Startup Fundraising, Part 3: So VC Isn’t for me. What about bootstrapping?

May 5, 2023

Over the past few months, we’ve been breaking down each step of the startup fundraising process with help from 2022 Future Founders Fellow Chris Cherian, founder and CEO of Gatherly.io and self-proclaimed fundraising nerd. 

This time, we’ve looped in another talented Fellow from our 2022 cohort: Ahriana Edwards, Founder & CEO of Vaila Shoes! You may remember Ahriana and from the spotlight feature we ran last year—or from the cover graphic for this very content series!


Ahriana Edwards, 2022 Future Founders Fellow, Founder & CEO of Vaila Shoes

As we described in the spotlight piece, Ahriana has firsthand experience launching a business without venture backing. In Vaila’s first year alone, Ahriana raised over $80,000 without giving up a single piece of equity in her business.

In this latest installment of the Think Like a Founder: Startup Fundraising series, we asked Ahriana to share some of her hard-won wisdom about this process (a.k.a. ‘bootstrapping’) for founders either unwilling or unable to seek VC money.

Part 1: Fundraising 101

Part 2: What is a VC (and is it for me)?

Part 3: So VC isn’t for me—what about bootstrapping?

Part 4: How do I start raising?

Part 5: What will my raise look like?

Part 6: So I’ve raised. Now what?

To V or not to V(C)? That is the question.

As we’ve established, not all businesses are well-positioned to secure venture capital funding. 

Maybe your startup’s Total Addressable Market (TAM) is too small or too niche to attract a big-money venture firm’s attention. In that case, even your roaring success in capturing huge swathes of the market might not yield a payoff big enough to be worth a VC’s time.

Remember, venture capitalists bet huge amounts of capital on the chance that even one of their investments will grow large and fast enough to recoup their losses on the others, and then some! If your business isn’t so easily or quickly scalable as, say, unicorns like Bevel or AirBnB, it might not make sense to receive VC backing. But that doesn’t mean it isn’t fundable. 

Businesses that can’t—or don’t need to—grow at the same exponential pace as those venture darlings may actually be better off seeking other sources of funding.

Remember, too, that venture capital funding comes at a cost, almost always in the form of an equity stake in the company. Some founders choose to bypass the VC route entirely in order to hold onto 100% ownership and control of their business. If you decide to raise the funding you need without giving up any equity, you get to keep your power to make decisions about your business’s direction, as well as a larger share of the spoils should it become profitable and/or acquired.

There are lots of reasons why founders decide to bootstrap their startups. The process may require a bit more legwork than cashing a giant VC check, but it can be just as effective a fundraising strategy for startups looking to stay independent and avoid some of the drawbacks of venture funding.

What does it mean to ‘bootstrap’ a business?

Bootstrapping is basically finding scrappy, piecemeal ways to secure funding for your startup that don’t involve giving up equity. 

In the earliest stages of bootstrapping, the most common sources of startup funding are personal: for example, founders’ personal savings, wages, or other kinds of personal wealth. Bootstrapping can be arduous; many founders start running their companies while working at least one full-time job.

Needless to say, not all founders who choose to bootstrap have access to sufficient capital from personal wealth alone. That’s where external financial resources like grants, loans, pitch competitions, crowdfunding campaigns, and more come in. These resources are considered non-dilutive because they do not require the founder to relinquish any equity; in other words, raising non-dilutive funding does not dilute, or weaken, the founder’s ownership of the company.

Ahriana’s Advice? “Bootstrapping is Scrappy.”

Ultimately, a founder who bootstraps their way to a healthy raise will likely rely on a combination of some or even all of these fundraising strategies. Successfully launching a business without venture backing requires resourcefulness, tenacity, and stamina. As Ahriana notes as she describes her own bootstrapping journey, 

Although I ended up becoming successful in raising over $80K in non-dilutive funding from pitch competitions, the process of winning that funding was very difficult…rather than cashing one big VC check, you have to really hustle for those small checks that will add up to what you need. It can sometimes feel like another full-time job because of all the extra effort you have to make.

As we described in her spotlight piece, Ahriana’s raise was a huge success. After launching her brand in Macy’s within only a year of  being in business, we asked her to share some of her most valuable lessons learned:

1. Know your finances.

  • Understanding your finances will be an important thing for you. Be intentional about setting budgets, figuring out your runway and burn rate, and your financial projections. Something like 82% of small businesses fail due to cash flow problems, so it’s important to have a sound financial plan before you start your business. 

