Author: Keyvan Firouzi
Read time:  4 minutes
Published date:  November 30, 2023
Updated date:  May 10, 2024
Many startup founders use their own money before seeking out funding from investors. Here's what you need to know about bootstrapping your startup.

When you’re just starting your company and getting your business idea off the ground, it might be too early to seek out outside funding. As an alternative to seed funding from venture capitalists or angel investors, many startup founders use their own money to bootstrap, grow, and build a prototype.

What is bootstrapping?

Bootstrapping is the process of starting and growing a company using your own resources, without relying on outside capital. Bootstrapping resources can include personal savings, credit cards, loans, reinvesting early profits, and low-cost or free tools and services. By bootstrapping, founders can focus on talking to potential customers and developing their idea without the influence of investors, allowing them to maintain complete control over their startup.

Based on Carta’s data from working with more than 40,000 startups, we typically see founders invest about $10K in the bootstrapping phase and spend 4-6 months building the foundation of their company before looking for outside capital. 

Bootstrapping vs. seed money

In the startup world, the difference between bootstrapping and raising seed (or pre-seed) money can be significant. Seed funding is the initial capital used to take a startup from concept to the early stages of operation. It’s often a riskier stage for investors since they’re banking on the potential of an idea and the capabilities of the founding team (rather than a proven business model). 

Bootstrapping allows entrepreneurs more flexibility and time to figure out if their idea solves a real, monetizable problem, prototype solutions, and achieve some level of market validation without the pressure and equity loss that comes with early-stage investment.

How to bootstrap your startup

Some early-stage startup founders self-fund by using their savings, borrowing from friends and family on friendly terms, or borrowing against a  credit card to stand-up a decent MVP (minimum viable product). 

Here are some tips for bootstrapping your startup:

Validate your idea before building it 

Don’t spend too much time and money developing a product that no one wants. Talk to customers, validate it with painted doors,  test your assumptions, get feedback, and iterate quickly. 

Use free or low-cost tools and platforms 

Easy-to-use tools and templates  are available for just about everything—from web development and design to marketing, sales, accounting, and more.

→ Learn more about Carta’s free tools and templates for early-stage founders

Outsource or automate non-core tasks 

You can’t do everything by yourself, but you also don’t need to hire a full-time team right away. Outsource administrative, legal, or technical tasks with platforms like Upwork, Rocket Lawyer, or Fiverr that help you match with professionals and freelancers. 

Prove traction as soon as possible

Don’t wait until you have a perfect product or a large user base to require signup or to start charging for your goods or services.The best way to fund your business is to use the money you make from your customers. 

Find a way to monetize your MVP, offer a pre-sale, or create a subscription model to generate cash flow. This can also help you validate your product-market fit and improve your product based on customer feedback.

Explore Founder Studio
Join Founder Studio for access to free resources and exclusive perks to help you successfully get your startup off the ground. 
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Advantages of bootstrapping

While self-funding your startup can be stressful, there are several advantages to bootstrapping, including: 

  • Full control and no equity loss: Bootstrapping allows you to retain full ownership and control of your business without giving up any equity ownership or decision-making power to investors. This gives you more freedom to experiment or change direction without external pressure.

  • Focus on customers: Directly align your business goals with customer needs instead of investor expectations.

  • Traction-driven: Encourages a focus on generating revenue from the start, which can lead to a leaner and more efficient business. 

  • Better for funding deal negotiations: If you bootstrap successfully, you can prove your business’ growth potential, viability, and traction, and increase your valuation and bargaining power when you decide to raise from investors.

Disadvantages of bootstrapping

While bootstrapping has its perks, there are also drawbacks to consider:

  • Limited resources and opportunities: You have to rely on your own savings, revenue, and personal network to fund your business. You may not be able to access the resources, opportunities, or connections that investors can provide, such as mentorship, expertise, partnerships, or distribution channels.

  • Increased personal risk and stress: Using personal finances or credit can lead to significant personal financial risk and added stress since it’s your own money on the line. 

  • Scaling challenges: Without substantial capital, it can be harder to scale quickly, take advantage of market opportunities, or fend off competitors. You may also miss out on the network effects or economies of scale that come with having more users or customers.

Bootstrapping your startup requires a combination of courage, discipline, and resourcefulness. With a well-executed bootstrap strategy, you can build a compelling proof of concept that can either sustain a profitable business or lay the groundwork for a successful external funding round down the line. 

The key is to start small, think big, and stay focused on creating real value for your customers.

If you’re looking to start your business, Carta’s Founder Studio can help you incorporate your business, learn business fundamentals— and when you’re ready, has all the resources and tools you need to raise funding. 

Explore Founder Studio
Join Founder Studio for access to free resources and exclusive perks to help you successfully get your startup off the ground. 
Join for free

Keyvan Firouzi is the former Director of Growth Product. Before joining Carta, he was the CEO of Preferred Return where he led the company through a management buy-out, re-launch, product expansion, and eventual acquisition by Carta within two years.
DISCLOSURE: This communication is on behalf of eShares Inc., d/b/a Carta Inc. (“Carta”). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. ©2024 eShares, Inc. dba Carta, Inc.(“Carta”). All rights reserved. Reproduction prohibited.