Season 1
| Episode
2

More Money, More Problems: The Case for Bootstrapping Your Startup

Do you need funding to launch your B2B SaaS startup? Steli Efti doesn't think so. Hear how he bootstrapped Close—scaling it into a successful B2B SaaS company without outside investors. Discover the pros and cons of bootstrapping and get tips for founders looking to self-fund.

Steli Efti
Steli Efti
Desiree Echevarria
Desiree Echevarria

Desiree: All right. Hey everybody. I'm Desiree Echevarria, and I am back, talking to founder and CEO of Close, Stelios Eftinopoulos—but you might know him as Steli Efti. That's his name on the streets. Did I pronounce that correctly? Stelios?

Steli: Perfectly. I'm so impressed. Yes.

Desiree: And today, we're going to be talking about bootstrapping your startup. What are the pros? What are the cons? How to do it properly. And Steli here is the guy who's been there.

Desiree: In the last video, we talked about bootstrapping, and we talked about how you got into Y Combinator with one idea for a startup, and it was a charitable giving app called SwipeGood. With SwipeGood, you were able to raise over a million dollars in investor funding. But then when growth stalled, you and your co-founders made the decision to pivot to another company, another idea called Elastic Sales. Growth stalled at SwipeGood; you pivot to Elastic Sales; you're not able to raise investor funding for Elastic, and later on you pivot again to Close.

Desiree: You don't raise investor funding for Close. We call that bootstrapping. You had no choice but to bootstrap your businesses after Y Combinator because it was basically bootstrap or die. Since then, it's been over a decade bootstrapping this business, which is now almost a hundred people strong, 30 million in ARR. So, it really worked out. But today, we're going to be talking about the practical realities of bootstrapping and what new early-stage founders can expect if that's the route that they take, right? Dirst things first, I've already said bootstrapping a million times, but let's define it.

Desiree: What is bootstrapping?

Steli: I think bootstrapping refers to growing your business by the strength of its revenue and profits and not taking outside investor money to grow the company. I don't know if it's still “hip” term. I know that for a while, a good friend of mine was trying to champion the term “customer funded” instead of bootstrap, but I think some things just don't have a chance, even if they're a bit more accurate, to succeed, and get broader adoptions. Bootstrap is still, I think the term that most use.

Desiree: It's like a very “grandpa” term—pull yourself up by your bootstraps and don't wait for any handouts from VC, is basically the idea. But it's a way to fund a company without outside funding. So, what options does a SaaS founder have when they're funding their startup?

Desiree: There's family and friends’ investment; you take out small business loans; you max out your credit card; you go on SharkTank. Give me the whole inventory of options a SaaS founder has to launch their idea.

Steli: I mean, there's probably more options than ever before. But realistically, for most people, they're either going to raise money either from angel investors, seed investors, an incubator, or a VC firm. They're going to take on some debt or they're going to try to bootstrap, which means start small finance; you can do most of the work early on and try to get to revenue and profits as soon as possible so that you can a) confirm that this product market fit that what you have is truly something that has legs and can succeed in the market, but also b) that you're going to be able to be in charge of your own destiny.

Steli: But the allure of raising a huge sum of money from, a brand name investor; it's just too much for most inexperienced SaaS founders not to be romanticizing and not to be flirting with, not to be hoping for, daydreaming about. But generally you could just go and get people to invest, give you money and get a share of your business.

Steli: You can go and take on debt. I don't think a lot of SaaS founders probably take that option. And the one is that you just get going and create a version one that people want to pay for as soon as possible and finance a business through revenue profits and your customers.

Desiree: Which is like the wise route, right? Like, “I actually have a thing.” So, it's almost like bootstrapping on the path to maybe getting funding later, while you're waiting for your Shark Tank invite.

Steli: Yeah, I think that it all depends, right? There's no one way that is the exclusively best way for every company, every person, every founder, but if you're in B2B, consumer plays can be a little bit different,. Sometimes there, you need the volume, you need the scale, you need millions of people to use your product or download your app, until you can really meaningfully start to monetize.

Steli: But if you're in SaaS, which is a subscription business model, and if you're in B2B, so you're selling to businesses, there's very rarely a reason to have to raise millions, hire lots of people, open lots of offices and invest in a ton of things before you're really ready to go to market or see if there's a demand for it.

Steli: If it's up to me, I would advise any business owner to own as much of their business as they can and to be in charge of their freedom and to be forced to have some good hygiene, some good discipline, right? Caring about things from the get go that are important to care about, versus, I don't know what a good analogy would be, but like, getting to the top of mountains by helicopters instead of hiking them up and then wanting to attend a competition because you've gone on all these big mountains. 

Steli: That's going to be a riskier business because you haven't learned to go through the pain, to build the muscle, to build the endurance, to build the experience, to really know how to like run up a difficult turn and make it to the top, because you always took the, simple finance, but also the artificial route, of just flying there and being dropped off at the end result.

