To bootstrap or not to bootstrap?
That is the question — at least, for many a startup founder at one point or another on his or her tech journey. The decision to pursue (and accept) formal venture capital funding has transformative implications on the way a business runs and the culture that supports it, and as a result, it’s a weighty question worthy of more than an ounce or two of cautious thought.
For years, some of Chicago’s largest and most successful tech companies eschewed formal funding in favor of running things on their own terms. But in the last couple of years, many of those same companies have made the strategic decision to partner up with a VC: in 2015 Sim Partners picked up $8 million after eight years of bootstrapping; 2015 saw kCura’s first ever external financing (to the tune of $125 million); 15-year old GoHealth received its first and only round of funding in 2012 after a decade-long run of roughing it; and most recently, former bootstrapping giant Vivid Seats announced an undisclosed round of private equity financing in January of this year.
Regardless of where you’re sitting, there are pros and cons to either side of the aisle. Bootstrapping lends itself well to autonomy and agency, while VC funding can open the door to the sundry resources needed to scale a business, and fast.
Here are eight of Chicago’s bootstrapped stalwarts — and the reasons why they say it’s the right choice for them.
Bootstrapped since: 2006
Why bootstrapping was the right way to go: “ContextMedia was built on bootstrapped resources as much by force as choice — we didn't like any term sheets offered,” said Shradha Agarwal, co-founder and president of ContextMedia. “Being self-funded challenged us to do more with less and stretch each dollar to its maximum ROI, and this culture of scrappy excellence remains a core value of ContextMedia today. Being self-funded also meant we prioritized developing a scalable and sustainable business model. Bootstrapping provides greater focus but shouldn't come at the opportunity cost of growth or innovation. It does allow us to invest in the long-term and affords us the flexibility to be nimble.”
Bootstrapped since: 2000
Why bootstrapping was the right way to go: “Keeping revenues higher than costs forces us to be disciplined in several areas; we need to be pretty certain that a new initiative will be successful before pursuing it; we need to do things right the first time; and we can take a longer perspective on some decisions — for example we are able to watch certain technological developments and market trends to determine our best timing, rather than having pressure for short term gains,” said Stephanie Burke, the company’s CEO and co-founder. “We can also pursue some initiatives that we think are just good to do, without knowing if/what the immediate payoff will be — and in hindsight these have been some of our best decisions.”
Bootstrapped since: 2004
Why bootstrapping was the right way to go: “When you’re focused on building a great business and infrastructure year after year, you begin to see the incremental gains that lead to big results,” said Jon Morris, founder and CEO. “By determining how much resource is needed to execute our company's plan for both the short- and long-term future, we've been able to strategize accordingly. I've always been laser-focused on reinvesting in the business and therefore have put a lot of emphasis on spending our time and money in the areas that will drive the greatest growth. This has given us the flexibility to invest in our people and culture in ways we might not be able to do if we were venture-backed.”
Bootstrapped since: 2000
Why bootstrapping was the right way to go: “Launching and scaling a company as large as Guaranteed Rate without incurring corporate debt was no easy task, especially in the early years as we built the business from scratch,” said Victor Ciardelli, Guaranteed Rate’s CEO and founder. “Maintaining ownership and control, however, has given us the freedom to execute with a long-term perspective and make decisions based upon what is best for our company, our employees, and our customers, instead of being driven by the short-term demands of creditors or investors. Guaranteed Rate’s bootstrap philosophy has nurtured a strong culture of innovation and self-sufficiency that has fueled our rapid growth and success over the past 16 years.”
Bootstrapped since: 2003
Why bootstrapping was the right way to go: “By remaining bootstrapped, we have been able to define our direction and strategy without having outside influence or pressure to adjust outside of our vision. Having funding during this process would have potentially allowed us to move faster, but at the risk of a weaker foundation of product and culture. By being able to prove our position in the market (despite no funding) we have quite a few options for how we can proceed and can choose from those with our company’s best interests in mind,” said Jason VandeBoom, ActiveCampaign’s founder and CEO.
Bootstrapped since: 2001
Why bootstrapping was the right way to go: “We’ve grown from a one-person operation in 2001 to a 65-person, employee-owned company. Brad's Deals is able to offer an organizational stability not often found in high-growth companies working on interesting things,” said Brad Wilson, founder and CEO.
Bootstrapped since: 2009
Why bootstrapping was the right way to go: "The number one benefit (to bootstrapping) is that the risk of failure forces your team to do the right things, both for customers and employees,” said Steve Blentlinger, Payline’s chief strategy officer. “What it means to a founder is retaining ownership (i.e. control) of your company and generating profits in a responsible manner. It’s the model we've employed at Payline Data. Along the way, this has allowed us to not only control the company direction and culture, but improve it as well. When we turned our backs on VCs last year and funded our growth through alternative means, we retained 100% of our equity, and in doing so, were afforded the opportunity to extend any ownership benefits to every single employee at the company. In fact, I even had tears in my eyes when we made the announcement to our team!"
Bootstrapped since: 2012
Why bootstrapping was the right way to go: “By remaining bootstrapped, we not only have been able to maintain control over the direction and growth of our great company, but we also have been able to learn the crucial importance of positive cash flow and lean business practices first hand,” said Andrew Parnell, EarlyBird’s CEO.
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