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Best of Bootstrapping: Bootstrapping to an Exit

Posted on Monday, Jan 7th 2019

Over the last decade and more, I’ve had the privilege of working with a large number of bootstrapped entrepreneurs. These include self-financed companies and also modestly capitalized startups that operate in a capital-efficient manner applying the principles of bootstrapping. [You can review my Bootstrapping course on LinkedIn to review these.]

For our Seed Capital series of podcasts and blog interviews, I’ve interviewed hundreds of investors, especially micro-VCs and angels who are playing in the early stage game.

I’ve asked all of them the following questions:

The commercial Internet has now been around for almost 25 years. Lots of stuff have already been built. Nowadays, there aren’t so many wide open opportunities out there. But there are many, many niche opportunities.

Some of these businesses need to be built for very small amounts of capital: Invest $1-2M, and sell for $10-15M. Do you have appetite for this type of investment?

What about a notch smaller? Invest $250k-$500k and sell for $5-$10M?

What about a notch larger? Invest $5-10M and sell for $50-$60M? 

All interviews are available on the blog and as podcasts.

As I expected, a large number of investors are still chasing Unicorns. They are interested in investing in companies that will go from 0 to $100M in 5-7 years. And they will consume a great deal of capital in the quest of hitting the coveted billion dollar valuation mark.

However, I am pleased to report that I have spoken with a number of investors who recognize the niche opportunities and answer yes to my questions above.

Yes, they are interested in investing small amounts and harvesting through smaller exits.

In that strategy is the recognition that most acquisitions happen in the sub $50 million price-point.

Therefore, for all stakeholders to make money, a capital efficient strategy is required.

I’ve also spoken with a number of CEOs and Board Members of public and pre-IPO companies on what they want to acquire. While the larger companies need to acquire significant chunks of revenue, in the smaller companies ($100-$300M), often, there is a different issue. A $100M SaaS company, quite likely, is making most of its revenues from one product. To thrive as a public entity, it faces tremendous pressure to broaden its product line and find one or two additional $100-200M businesses.

How would they do that?

The market, of course, is full of heavily venture-funded SaaS startups with very high valuation expectations.

Most of these are not affordable for a small, recently public or pre-IPO company.

Instead, a small, capital-efficient startup that has shown product-market fit in a domain with strategic alignment is far more interesting as an acquisition target.

So, I have two questions that are worth discussing here:

1) Capital Efficient Startups: Are you considering the Bootstrapping to Exit path, or are you obsessing over Unicorns?

2) Small Public or Pre-IPO Companies ($100-200M): Are you able to find small, capital-efficient startups to acquire?

Let us use the Comments area for discussions on the subject.

