Bootstrapping is likely to be found in almost any successful company’s history. Before taking venture money or other types of outside financing, many of these enterprises are totally self-funded. Entrepreneurs who started their companies from the bottom up are a rare breed. To start a business and carry it through to completion, you’ll need a strong mix of confidence, risk tolerance, self-discipline, drive, and competitiveness. In this article, we present 20 successful bootstrapped startups that got acquired.
Bootstrapped startups and startup acquisition
Bootstrappers take a concept and, with the help of skill and expertise, turn it into a profitable business without the help of investors and with little or no initial funding. To succeed in this manner, you’ll need a lot of effort, good work ethics, and absolute focus. Startup acquisition is a process in which a large corporation buys a small business or startup and takes control of it by purchasing the majority of all of its shares or assets.
What is bootstrapping and its origin?
The term “bootstrapping” comes from the expression “to pull oneself up by one’s bootstraps” which was popular in the 18th and 19th centuries. It refers to a difficult task back then. It now alludes to the problem of creating something from nothing. A bootstrapped business is one that was established and grown entirely using the entrepreneur’s own money and income earned by the business.
How does bootstrapping work to grow a startup?
When an entrepreneur starts a business with very little money and no outside backing, it is referred to as bootstrapping. Bootstrapping is when someone tries to establish and grow a business with their own money or the new company’s operational revenues. A bootstrap method is a resampling approach that uses replacement sampling to estimate statistics on a population. It’s useful for calculating summary statistics like the mean and standard deviation.
Pros and cons of bootstrapping a startup
An entrepreneur must execute a large concept, focus on profitability, build skills, and become a better businessperson to manage a successful bootstrapped firm. Here are the advantages and disadvantages of bootstrapping a startup:
Pros of Bootstrapping
- The entrepreneur has complete control over the company. He is capable of making all business choices on his own. There is no pressure from investors, and the entrepreneur is free to work on his own schedule.
- Instead of pitching to investors, the entrepreneur may spend his time and attention on the business.
- There is no need to wait for investors; once the company plan is complete and the relevant permits have been obtained, you can immediately begin operations.
- Once the firm starts to perform and demonstrate value, it becomes simpler to acquire investor capital.
- It challenges company owners to come up with a viable model. The majority of failing enterprises have a bad business plan. On the other hand, bootstrapping businesses are obliged to design systems that generate immediate, long-term cash flow to avoid this scenario.
- It gives you a feeling of accomplishment. For some entrepreneurs, constructing something from the ground without the assistance of others is a prize in and of itself.
Cons of Bootstrapping
- The entrepreneur bears the whole financial risk.
- Bootstrapped enterprises rely on internal funding sources, loans, credit cards, and mortgages, thus having minimal finances.
- A lack of sufficient cash might stifle a company’s expansion.
- Bootstrapped enterprises can suffer credibility challenges because there are no well-known investors to boast about.
- It can be dangerous. Self-funded enterprises are more likely to run out of money and struggle to scale as their demands grow. This might make it difficult for a business to attain its full potential.
- It limits the resources and possibilities available to you. Traditional fundraising methods provide opportunities for networking with top-level support, such as board members, shareholders, and influencers, as well as larger sums of money. You have fewer resources and prospects when you start a firm independently.
Why do startups need to bootstrap?
Investors back a company in exchange for a share of the company’s ownership. Bootstrapping allows founders to keep their stake in the company. It drives entrepreneurs to develop a viable company plan. The majority of failing enterprises have a bad business plan. Here are reasons why startups need to bootstrap:
- Implement the big idea – It’s preferable to break down a huge concept into a succession of smaller ones and focus on the best. Then you go back and finish the other portions. In most cases, a company’s success is determined by how well it executes a business idea rather than the idea itself.
- Skills development – Starting a business necessitates the development of a wide range of talents, as well as enthusiasm, resilience, tenacity, and bravery. These are frequently necessary in order for a bootstrapped business to function.