Steli: So somebody gives you millions of dollars. Even if you have the best of intentions, you're going to want to spend it. They're going to want you to spend it. So you're going to overspend. It's just a question of can reality catch up to sort of the overspending pace that you've set or not.

Steli: And so, for my liking, if you can grow your business more organically, more so sustainably, that's probably the better option.

Desiree: That's a really great analogy. I haven't heard that before. Like the difference between hiking and then just being placed on top of the mountain; it can create this artificial sense that you've achieved product market fit when you haven't really, there might just be a lot of initial excitement and groundswell and then, but is it sustainable type thing?

Desiree: I find that fascinating, but that's a really great analogy. We mentioned Shark Tank before; Mark Cuban has one of my favorite quotes about getting investor funding, which is, “Funding is not an achievement; it's an obligation.” But you can't tell that to an early-stage SaaS founder who's pitching in front of VCs in Silicon Valley.

Steli: It's hopeless. Like there's certain things that you have to experience yourself to be able to mature. And then look back and have sort of more context or look at things more differentiatedly. I can tell people all the time that being a rockstar is not all that. And that this comes with celebrities, a burden, and it comes with a lot of stress.

Steli: But the younger people are, the more they’ll be like, “Yeah, yeah, yeah, shut up. Give me the fame, the admiration, the limelight, the money, the fancy cars.” So it's tough, I think, to escape the allure, but it's definitely right.

Steli: Then I thought when I first moved to Silicon Valley from Europe, all I wanted to do was to raise millions. That was all. To me, that would mean that I'm going to do something incredible and that I'm succeeding. It's very alluring until you finally get to that point, as in many things in life that you daydream about and then become reality and you go, “Oh no, there's something good about it, but there's also lots of strings attached and it's a burden.”

Steli: And it's a responsibility and this doesn't mean anything. All this means is that I now have to work harder and I have more people that I'm responsible for and, and accountable for, and shit, this has to now succeed because I now took on other people's money as well and didn't just invest my own time and energy into this.

Desiree: Do you ever see founders delaying, or putting off starting their business in earnest? Because they're still waiting on landing that investor funding. You ever run into that problem?

Steli: No, I mean, there's definitely founders that exclusively are committed to raising money to succeed.

Steli: And most of the work they're putting in is in order to be able to raise money. So they take on that lens. So the website that put together the pitch deck, the meetings they're taking, even the way they think about presenting their idea, they might alter it. Most founders will alter even the way that they think about the idea, because they think, well, if we just adjusted the AI is now really popular.

Steli: We wanted to do X, but now what's our X plus AI angle to make us more investable, to make us more exciting. Then they talk to an investor and then investors says, yes. X and AI is cool, but it needs to be X and AI for the enterprise because they, that investor made all their money in an enterprise, in a business that's sold to the enterprise.

Steli: So that's their bias of success. So the startup goes back, changes that pitch deck, talks to the engineer, says we need to focus more on what the enterprise needs, make some meetings with enterprise executives. And then has another meeting with another investor that says, Oh, no, no, no. Enterprise.

Steli: This could be an end consumer player, prosumer play, right? That could be way bigger. You need to think of hundreds of millions of users. And most founders doing that process will zigzag to death because they're very externally focused: How do I make myself sexy, appealing, and attractive to these outside people that ultimately I can't control.

Steli: I don't know their lives. I don't know their bias. And if I am choosing to make decisions on what my business is going to be based on what it's likeability or investability will be to outsiders, I instantly run the risk that I'm not focused on what truly matters, which is the customer, the problem I'm trying to solve.

Steli: The thing I'm truly passionate about. And I’m just going for popularity. I'm trying to be the popular person at the bar at the hot club that will not make for like life decisions that will be really a part of my integrity or really authentic to what I'm trying to do with my life. Most likely.

Desiree: That's a good point. Your audience in the boardroom is not the same as the audience in the market; that's not your end user necessarily. That’s really good context. So let's get down to brass tacks. You bootstrapped Close. What have been the pros of bootstrapping this business?

Steli: I mean, the pros are very straightforward. Number one, we own the founders, me and my co founders own more of the company. We have been able to build the business to our own liking. Sort of deciding what we think is best for our customers, for employees and for ourselves without the need to justify that to external people, whose main motivation is that you go and take the maximum amount of risks, give the maximum amount of return.

Steli: And if you fail, that's totally fine to them. But if you fail, they want you to fail fully. Right. So we were able to have a lot more freedom in the choices we made. A lot more freedom in the direction, the decisions we're making, we're able to build a business that yes. It didn't turn an overnight success.

Steli: It didn't scale to hundreds of millions in revenue be sold for a billion in two years, where we're not a rocket ship in that sense, but step by step year by year, we built something really special, that's very valuable and that we're still in control of that. We still love where we didn't make a lot of compromises and a lot of choices that were pressured upon us.