This segment is a part in the series : Best of Bootstrapping

. Bootstrapping to an Exit
. Why is Bootstrapping Important?
. How Can You Play this Low-Probability Game Intelligently?
. Do NOT Go to VCs as Beggars - Go as Kings
. Excess is NOT Required for Success
. Bootstrap First and Raise Money Later
. Some Bootstrapping to Exit Case Studies
. The Buy Side of Bootstrapping to an Exit
. Blitzscaling vs. Bootstrapping
. Bootstrapping to Unicorns
. Cinedigm Acquires Bootstrapped 1Mby1M Company Future Today for $60 Million
. Mailchimp Bootstraps to $600M Revenue
. Bootstrapping from Arizona to $10 Million
. Bootstrapped Basecamp Executes a No Nonsense Strategy
. How Under30Experiences Bootstrapped to $5 Million
. Bootstrapping with a Paycheck
. How CEO Amjad Hussain Bootstrapped using Services from Michigan
. Seed Investors Who Like Bootstrapped Businesses
. How iHeartRaves CEO Bootstrapped a Niche e-Commerce Company to $20 Million
. Bootstrapping with Services
. How The Intern Group CEO David Lloyd Bootstrapped to $13 Million
. How Passageways CEO Paroon Chadha Bootstrapped from Indiana
. How SmartBuyGlasses CEO David Menning Bootstrapped to $50 Million
. Death by Overfunding
. How RainmakerForce CEO Mack Sundaram Bootstrapped Decisively to $5 Million+
. How FormAssembly CEO Bootstrapped a Virtual Company with a Paycheck
. TimeSlips CEO Mitch Russo Bootstrapped to Exit with Sage
. The VC-Entrepreneur Compensation Disbalance
. BioConnect CEO Bootstraps with Sophisticated Strategic Maneuvering
. Tremend CEO Marius Hanganu Bootstraps from Romania
. Gesture CEO Jim Alvarez Bootstraps to $10 Million
. SproutLoud CEO Bootstraps to $30 Million from Florida
. Tuft & Needle CEO Bootstraps to Over $100 Million
. Co-founders Bootstrap Linguamatics to Over $10M from the UK
. Ownership Matters
. Vainu Co-founder Mikko Honkanen Bootstraps from Finland
. Entrepreneur Couple Bootstraps to $10M from Colorado
. Power2Motivate CEO Bootstraps to $80M from Canada
. Financial DNA CEO Bootstraps to $10M+ from Australia
. Big Barker CEO Bootstraps a Niche E-commerce Brand
. PrecisionLender CEO Bootstraps to Over $10M from North Carolina
. Master Bootstrappers with Over $1B in Exits
. Ultra Mobile Founder Bootstraps to Over $100 Million
. Bootstrapping a Two-Sided Marketplace to $10M
. Can You Bootstrap a Virtual Company to Over $5 Million?
. Capital Efficient Entrepreneurs Turn $1M into $80M
. Discussing the Journey Through Failure to Success
. From a Small Town to $12 Million
. Bootstrapping to Y Combinator and $10 Million Series A
. Bootstrapping a Marketplace to Over $10 Million
. Freightwise Bootstraps to $33 Million
. Bootstraps First to $5M ARR, Raises $10M Later
. Bootstraps in Europe, Raises Money and Goes Global in the US
. English Major Bootstraps a Tech Company
. Bootstraps with a Paycheck to $15M from Tennessee
. Queue-It Bootstraps from Denmark to the US
. Bootstrapping A Virtual Company To $25M
. ActiveCampaign CEO Bootstraps Using Services to $40M
. Alteryx Bootstrapped with Services to a Public Unicorn
. Inspyrus Bootstraps Using Services to an Awesome Business Model
. CEO Bootstraps Using Services to Millions from Russia
. Wiredrive CEO Bootstraps Using Services to $10M
. Scaling to Over $10M by Bootstrapping Using Services
. Bootstraps Using Services from Poland to a US SaaS Company
. ButcherBox CEO Bootstraps a Perishable Meat Business to Significant Scale
. Waveform CEO Bootstraps to $8M
. Bootstrapped Entrepreneurship from Estonia
. From Laid-off Engineer to Successful Startup CEO
. Imagine Easy Solutions CEO Bootstraps to Exit
. BannerBuzz CEO Bootstraps to $35M
. Bootstrapping a Virtual Company to Scale
. Bootstrapping Using Services from Wisconsin
. Best Tactic for B2B Startups
. Bootstrapping by Piggybacking from Romania
. Bootstrap First, Then Scale with VC Funds
. Bootstrap to +$10M First, Raise Money Later
. Madwire CEO Bootstrapped First, Raised Money Later to $120M
. Bootstrap Using Services First, Raise Money Later
. Wonderful Bootstrap with a Paycheck Story
. RushOrderTees CEO Bootstraps to $23M
. Bootstrapping with Freemium and Free Trials to $13M
. Bootstrapping, Pivoting, Gaining Liquidity, Scaling to $100M+
. Bootstrapping with Affiliate Marketing
. Bootstrap to Exit, Bootstrap Again, Then Raise VC Money
. Bootstrapping Using Services to $12M
. Bootstrapping an Ad Tech Company from Paris
. Bootstrapping a 100% Virtual Company from Ireland
. MiQ CEO Bootstraps with Services from London
. Bootstrapping to $8M During the Covid Crisis
. Bootstrapping a Marketplace from Brazil
. Bootstrapping Using Services from Sweden
. What Should Startups Do To Raise Seed Capital in 2021?

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[…] Article originally published as Best of Bootstrapping: Bootstrapping to an Exit. […]

Bootstrap to Exit – VentureWoods Monday, March 11, 2019 at 6:39 PM PT