- Increase profit – This is how the company gets financed. When compared to the managerial philosophy of a venture-funded or angel-funded firm, bootstrapped startups require a totally different perspective. Bootstrapped enterprises often intend to last a long period, expanding slowly and discreetly while establishing paying customers to cover operating expenses. Companies that get outside money, on the other hand, are expected to develop rapidly in order for the investor to have a viable exit strategy.
- Successful and growing startup – Bootstrapping is likely to be found in almost any successful company’s history. Before taking venture money or other types of outside financing, many of these enterprises are totally self-funded. Entrepreneurs who have created their companies from the ground up are a rare breed. To start a business and carry it through to completion, you’ll need a strong mix of confidence, risk tolerance, self-discipline, drive, and competitiveness.
Understanding startup acquisition
Startup acquisition is a process in which a large corporation buys a small business or startup and takes control of it by acquiring the majority of all of its shares or assets. If rivals and other businesses want to buy your firm, your team has accomplished quite an accomplishment. Many businesses begin with the goal of eventually selling high, but only a tiny percentage of them succeed.
How does startup acquisition work?
The process of purchasing a newly created firm that has achieved market momentum is known as startup acquisition. In general, these startups made a stir in the business world and drew the attention of established corporations. Rather than starting a firm from the ground up, many large and established corporations hunt for dynamic and innovative startups to purchase. Due to the numerous elements to consider, as well as the potential for difficulties arising as a result of integrating the acquisition with the mothership (so to speak) and other considerations, meticulous preparation is required.
Why do startups get acquired?
After a certain point, startups become less productive. As a result, being bought by large corporations aids their production. A desire for exposure: A large corporation’s purchase allows a startup to gain the most public notice possible.
- Increase productivity and growth – These are often self-made or bootstrapped tiny private enterprises, accelerator program products, or side ventures of skilled people working for big corporations. They gradually gain market share, and unless they are recruited to join with a commercial behemoth, it would only take a couple more rounds of investment to go public on their own.
- Financing requirements – Security’s commercial case is commonly misunderstood. As a result, the far more well-defined, highly quantitative money (financial) requirements will take precedence. Finance companies that can directly account for how sales and marketing spending equals greater revenues are common.
- Building relationships – When mutual understanding between or among persons improves, relationship building occurs. This might occur between two coworkers or throughout a whole team.
- Debt clearance – The same is true for your business. A bank or another lending institution provides debt funding. Although you may receive it from private investors, this is not the norm.
Successful bootstrapped startups that are acquired
Today, the majority of businesses rely on outside funding. Most companies require substantial investment to grow into million-dollar businesses. However, we were surprised to learn that many businesses operate without any outside capital or investment. These businesses are known as bootstrapped and are extremely successful and may be acquired by big giants to make them more profitable.
|Entry||Company name||Location||Industry||Founding year||Total funding|
|1||MailChimp||United States||Email Marketing, Software||2001||$48M|
|2||Lynda||United States||E-Learning, EdTech||1995||$289M|
|3||Braintree Payments||United States||FinTech, Payments||2007||$69M|
|4||RXBar||United States||Food Processing||2013||$600M|
|5||Scentsy||United States||Consumer, Retail||2004||$42M|
|6||Spanx||United States||E-Commerce, Fashion||2009||$154M|
|7||Tough Mudder||United States||Communities, Events||2010||$15.8M|
|8||Mojang||Sweden||Developer Platform, Gaming||2010||$289M|
|9||Behance||United States||Business Development,Information Technology||2006||$6.5M|
|10||Thrillist||United States||Fashion, Lifestyle||2004||$54M|
|11||Grasshopper||United States||Digital Media, Messaging||2003||$162M|
|12||Datto||United States||Cloud Computing, Flash Storage||2007||$100M|
|13||InsideSales.com||United States||Analytics, Artificial Intelligence||2004||$233.3M|
|14||GitHub||United States||Cloud Computing, Developer Tools||2008||$350M|
|15||TechCrunch||United States||Digital Media, Events||2005||$99M|
|16||Kayako||United Kingdom||CRM, Customer Service||2001||$88M|
|17||FastSpring||United States||E-Commerce, E-Commerce Platforms||2005||$30M|
|18||Spie SA||Switzerland||Energy, Information Technology||2011||$14.33M|
|19||CSRA||United States||Government, Information Services||2015||$90M|
|20||InterCall||United States||Telecommunications, Video Conferencing||1991||$45M|
10 bootstrapped startups that are acquired
While many in the innovation ecosystem are apprehensive of startup acquisitions, when one firm buys another, it strengthens and makes the ecosystem more self-sufficient. Capital is returned to the acquiree’s investors when a startup is purchased. Here are:
RxBar, a protein bar brand recognized for its elegant, minimalist packaging, was founded by Peter Rahal in 2012. RXBARs are protein bars produced with only a few basic ingredients that are ideal for on-the-go breakfasts, protein-packed snacks, and pre/post-workout nourishment.