Steli: And what we have seen, we have a lot of founder friends that did take on money and a lot of them, even the ones that became tremendously successful in pure monetary terms that scale to hundreds of millions or sold for hundreds of millions looked and felt miserable for a lot of the time, because it's very hard to be a happy person when most of the days you make decisions, you don't really fully feel good about, and you're forced to push your company directions or build your product in a way because others force you to, and need you to, and want you to do that just doesn't feel good over, over the long haul. 

Steli: That's not fun. It's probably again, coming back to our knowledge of like being with a partner in a long term relationship that only was interested in your looks. So every day you now have to dress and look a way that pleases that person that day.

Steli: It's going to get old. That's not going to be very fulfilling if that's all you got to do. And you'd be wishing that you'd found somebody that actually you have more in common and that is more interested than just in how attractive you are in that very moment. So I think the freedom it has given us to bootstrap has been a big success.

Steli: I think the restrictions to some point; taking on a lot of money comes not only with the responsibility of success, it comes with the responsibility of spending it. Now that doesn't sound like a bad thing, but it is, right. There's a, there's an old movie with Richard Pryor. I don't remember the title.

Steli: It's an old movie with him where he has to spend, I don't know what it was, a million dollars in a short amount of time, or he's not going to inherit all the money from some like rich unknown uncle or something, and that the whole move is about like this poor guy, that's like so excited to spend all that money, but it turns out, and you can tell during that story, that it's not that easy to spend all that money. In a way that doesn't ruin your life or in a way that doesn't create a lot of issues. And so you raise, you raise a ton of money. The expectation from investors is that you're going to spend it.

Steli: They are not interested in giving you 10 million for you to just like not touch it for years and just grow organically and slowly. No, no, no, no. They need you to spend it within like the next 18 to 24 months, and move faster and grow faster. So you could go and raise the 50 million.

Steli: So, that is a lot of pressure. That means you have to find outlets to spend money. Typically, what that means is you're going to start hiring a lot more people. You're going to be opening office. You're going to be doing things that are expensive. You're going to be running a lot more advertisement, even if it makes no sense, even if it's not profitable, even your product isn't ready, even if you don't have product market fit, you're gonna have to start spend, spend, spend, and create the impression that this thing is growing and exploding, and if it is, coincidentally, you're lucky.

Steli: It's more of a lottery ticket. I mean, in most cases it isn't, so you have to do whatever black magic it is that people have to do to try to close that gap between all the spending and scaling that you do to spending 10 million, that's quite a big budget on year one as a company and like catching that up with the reality of like people actually buying your product, using it, getting value from it at a scale.

Steli: So not having to spend a lot of money and having to worry about spending money and pleasing investors, being able to build a business in the way that we want it with complete freedom; those definitely are some of the benefits.

Desiree: You mentioned hiring and I've worked for a VC back company. I've worked for a bootstrap company and the major difference that I've seen, one of them, has been hiring. And it's like you said, when they get a VC company gets a, an influx of like series a, they can spin up a 30 person marketing team overnight. Like Santa Claus just showed up with a sack full of marketers.

Desiree: Here you go. Here's how here's 10 million worth of marketers. And then, I've also seen that company a couple of years in, now we have to start removing these seats. We over committed on a lot of the roles. We're shifting strategies. Cause that's startups too. And then thinking of like the responsibility of like, Oh, wow.

Desiree: I'm having to let people go. It's probably not a good feeling as a founder to have, but I want you to talk about like, Because you don't have that problem. That's a bit of a champagne problem. You don't have as a bootstrap founder, you do have to be more disciplined about the hiring decisions you make as a bootstrap founder.

Desiree: Can you talk a little bit about that? Like how has that been a good thing? How has that been a bad thing?

Steli: I don't know. I mean, for me, discipline is a good thing, and most of us don't opt in for discipline until we've acquired enough experience with both discipline and lack of to then have the wisdom to choose it.

Steli: But none of us likes discipline. It's like something that we have to use willpower for and eventually, it becomes maybe part of sort of our operating principles. I think overhiring is such a dangerous path to go down. And again, you raise money and it forces you to hire as fast as possible.

Steli: So the risk of overhiring is, is almost very, very, very high. And the problem with that is that as in many other things, I don't know who said this quote, but like most companies don't die of starvation. They die of like indigestion, right? So it's one of those things where if you hire too many people, but the work and the company and the customer base and the product is not in true and honest and real demand of these roles and of this work. Now, giving people busy work, them pretending their work is doing something, then you pretending that the pretended work is pretendedly leading to outcomes to other people. Now it's such a big, we're just pretending game and that becomes your main job.

Steli: It's the biggest chunk is to sort of make things look good and come up with things people should be doing. All day long. And then, as you said, you switch strategy, you pivot your product. Boom. Now, you've invested all this time onboarding people, getting to know them, investing time in them, managing them, onboarding them, doing all this project work, and now you're going to have to go through the toxic experience of letting all these people go, communicating that with the people that stay.