2. Work smarter, not harder, to find funding opportunities.

  • Did you know that you can set Google Alerts to find relevant pitch competitions and grant opportunities? You can set up a bunch of different alerts for pitch competitions and grants available for your company, industry, region, etc. I typed “Pitch Competition in Atlanta” into https://www.google.com/alerts and I’d receive daily updates if that phrase turned up anywhere in sight of Google’s search engine!
    • Tip: Isolate key terms when creating alerts to maximize reach. For example, some of your alerts might look something like this:
      • “pitch competition” “application” “open” 
      • “grant” “female founders” “application” “open”
      • “pitch competition” “illinois” “social impact”
  • Social media (especially Twitter, Instagram, etc.) can be great places to find resources and information. Start by following your favorite founder(s) and look at their network, events/programs that they’ve engaged in, and start a follow train. Make sure to incorporate organizations and individuals that are involved with your industry—that way your entire timeline is covered with timely, relevant opportunities. 
  • Join as many (free) founder networking groups as you can, whether in-person or online. As you start to participate in these groups, be intentional about staying connected with the people around you. One of the most valuable things that I did was create a group chat of ‘Founder Besties’ where we all could share tips, resources, and opportunities with one another.
  • Save all your application materials (i.e. writing for grants, pitch competitions, accelerators, etc.) so you can reuse or adapt answers you’ve already written to suit different opportunities.
  • Having a hard time writing concisely? Try pasting your writing into an AI like ChatGPT and asking it to reduce your word count, or else rewrite what you’ve written in a way that’s easier to understand.
    •  Don’t rely exclusively on AI, though—ChatGPT is a tool, not your brain. 

3. You are not a machine—your health is the health of your business.

  • Manage your energy levels. I felt a lot of burnout while bootstrapping and it took away from building my business. Find a healthy balance of raising funds and taking care of your day-to-day.
  • Try a sprint schedule to help manage your stamina. For example, if you’re going to do 90-day sprints where you spend the bulk of your time on fundraising, take the next 30 days to rest, recharge, and take care of the rest of your business. 

4. Your network is your net worth.

  • You’ll start to see many opportunities that come up within your network that you wouldn’t have access to on your own. Be intentional about giving resources just as much as receiving them.
  • Affinity groups are golden! An affinity group is an intentional community (online or in-person) of people from similar backgrounds or experiences. Being a founder in the early stages is lonely—but you aren’t the only one going through this journey. Getting involved with demographic- or geography-based groups like Ladies Who Launch and LTX Connect, for example, can connect you with other founders who might be walking a similar path to yours. What’s more, these groups can help you build your network and access more resources and opportunities to elevate your business.
  • Networking includes the people to whom you’re pitching! Stay in touch with each and every person that passes on the opportunity to fund your business. Remember, a ‘no’ can always turn into a ‘yes’ later if you make the effort to maintain the relationship.

5. Don’t be afraid to ask for help—you’ll probably need it (and that’s ok!).

  • Have someone whom you trust to be honest with you read your applications. Ask them to share specific, actionable feedback for improvement—not just what they think you want to hear.
  • Ask for outside help to assist with your business operations while you’re fundraising. This could be an intern, a virtual assistant, or some other personnel. You’ll probably be spending so much of your time and energy focused on meeting grant deadlines, revising your pitch, attending networking events, etc. that you might not be able to get to all the logistical/housekeeping work that keeps the business running. An extra set of hands (physical or digital) can make a huge difference in your quality of life.

“You can’t say the right thing to the wrong person, and you can’t say the wrong thing to the right person.”

Bootstrapping is hard. It can be frustrating, exhausting, and even demoralizing at times. But it is possible! As Ahriana recalls, 

It took PLENTY [her capitalization] of ‘no’s before I finally got to one yes. I would spend hours updating my pitch deck, changing my messaging, even having doubts about my business and my potential. But one thing that kept me going was a good piece of advice from my mentor:

‘You can’t say the right thing to the wrong person and you can’t say the wrong thing to the right person.’

So be authentic! That’s my single biggest piece of advice for any founder. You don’t have to change your mission just because you get rejected. The right person and opportunity will find you if you keep looking.

The Bottom Line

Remember: just because your business doesn’t receive venture funding doesn’t mean that it isn’t viable, scaleable, or profitable. Bootstrapping can help you stay more connected and independent in setting your company’s direction, and can set you up for a cash-flow positive business down the road, if not a lucrative acquisition by a bigger market player.

Future Founders is committed to creating a world where opportunity, choice, and economic freedom are equally available to all—not just those with access to personal or familial wealth, and not just those with access to venture capital. We connect founders with skills, resources, and opportunities that empower them to take their businesses to the next level.

The bootstrapping process may be arduous, but, as Ahriana says, you don’t have to do it alone. At Future Founders, we’re building the nation’s largest inclusive community of intentional young entrepreneurs—and we’d love for you to join us.

 

To learn more about Future Founders’ programs for early-stage entrepreneurs, click here.

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Ahriana Edwards is the CEO and founder of Vaila Shoes, a modern dress shoe brand designed intentionally to help women with extended shoe sizes feel confident and stylish at the workplace and after hours. She was a member of Future Founders’ 2021 cohort of Startup Bootcamp and the 2022 Fellowship. 

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