They achieved the unicorn status either through bootstrapping or raising little money
Startups raise money from investors to scale their businesses. Most of them plan to scale through funding in some form.
But these startups stand out from the crowd as they build their fortune either through bootstrapping (without raising money in any form) or through very little funding down the line.
These startups have several things to offer as valuable learning due to their ability to create cash flow, generate revenue, and achieve product-market fit without any external capital.
The startups have managed to retain the majority of the control of their own company and have since either been acquired, offered an initial public offering (IPO), or are still going ahead.
The first in the list is the SAAS company that was launched in 1996 when the software culture was just on the rise and there weren’t many software companies in India. Identifying a gap in the local markets, Sridhar Vembu started the company. Vembu says that the driving force for them was the number of software that India used and they felt that there must be a huge opportunity.
How Zoho handled competition?
Zoho offers direct competition to Salesforce and it does so by using two strategies for its growth:
- They focus on offering a freemium (providing basic services to the customers for free and charging on premium services such as add-ons or few advanced services to the paying customers) to lure customers to eventually shift over to their complete suite of products.
- They offer their products at a lower price to attract new or young companies and startups, enabling them to access a full range of CRM keeping in view their limited budget.
Also read: Types of business models
The company is currently valued at $6 billion, with 50 million users, 9,000 employees, and around 11 offices worldwide.
Launched in 2003, Shutterstock is one of the earliest stock images site. It was founded by Jon Oringer, a software developer.
While selling products to his own email list, he realized that the products sold better when attached with a photograph. Using photos was expensive so he started to shoot his own photos. He soon realized that other entrepreneurs might want stock photos on the web as he did. This was the starting point of Shutterstock. He put his own collection of 30,000 photos on the website and charged users $49 a month for unlimited use.
Later, Oringer scaled by adding contributors other than himself. This was done primarily through bootstrapping. A small amount of money was raised mainly to scale the team.
Today Shutterstock is valued at 2.5 billion dollars. One of the main reasons behind the success of Shutterstock was that it was able to achieve the product-market fit relatively soon when the demand for the photos exceeded its own supply.
- Originally started as an email marketing service by Ben Chestnut and Mark Armstrong in 2001, Mailchimp is now used as an all-in-one marketing platform. The founders while running their design consulting company were being asked constantly by their clients for the newsletters. Instead of creating the newsletter for them each time, the founders decided to create a tool for them.
The interesting part is that Mailchimp was actually started as a side business. It was later decided by the founders to take it as a full-time business. The growth strategy that they adopted was switching from a fully paid service to a freemium model to fight the recession wave. They saw an increase in the number of users from 85,000 to 4,50,000 within a year.
Mailchimp is owned entirely by the co-founders since its inception, has never accepted any venture funds, and earned the current stature through bootstrapping. With a revenue of 700 million dollars and 800 plus employees, they have an estimated valuation of $4 billion!
- Launched in 2002, Atlassian came out as one of the most successful tech companies with products like Trello and Jira under its portfolio.
- Their project tracking software is one of the fundamental reasons behind their success as it’s the product used by many technical systems. Another reason for their success is their focus on building something smart & intuitive that did not need any formal sales team to sell.
The strategy they adopted to scale fast
They offered a free trial to users. By doing so, they tempted the users to invite their team members too onto the platform. With more team members on-board, it would be difficult to work without the tools. This caused the product to become ‘sticky’ that the users could not work without. Also, a low-cost distribution model helped them to scale fast.
Atlassian later raised money to smooth out the process to bring board members to their company (as people were suspicious that they could not do all this just by bootstrapping!).
To Wrap Up
The above list showcases startups that began their journey bootstrapping and built giant businesses without the investors’ money. As we hear more and more startups raising money from venture capitalists or angel investors, we tend to think that raising funds is mandatory. Although few technologies and ideas might need funds to get started, many ideas can be built and scaled successfully through bootstrapping.