Steli: All these activities, hiring and recruiting takes a tremendous amount of energy, time, and attention away from other work. Firing takes even more attention, energy from all the work you do that a bunch of times, there's nothing left for you to actually build a business with.

Steli: So I think the discipline that it gives you, that forces you to ask yourself right now, is the company making enough money and are we seeing enough success in this type of activity to hire another person here or another two people can the company finance that can our revenue finance that I think is a discipline that is really important.

Steli: In today's world, where it's not like it used to be a lot of things. If you use modern technology and if you're a SaaS business, you just don't need a huge team on day one, you don't even need it on a year 10. But you can with a relatively small team, utilizing technologies, being smart, being a little, you know, resourceful, you can do quite a lot, right.

Steli: And, so, I think hiring a little slower in the early days and hiring in accordance with your growth and with your success in the market is leading to sort of a healthy foundation that then allows you to build something really large and really significant, in a very stable and sustainable way.

Steli: A lot of times people, and this is probably propagated a lot by, investors as well, but just by the culture, people think, “Oh, bootstrap that means small.” That means not scaling. That means, they used to be like a lifestyle business, as if, that's a derogatory term. Like you don't even have world changing ambitions.

Steli: You're just a little lifestyle business. Well, you know, it's like saying, “Oh, you're trying a business to become a million, we're, we're buying lottery tickets.” You're not on the fast track, on the smartest track, which is zero work, and millions in returns. Yeah, you're right. But at the same time, how many of you are going to win the lottery?

Steli: Not many. The same odds for raising tons of money. How many of you will be truly successful at that game? Not many. Most of you will be wrecked at the end. Broke, spiritually, financially, mentally, it's not going to be a nice game for you. Now, if, as an investor, I want to invest in lots of people, tell them all to go all in.

Steli: And if all of them go broke and one is like a outsized, crazy return. That works for me, right? I still made money, but if you're not the one lucky one then you're going to be in trouble. Now, you, if you were telling me this, when I came to Silicon Valley and I was 23 years old, you know what?

Steli: My response would be very simple. I'm going to be the one that I'm going to be the one successful. I'm special, I'm going to change the world. And I think we need that. That's a beautiful thing to believe that. So that's totally fine. I had that myself. I think people need to have a humanity; humanity benefits from youthful sort of confidence, right.

Steli: And ignorance, like all that is good. But coming back to the question of hiring; I think that when you move super fast and you hire lots of people because you're pressured to, and because you can, and because you don't have to worry about if you need these roles, you just say, we will, what you're doing is you're basically setting yourself up for really shaky foundation. You most likely are going to hire the wrong people. You're most likely going to make mistakes in the culture you're creating. You most likely are going to do a lot of work in the wrong directions. All that is distraction, distraction, distraction, distraction.

Steli: So much work for things that fundamentally don't matter because none of this has to do with customers or customer product, product market fit, none of that. You don't need a huge PR department. If you have no product, no users, no customers. If coming up with stories on how to run a Superbowl ads, when you have nothing of substance is not the best use of energy and time, it's such a waste.

Steli: So I think hiring a little slower at the beginning will ultimately, and eventually help you to hire faster and to accelerate faster. And I think that today more and more SaaS companies will start, that will become billion dollar businesses, with tiny teams. So, that connection of we need to raise lots of money, or we cannot build this really powerful product or have this tremendous success in the market becomes less and less true anyway.

Steli: So I think that’s a sort of an old way of doing things. And in the future, we'll see less and less and less of this.

Desiree: Yeah, it makes a lot of sense. And I, not to like toot our own horn here at Close, but I just started working here a couple months ago. I'm on month four of working here.

Desiree: And one of the things that I found remarkable is that this s a small team, about a hundred people. The tenure here is incredibly high, like years. higher than the tenure at the of the average employee at like a VC startup. There's incredible turnover and VC startups and you come to this place and you talk to people who've been here five, seven, 10 years, the entire time, and that's just a real testament to me about if you're slow and deliberate and just really intentional about the people you're hiring, you create a culture that is less subject to, to chaos, to turnover.

Desiree: And that's what gets you like the long term stability and growth. So to me, that is when a bootstrap business is that it's best when you can have a really healthy culture and you kind of trust the people around you, trust leadership a little bit more. So, there's good and bad in both, but you definitely attract a certain type of people with a bootstra startup.

Steli: And just to talk a little bit about the hiring pros and cons with lots of VC money or bootstrap. Things go in ebbs and flows and trends, and in cycles. There was a time for instance, where the market was booming and money was unlimited. And we had all this excitement about some new trendy technologies and all these companies were hiring and recruiting so aggressively and offering insane salaries just to recruit people from other companies, just doubling their salaries, there was inflation in like just titles and salaries, like crazy.