GitHub, Inc. is a software development and version control corporation that specializes in Git-based products. It integrates Git’s distributed version control and source code management features with its own.
The veteran video-based education platform and how it generated $70 million in sales in 2011 without receiving any money from outside investors back in May. It has continued to develop since then, with revenue reaching $100 million in 2012. Lynda.com, founded in 1995 by Bruce Heavin and Lynda Weinman, is not your standard technology company. The firm is old in comparison to its competitors. Furthermore, it has eschewed venture money, is still run by its happily married co-founders, is subscription-based, has been profitable since 1997, and is situated in a tiny community in Southern California – not in Silicon Valley, New York, or Los Angeles.
Mojang Studios is a Stockholm-based Swedish video game developer. It was created in 2009 as Mojang Specifications by independent video game designer Markus Persson for the creation and distribution of Persson’s sandbox and the survival video game Minecraft. Persson had departed a previous video game business two years before, and the firm took on his name.
Dave Elkington, the founder and CEO of InsideSales.com, and his wife worked graveyard shifts for a cleaning business between 2004 and 2005. They cleaned a doctor’s office to prepare it for the next day’s visits, all in the name of raising money for their fledgling business. Their sole outside finance at the time was a $10,000 family contribution from Elkington’s mother-in-law.
Blakely started Spanx with $5,000 of her own money. She bootstrapped the company’s growth by selling her goods and swiftly securing substantial buy orders. With total revenue of $4,000,000 in its first year, Spanx was profitable.
The company is situated in Norwalk, Connecticut. Austin McChord, a graduate of Rochester Institute of Technology, launched Datto in 2007. Austin founded the firm shortly after graduating from college with the objective of providing lower-cost SaaS-based backup and recovery solutions so that smaller businesses may benefit from the technology. Austin built the device in his basement because he thought he could give a superior product than what was currently offered.
TechCrunch is a high-tech and startup-focused American internet publication. Archimedes Ventures, managed by partners Michael Arrington and Keith Teare, was formed in June 2005. AOL purchased the firm for around $25 million in 2010. The site was owned by Verizon Media from 2015 to 2021, following Verizon’s acquisition of AOL and Yahoo in 2015. Verizon sold its media holdings, including AOL, Yahoo, and TechCrunch, to Apollo Global Management in 2021, and Apollo merged them into a new company called Yahoo.
CSRA Inc. provides information technology services to government clients in the areas of national security, civil government, and health care and public health in the United States. The Department of Defense, Homeland Security, the United States Army, United States Air Force, and intelligence agencies made up its largest market, national security.
Kayako is a unified customer care platform, which means that businesses can use it to handle customer feedback and assistance across numerous channels, such as phone, email, Twitter, and Facebook. Kayako has never received outside finance despite having (just) 100 workers. It operates in three countries, is profitable, and is expanding.
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