version. Because people truly see the value in our products, we grow our customer base before spending a dime on marketing.

If I was required by investors to meet arbitrary KPIs, I would have spent my early days mastering PR and sales. I’m not an expert in either of those areas, and I don’t like them either. I’m sure the company wouldn’t be able to grow if I was forced to focus exclusively on those aspects of the business.

Your most important stakeholders

Today, as an advisor to several founders, I always share my 50-50 rule: spend half your time on product and half your time on development. I also encourage founders to release their most important features as soon as possible so they can get them into the hands of users. They can then gather important feedback about their product—before even asking people to pay for it.

That’s another takeaway: Never stop listening to your users—your most important stakeholders. When people get too attached to their product and ignore whether it meets user needs or not, they are doomed to failure. Growing your business organically requires letting go of your ego and understanding that even smart products will fail if they don’t meet the specific needs of your target audience.

Another thing startups do differently is they focus their efforts on creating impact. For example, Capchase’s report shows that the healthiest businesses don’t spend the most on sales and marketing, but instead have a “sharp” understanding of which channels and campaigns have impact. biggest and bring faster profits. In the early stages of a startup, perfecting your product has more impact than flashy marketing campaigns. With tighter budgets and smaller teams, startups tend to apply this way of thinking to everything they do. That’s why I tell entrepreneurs and team members ARRIVE Automate their busy work—to spend more time on “big things” or more meaningful work that advances your company or career.

Recent reports shows that in 2024, VC funding hit a six-year low. This might make the startup scene shudder, but it doesn’t. Bootstrapping is a safer, more reliable route. And perhaps most important for your company is that it creates the optimal environment to develop better products for customers.

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