Steli: And during that time, we did very well in retaining most of our people, but it was tough and we're thinking, well, this is how much longer can we get through this storm when like every day our team members are getting like five, six emails with insane financial offers. But then, the pendulum swung on the other side and there were like layoffs and, bankruptcies and scandals and this.

Steli: All that recruiting collapsed and all of a sudden you could really sense internally at Close, how many people were like, “I'm sure glad I stuck around here, sure glad I didn't jump over to that Titanic boat that looked really cool for a moment.”

Desiree: Suddenly no one wants to go work for Adam Newman. Suddenly all the concerts, he's flying people to at WeWork, just the concerts and the, “Oh, come out to my island. And you're like, well, you know, it's fun for a minute. And then you're like, wait a minute. Now we don't have health insurance.” So, it can only last so long.

Steli: And now we get all these candidates that are like, “I'm over this VC thing, this is the second VC based company I was part of. And the founders are a mess and the people hiring, firing and pivoting, and I want a company with people that are thinking long term that's been around the blog, that is product market fit.” All of a sudden we're like an attractive company in this space and we benefit from this. And honestly, there's going to be a time again where we're like the ugly duckling again.

Steli: It comes and goes and ebbs and flows. The right type of people will stick around at Close and we'll see the benefit of working with exceptional talent long-term on something versus everybody's just sticking around for a couple of months and then hops over to the next shiny thing, but if you're long enough in a market or in a space, you'll learn to stay cool and to not get distracted as easily because things come and go. Everything is a cycle and when you play to win with a sort of a long term strategy, then, you know, “Oh, we got time. We can be on the downswing for a little, and then we're going to be on the upswing.”

Steli: But net over a long enough period of time, we're going to win.

Desiree: I like that. So, to get away from hiring. I know that one more concern; I'm sure there's tons of concerns founders have all day, every day. Their heads are just filled with concerns. I know that one concern is going to be, “How am I supposed to do customer acquisition on a shoestring budget for my SaaS company?” As a bootstrapper bootstrapper, you';; never going to outbid a fortune 500 company for a Google keyword, right? We compete with a Salesforce. We're not going to outbid Salesforce for keywords when you don't have endless funds to do sales and marketing.

Desiree: You kind of have to become really creative out of necessity. So, what are some of the ways that you acquired customers in the early days that cost you little to nothing as a bootstrap business?

Steli: I mean, when we went into market in January, 2013, again, we realized we're not going to out advertise or outbid all the other players in the space, but we saw an opportunity in content back then. We looked around at all the blogs and YouTube channels of other CRM companies.

Steli: And we arrogantly, and maybe a little accurately thought they stink. Like we wouldn't want to read any of this. We don't think that these opinions or takes are what works today and what resonates with the current founders of the current market. And so we started creating content and sharing what we're learning, sharing what we'd learned running Elastic Sales was, which was an outsourced sales agency.

Steli: So with an incredible amount of stories and experiences and experiments that we'd run in doing up on sales for B2B SaaS companies, and it resonated, people cared about these stories. People cared about, and resonated with the advice that we're giving. So we started slowly building an audience. We also had built a product that was very differentiated and did a few things significantly better than any other CRM and many things we did terrible.

Steli: But these things that were really, really incredibly differentiated that we had done resonated again with a small niche, a lot of startups, a lot of SaaS companies were like, “Ah, this is great. This product is amazing. The API of the CRM is incredible.” And we started creating a little bit of a buzz. We started creating a little bit of an audience.

Steli: And then, we went outside and we met people and we talked to them and we shared with everybody what we were doing and step by step, we grew. Now, we had a product that resonated with the market, and we had stories to tell. So all that was the accumulation of a prior company and lots of prior experience.

Steli: So, it's not like we'd never done anything entrepreneurial; we'd never done anything in sales, and we came right out of college and thought, let's build a CRM and, write some articles and we'll succeed. It took a good amount of investment to be in a position to succeed as quickly as we did without any external funding.

Steli: But I'll say this, no matter how much you raise, even if you raise a million or two, you still have a lot less money than your best funded biggest competitor. So, as a startup, you should only succeed if you are more creative or differentiated in some way that your competitors aren't. Otherwise there's no need for new companies, we could just leave the companies that already exist that are big and tenured to run the show.

Steli: And so that's not a downside. That's actually an upside. And many times I tell people being a small company, or you being the founder that reaches out to a prospective customer, for instance, that is not a downside. That is a plus. A lot of people, they are a little insecure about their position. “Oh, we're just a bootstrap little star.”

Steli: It's just me, and if I sent somebody an email and they realize it's just me, I won't have credibility and they will want to go with a VC backed competitor because they seem more credible. So, they approach the market with an insecurity because they haven't raised money or because they don't have a huge team or because whatever. NO! The value that you bring to the table, hopefully, is that your subject matter expert, you know something about the space of this problem or this industry that others don't know.

