Bootstrapping a business isn’t a new fundraising method for startups, but it is a growing trend.
“Venture capitalists are a lot more disciplined with how they’re investing, so the current environment hasn’t been as attractive to fundraise early on,” said Fernanda Baker, Executive Director in Startup Banking at J.P. Morgan. “It’s pushing founders to bootstrap for longer.”
Baker and DeMarcus Williams, Managing Director of Startup Banking at J.P. Morgan, offer tips for founders looking to bootstrap a startup.
What is bootstrapping?
Bootstrapping is the process of starting and growing a company without outside investment, instead using personal finances or operating revenues of the new company.
This self-funding method works well for founders in industries that don’t require extensive inventory or significant upfront capital, such as service-based businesses, niche SaaS and micro-SaaS companies, and content creation.
Bootstrapping also appeals to successful serial entrepreneurs, who can use profits from previous successful ventures to fund a new startup.
Benefits and drawbacks of bootstrapping a business
Successful bootstrapped companies can provide founders with several key benefits:
- Full control and ownership of your business: “Bootstrapping means there’s no equity dilution—you are the sole owner of the company,” Baker said. “It forces you to find a way to get to money without diluting your company.”
- Disciplined growth: Bootstrapping forces founders to focus on efficient operations and profitability early. “Bootstrapping gives you time to own your strategy and think about what you want to do with the bootstrapped business without external interference,” Baker said.
- Stronger unit economics: Because every dollar is scrutinized, bootstrapped startups can achieve better margins. When founders have abundant capital, they may take on too many things at once. “With bootstrapping, you pace yourself. You think about healthier margins because you don't have so much capital available,” Baker said.
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Bootstrapping also presents several potential challenges:
- Slower growth: Limited capital can make it hard to capture market share quickly. “Your time to product launch is probably slower than it would be with a company that has already raised $500,000 or $1 million,” Baker said.
- Resource constraints: Without outside capital, bootstrapped businesses have limited budgets for talent, marketing, and research and development. Bootstrapping isn’t viable for capital-intensive industries—such as applied tech, biotech and fintech.
- Missed market timing: “In fast-moving industries, speed can be critical,” Baker said. “If you take too long to launch, competitors might be launching faster than you and gaining market share.”
- Founder burnout: Self-funding creates both financial and time pressures. Founders sometimes juggle full-time jobs while developing their startups, leading to long hours and personal financial strain that can contribute to burnout.
What is seed strapping?
Before reaching Series A, founders can use a range of funding approaches—from pure self-funding to raising multiple seed rounds.
“For most founders who aren’t independently wealthy, raising some institutional capital early on is essential for scaling quickly and establishing a competitive edge,” Williams said. “Seed strapping offers a compelling path for early-stage founders to achieve meaningful revenue while retaining control.”
Seed strapping is a startup funding strategy where a company raises a single round of seed funding, then focuses on building a sustainable, positive cash flow business. The intent is to balance the advantages of outside capital with minimal equity dilution, empowering founders to maintain long-term ownership.
Seed strapping offers several benefits.
“By pursuing a seed-strapping strategy, founders can safeguard their equity because they’re not subjected to continuous rounds of fundraising and ongoing dilution,” Williams said.
“Startups that follow a seed-strapping strategy often enjoy enhanced operational flexibility in their growth journey. While partnering with later-stage investors can accelerate scale and offer invaluable guidance, it may also come with more structured expectations for returns and defined timelines for growth.”
A growing number of AI solutions, such as coding assistants and sales automation tools, are making seed strapping a viable, attractive option for founders. “These solutions will only become more sophisticated in the years ahead,” Williams said.
5 tips for bootstrapping founders
Common mistakes for bootstrapped businesses include overestimating runway, neglecting marketing, and failing to establish growth milestones or validate pricing early. To avoid these pitfalls and achieve sustainable growth, founders should:
- Prioritize paying customers: Your customers provide the most valuable data for improving and selling your product. “Prioritize these relationships—even if customers are paying a small amount—so you can learn from them and get feedback on your product,” Baker said.
- Keep operations lean: With limited capital available, rigorous budgeting and financial planning become essential, including tight cash flow management and maintaining a low burn rate. Bootstrapped and seed-strapped founders can then reinvest profits to help their companies grow.
- Allocate resources wisely: Keep overhead low and outsource selectively. For example, you can leverage no-code, AI and open-source tools rather than hiring team members or outsourcing the tasks. Consider hiring fractional C-suite executives to access senior expertise while keeping costs down.
- Develop a strong network: Networking can not only help get your product in front of customers, but also connect you with mentors and collaborators. Look for networking opportunities through industry events, entrepreneur meetings and organizations that support early-stage companies. For example, J.P. Morgan hosts events for bootstrapped and seed-strapped founders and startup ecosystem leaders.
- Balance growth with financial stability: Sustainable growth involves careful planning and a clear understanding of your startup’s financial constraints and growth potential. When allocating resources, prioritize areas that will create the most value for the business. Avoid overcommitting to major expenses or rapid expansion that could strain your finances.
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JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
