Despite what entrepreneurs may think, every successful business was started from scratch by someone with a great idea and the desire to see it come to life. But at some point, every startup owner has wondered, "How do I get VC funding?" Although this alone is not the only way to receive funding in the business world, many focus entirely on external funding. Whether or not a startup makes millions of dollars in its first year, the good news is that companies can grow without external funding.
Bootstrapping a company is known in financial terms to start a company without outside funding. For instance, an entrepreneur will use her own money and revenue instead of raising capital through venture funds to further grow the company. This can come from personal savings, profits from sales, pre-order amounts, etc.
There are many reasons startups choose to stay away from external funding. It can be the desire to have complete control over their companies and not be bound to investors. Or it can be an inability to raise capital through venture funds. In either case, the company grows through its internal funds.
Bootstrapping is more common than you might realize. Many multi-million dollar businesses grew with little to no external funding. However, this is not easy. The first step is to develop a business model that can provide fast growth without needing upfront money.
Here are the 5 strategies for growing a business without capital, with multi-million dollar examples:
1. Foster Customer Relationships
David Hauser and Siamak Taghaddos started Grasshopper, a telephone service company, using their savings. As neither Hauser nor Taghaddos had a lot in savings, they needed the money from sales to keep the company running. The company couldn't wait to perfect the product before launching. Instead, they built a Minimum Viable Product (MVP) and started selling.
From day one, the company focused on building customer relationships. They didn't have much money to spend on advertising, so they focused on increasing customer satisfaction. And it worked wonderfully! About 50% of their new customers came through word-of-mouth recommendations from previous customers. This boost in sales funneled incredible growth and since sold for $170 million without external funding.
2. Focus on Generating Profits
Sevetri Wilson started Solid Ground, a consulting and management firm with zero capital. At 22 years of age, she grew this company from zero to over a million dollars in revenue. She did all of this without ever receiving a cent of external capital.
Wilson had a simple strategy from the beginning: the money coming into the business should be higher than the money going out. If the business is working without external funding, profits are the only way to keep it running. In her book, Solid Ground: How I Built a 7-Figure Company with Zero Capital, Wilson states that growth doesn't matter if the company is not bringing in any money.
From day one, Wilson carefully kept a record of all the business expenses. She considered many strategies that could reduce the cost and increase the revenue. More so, she focused and prioritized the business areas that maximized returns.
3. Find a Cash Source
Chris Davis and Mathew Arevalo co-founded Loot Crate, a gaming-related subscription service with virtually no cash. They came up with a unique business plan and asked customers for money upfront. Essentially, they sold a product before it was even manufactured or sourced.
Loot Crate sold a product that was easy to create and was valued very highly by its customers. All of this happened out of their apartment. They delivered the package themselves, using their cars. This gave them a runway that wouldn't have been possible otherwise.
4. Build a Scalable Business
Lynda Weinman and Bruce Heavin started Lynda.com, an educational platform for non-techies, back in 1995. The venture began with Weinman and Heavin teaching physical classes to students. After the success of a few courses, they decided to produce books and educational videos, which later turned into an online teaching platform.
When Lynda.com started, Weinman worked odd jobs to earn a living. She focused on scaling the business without her involvement because she could only dedicate limited hours to the company. Therefore, the easy reproduction of educational material was imperative.
Throughout their journey, Weinman and Heavin have stayed away from venture capital. Instead, they focused on building a profitable business that scaled exponentially. Finally, in 2015, the couple sold the company for $1.5 billion.
5. Develop an Efficient Marketing Channel
Michael Salguero started Butcher Box, a grass-fed meat delivery subscription service, out of his home as a hobby. His savings and money generated from a Kickstarter campaign were his only funding source. The funds sourced and delivered the meat.
The company couldn't spend a lot of money on advertising. They developed a model which didn't require any upfront costs. Instead, they created agreements with many social media influencers who cared about grass-fed beef and having a healthy diet. The influencer received a certain percentage of each sale as per the agreement.
This model ensured that no money was spent until the product was sold. The company continues using this strategy to go from a thousand dollars a month to over a million dollars in revenue each week.
These 5 strategies to grow your business without capital with multi-million dollar examples show you that everything is possible. However, you are best situated to decide what's best for your business at the end of the day. Each company takes a different road to achieve its mission. Remember that exponentially growing a company without capital is possible; these companies remind you that there are thousands of examples of companies that did it without external capital.
It's essential to keep in mind that organic growth requires revenue. Whether you develop an innovative advertising model or create a high-value product, a bootstrapped company needs to emphasize sales and revenue to avoid VC funding as long as it possibly can.
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