Steli: And it's very rare that I get to speak with somebody that is a founder that lives a breeze, that problem day in, day out, that build the product from the first line of code. That is something of a benefit to a lot of customers because they're going to get to talk to somebody that's way more interesting, that's way more knowledgeable and experienced versus to talk to some salesperson that this VC backed company hired and some support person that's been there for two weeks.

Steli: That's going to be a much better experience for me. So, I think acquiring customers in the early days has a lot more to do with insight and finding a way to connect with the right buyers that you don't have to scale. Even just meeting people one at a time or sending some emails or making some connections on social media, or creating a little bit of content or cold calling a few people right on your own.

Steli: You don't need to start with millions of customers. One customer at a time is all you need to get feedback, to get usage, to be able to fix things, to generate new insights, and hopefully ultimately to innovate and create something that has resonance in the market and has product market fit.

Steli: And then, once you have that proof that it's working, then you very soon will be able to afford to hire more people and do more things to grow even faster.

Desiree: It definitely worked for Close. You started at a little apartment; office in Silicon Valley, making cold calls to people.

Desiree: And now you've got an entire marketing team. I'm here doing marketing. That's the whole reason I'm here. I do have one last question. You've had a lot of success bootstrapping; you learned a lot of things. Let's say I give you a time machine, you go back in 2012, someone says, “You now have the option to take investor funding, start over from scratch, take investor funding, 20 million series A and, or you can bootstrap and do it all again.”

Desiree: Which would you choose?

Steli: I would definitely bootstrap, but I have, what do they call it? Survival bias, whatever, selection bias, whatever it is. We've had tremendous success, right? So from a perspective of success, I can easily say, “Oh, I wouldn't change a thing. I like the way this has gone.” If we had failed, maybe I would think differently.

Steli: But I absolutely would not want to raise money. There's not a single thing that we've ever wanted to do that we couldn't do. Damn it, because we didn't have a bunch of extra millions laying around. That was never an issue. The things that we always wanted to do, we could finance. And we always, most of the time had a little bit more money than we needed.

Steli: And that pile grew and grew and grew and it's still growing because although this is a big business. Now we invest a lot of money and a lot of things, there's nothing that we want to do. That's like a crazy amount of money and sort of moonshot. Let's spend insane, bags of money and hope things will work out.

Steli: So no, I wouldn't want to change a thing. And even if you ask me, if you started a totally new business, let's say sales shuts down or whatever, in a couple of years, you start a new business. Unless I do something that requires tremendous amount of money in R & D, some like deep tech or building rockets or something crazy that just, you cannot finance with a customer base, which I don't think I'd be the right founder to start anyways.

Steli: I'm definitely not going to raise a seed round to play around with some ideas of the B2B SaaS space. No, I would always choose to build something with my resources and the people that I know well, and then grow it organically, healthily by the success that we're seeing in the market for sure.

Desiree: That is objectively the correct answer. So good job on that. All right, that's actually all the questions I have. I thought this was a great discussion I like I if I could go back to like teenage Desiree who was like a punk rock kind of counterculture kid who was very like anti establishment, anti the man.

Desiree: If I could go back to her and say, at some point in the future, you're going to be having a conversation about bootstrapping a business, and you're going to be so interested, this is going to be a fascinating area of stud for you, bootstrapping a business. I would be like, “wWhat the hell are you talking about?”

Desiree: And yet that's where we are. I had a very fun time talking to you about bootstrapping a SaaS company today. Next time we're going to be talking about pivoting, how to pivot; when is it the right time to pivot your startups? Obviously startups are right for pivots. So, everybody look forward to that.

Desiree: Steli, thank you once again. And, bye y'all.

When I moved to Silicon Valley, I thought that if I landed a million dollars in funding, I would have made it

Looking back years later, I know that the dream of raising investment was the wrong dream to chase. Funding shouldn’t be the goal—it’s a means to an end. 

I tried like hell to raise investment for my startup, Close, but there were zero takers.

I had no choice but to bootstrap; it was either bootstrap or die.

But I’m glad I was forced to take the self-funded approach. Close has since scaled to $30 million in ARR, proving that bootstrapping can lead to some pretty amazing growth for B2B SaaS startups. 

In this article, I’ll share my experience with the practical realities of bootstrapping so founders know what to expect if they choose to self-fund their startup. 

What Funding Options Do You Have as a SaaS Founder? 

These days, there are more funding options than ever: seed investors, angel investors, an incubator, or a VC firm. You could also take on debt, max out all your credit cards, or if you’re really patient, just wait for an invitation to Shark Tank. (You might be waiting a while.)

There's no one-size-fits-all approach that works for every company, but in my experience in SaaS and B2B, there’s very rarely a reason or need to raise millions right away and invest in a ton of things before you even go to market and validate demand. Instead, you might want to consider the option I took with Close: bootstrapping. 

