The case for bootstrapping: building and selling a startup without a cent of funding

It is easy to get taken in by the allure of entrepreneurship. People gravitate towards visions of eight-digit seed funding sums, several additional rounds of investments, and finally that glorious payout in the form of a billion dollar exit.

They peruse tech blogs like ours and gaze wistfully at the gargantuan sums of capital being moved around between investors and startups. But if you dig deeper, you’ll see the other side of the coin. Being an entrepreneur is far from sexy – it’s blood, sweat, and tears shed constantly in the hope of the great exit. Juggling both investor expectations and the day-to-day task of building your business up is incredibly taxing, and certainly not for everyone.

Jon Yongfook, founder and CEO of Beatrix, believes there is another path that is equally rewarding, and that is to bootstrap. He has good reason for his faith: just last week, he sold his press release delivery platform Pitchpigeon to US-based marketing company Mikrolink for a sum which Yongfook would only describe as “a very healthy multiple of [Pitchpigeon’s] annual revenue”. Pitchpigeon was entirely bootstrapped.

Given that the startup was bringing in yearly profits upside of five-figures, the sum likely isn’t too shabby. Additionally, since the business was bootstrapped right from the start, every cent of the deal went straight into his pocket.

Yongfook is not the first to advocate bootstrapping – several well-respected veterans like Jason Fried of 37Signals advocate focusing on your startup’s profitability from the get-go.

In Yongfook’s opinion, bootstrapping is the fastest route to profitability:

It’s funny how you can talk about your company and say, ‘we have 500 customers,’ and people think nothing of it because it doesn’t sound like an impressive number. But in the SaaS [Software as a Service] world that’s the rate at which you measure things. At roughly 1,600 customers, with an average subscription fee of US$50 per month, you’re bringing in almost a million dollars in annual revenue, with the vast majority of that being profit as it’s all software. It’s a business model that is far more fun than something more consumer or internet oriented, where you’re burning more cash than you’re earning in order to acquire customers.

Profit from day one

When Yongfook began working on Pitchpigeon in early-2013, he made up his mind to only pursue ideas that could be profitable right from the start.

“I’m a Rails developer, so if I get an idea, it’s pretty easy for me to build a quick prototype to test the idea out,” he explains. “I built the first MVP [minimum viable product] version of Pitchpigeon in like less than a week, and tested the value proposition by putting it on Hacker News and a few other places. It got a really awesome response, making money from day one.”

The case against funding