What is bootstrapping exactly? It refers to growing your business by the strength of its revenue and profits and not taking outside investor money to grow the company. People also refer to this as self-funding a startup—maybe to sound cooler and less like a grandpa—but whatever you call the practice, it means no investors are involved. 

For this option, you have to create an early, lightweight version of your product that people are willing to pay for, allowing you to fund your business with the revenue from your initial sales. It’s a very practical source of funding a business, even though it might not seem as sexy as venture capital.

The Allure of Raising Millions 

Few startup founders can resist the allure of raising a huge sum of money from a brand name investor. For five years, I tried to raise money for my first startup and only managed to cobble together a measly $50,000. I’ve made my peace with the fact that I am the world’s worst fundraiser. 

I had better luck once I teamed up with my co-founders, Anthony Nemitz and Tom Steinacher. We were accepted into Y Combinator with our startup SwipeGood and secured a $1.2 million seed round from investors within the first two weeks. “Finally,” I thought. “I’ve made it.

My celebration was short-lived, however, as growth at SwipeGood stalled. We decided to pivot to a new idea: Elastic Sales. With Elastic, we offered “sales as a service” for tech startups in Silicon Valley.

Unfortunately, the idea for Elastic didn’t resonate with our Y Combinator investors as much as SwipeGood did. VCs were looking for a different kind of startup to invest in and they weren’t interested in our new idea.

At that point, I had a choice: I could keep tweaking the idea for Elastic until it became something that would appeal to investors, or I could go ahead and build it anyway without their money. 

My co-founders and I chose the latter. We knew we had something with Elastic—it was my wheelhouse (B2B SaaS sales) and we had already validated the idea and the demand by landing a few early customers. What, exactly, were we waiting for? 

It had taken me so long to find investors up to that point, and I was sick of waiting to build something. I wanted to move fast and start generating revenue. 

Elastic was so successful, we were able to spin an entirely new business from it, Close. With Close, we sold the CRM software we had built for our own internal sales team. Suddenly, we went from being a “sales-as-a-service” business to being a true “software-as-a-service” company. 

I wanted to see how fast we could scale this time, so I tried to fundraise—again—for Close. (What can I say? Old habits die hard.)

When Close didn’t grab the attention of investors either, I decided to keep going full-steam ahead with our bootstrapped business. We were already gaining traction without additional capital, so it just made sense to keep reinvesting our profits back into the business. 

As a founder, you need to ask yourself what you’re actually chasing: a business or an investment.

Bootstrapping might require more patience, but it can build a more resilient, sustainable business.

Taking the Long Way Up: Reasons Not to Take On Investors

Imagine the journey to the top of the mountain. You can start at the bottom, hiking switchbacks and climbing, feeling the ache in your legs as you make your way up slowly and finally reach the peak. Or—you could have a helicopter drop you right at the top. After all, the view would be the same, right? 

I like to think of bootstrapping your business as taking the long way up. It’s more difficult, sure, but you learn as you go. You build endurance and strength trudging up the rocky terrain. Taking the “simpler” route is enticing and it may feel pretty good at the top, but your sense of accomplishment is artificial, and you haven’t learned or built those muscles. 

Similarly, taking on huge investment can lead to a false impression that your business is successful. It can hide (or delay) the answers to very basic questions:

  • Is my idea capable of achieving product-market fit? 
  • Is there enough demand to make this business last long term? 
  • Can this business ever achieve profitability? 

If 75 percent of venture-backed startups fail, that means 75 percent of the time, the answer to these questions is no. 

On the other hand, when you bootstrap your startup, you find out the answers to those questions along the way, when there is more time and capacity to learn, pivot, and course-correct. Bootstrapping might require more patience, but it can build a more resilient, sustainable business.

The Tendency to Overspend and Overhire 

If an investor gives you millions of dollars, they expect you to spend it. That money isn’t a gift—it’s the gasoline they want you to throw onto the fire. 

Your primary job as a founder will be spending this money. It might sound exciting at first, but it gets old fast. It’s like the movie Brewster’s Millions, where the main character (played by Richard Pryor) needs to spend $30 million in 30 days with a complicated set of rules—and the challenge becomes a nightmarish burden on his life. (Hopefully I’m not the only person in the world who has seen Brewster’s Millions.) 

When you raise millions of dollars, you become the steward of this money. You’ll use investor money to rent an office in a hip part of town and you’ll paint cool murals on the wall and pack it with amenities to attract the best talent. And, of course, you’ll go on a hiring spree. 

HP co-founder David Packard, once said, “More businesses die from indigestion than starvation.” When startup founders hire fast, they can end up overhiring, creating a kind of “business indigestion.” 

Hiring will take most of your time and attention. As a founder, if you choose to be heavily involved in vetting every hire because you want to create a strong culture from the get-go, that’s a good instinct—but that’s a huge time commitment if you need to spin up a 50-person team in a year. 

If you want to be more hands-off and simply hire fast, you run the risk of making the wrong hires. And the damage from one wrong hire can take months (and tens of thousands of dollars) to undo. 

You’ll be forced to hire for roles even if you don’t need them because investors want to see more butts in seats—regardless of the ROI you’re getting out of every role. 

Plus, let’s not forget how quickly startups change strategy. One change in a strategy can result in layoffs and firings. Not only is this a painful decision to make as a founder, but it can poison the culture for the broader team. 

Any way you slice it, hiring will cost you a lot of this money you fought so hard for.

On the other hand, when you bootstrap a company, you’re forced to be more disciplined with the way you hire. You simply need to ask yourself: “Is the company making enough money right now to justify this hire?” 

I’d take a slower, more disciplined approach to hiring over an investor-paid hiring frenzy any day. 

Building a Business for Investors, Not Customers

It can be hard to find the balance between raising money and maintaining your vision for the business. It’s much easier to allow yourself to become externally focused, tweaking your idea to seem more enticing to investors (and not always for the better). 

It’s important to remember: Your customer in the boardroom may not be the same as your customer in the market. 

One investor might be bullish on AI and suggest you add an AI angle to your product, even though you know that’s not the best move. Another investor with an enterprise background might suggest an enterprise model even though you want to target the consumer market. 

Your website, your pitch deck, the meetings you take, even the way you think about your idea may be altered to appease potential investors. You might lose sight of what truly matters: the customer, the problem you’re trying to solve, and why you’re passionate about it in the first place.  

Your customer in the boardroom may not be the same as your customer in the market.

The Benefits of Bootstrapping a B2B SaaS Company

Close wasn’t an overnight success, but step by step, we were able to build something valuable without having to make too many compromises. 

When I think about why I’m glad I bootstrapped Close, the reasons that come to mind are:  

  • The founders own more of the company. 
  • We were able to build the business to our own liking, deciding what we think is best for customers, employees, and ourselves without the need to justify our choices to outsiders.  
  • We were able to make better hiring decisions which has led to better retention. If you're slow and deliberate and really intentional about the people you're hiring, you create a culture that is less subject to chaos and turnover.

If I could sum up the benefits of bootstrapping Close in one word, it would be: freedom

I’ve seen many of my founder friends who accepted investor funding achieve tremendous success, yet they often felt miserable. It’s hard to be a happy person when you have to make decisions you don’t feel good about or you’re forced to push your company and build your product in a certain way. 

It’s like being in a long-term relationship with someone who is only interested in your looks. Every day, you have to dress a certain way to make yourself attractive to them. Years go by and you start wishing you had found someone who was actually interested in you as a person, not just how attractive you are. Hindsight is 20/20. 

With bootstrapping, you don’t have the obligation of scaling at a certain speed and building a business to please a board of directors. You have complete control over your destiny. 

Tips for Bootstrapping Your Startup

If you decide to bootstrap, just remember: there’s nothing wrong with starting small. Being a small company is not a downside. It’s a plus. 

The discipline required to bootstrap is a good thing too. You learn to stay focused and avoid getting easily distracted. You also learn to get creative to acquire customers better than your competitors. 

Acquiring Customers on a Limited Budget 

One of the hardest things about bootstrapping is acquiring customers on a shoestring budget and trying to compete with the highly funded players in your space. It can be damn near impossible to out-advertise them—but, again, this forces you to get creative. 

When bootstrapping Close, we had two major advantages: 

  1. We had a highly differentiated product (a sales-focused CRM built specifically for sales teams, not marketing or customer support).
  2. We had a distinct point of view about our niche (B2B sales) and we saw an opportunity in content and set our sights on out-educating our competitors. We built a loyal audience through content and authentic advice that resonated. 

First, think about what makes you different. Then, send an email, make some cold calls, post on social media. All of that is free. It only requires time and hustle. 

Building One Customer at a Time

It’s undeniable that investors accelerate your growth. Scaling quickly is great, but here’s the thing: You don’t have to scale like crazy to be successful. 

You don’t have to start with a million customers. Scaling in the early days has a lot more to do with connecting with the right customers. You just need to land one customer at a time to get feedback, innovate, and find your product-market fit. You can build something with the resources you have.   

If you’re a SaaS business, you don't need a huge team on day one—Hell, you don't even need one in year 10. Close turns 12 this year, and our team is still under 100 people! 

I believe that in the future, SaaS businesses will become billion-dollar companies with tiny teams and the need for investment to scale big, bloated teams will become a thing of the past.

Looking back at our experience with Close, there’s not a single thing we’ve ever wanted to do that we couldn’t do because we didn’t have millions of dollars laying around. We built our company for ourselves, one customer at a time. 

I’m willing to bet you can too.

Are you a B2B SaaS founder trying to scale your business from the ground up? Check out the rest of this series, The 0 to $30 Million Blueprint, where I share more of my lessons and advice from over a decade of scaling a B2B SaaS company.

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