7 practical ways to build your SaaS without raising capital
I wrote a post on LinkedIn about startups that raise venture capital and how bootstrapping gives entrepreneurs more freedom, long-term wealth, and optionality. It’s getting a lot of engagement, and some have told me, “sure Kyle, it sounds nice but it’s not easy to bootstrap”. I’m not suggesting it is easy, but it’s possible.
I'll outline some ways to self-fund your business without giving away equity.
Run a service business
The first, and most common way, is to run a service business to fund the startup. This is how 37 Signals famously built Basecamp. Mailchimp was also spun off from a services company.
It's also how I got Proposify off the ground, as I was running a web design agency.
There are downsides to this, of course. It's hard enough to build a SaaS product without being distracted by client work. Again, not easy, but possible.
Tech-Enabled Service
Build a service business to solve the customer problem, and gradually build tech around it to use internally first, then offer it as a SaaS subscription.
This is similar to running an agency, with the difference being that you are instead focused on one customer and one problem, you're just solving it manually first before trying to automate it with code.
To start, you can offer a service such as consulting or design to solve a customer problem and build software you use internally to increase efficiency or get better results.
Once you refine the software, you can offer it along with your services to customers and collect feedback to enhance its value.
Eventually, you can sell the software with or without the service component, similar to how my friend, Marcel Petitpas is building his company, Parakeeto.
He helps agencies become more profitable. He started with a software solution but found customers needed guidance, so he spun it into a higher-priced service that in turn, funds the software development.
Get paid to build a bespoke solution
When you are talking to the market and validating problems, you may find customers are so desperate for a solution they will actually hire you to build it.
The key, of course, is to make sure that the customer is just hiring you to solve their problem, not build an app that they own and sell. Make sure you have an IP agreement to retain ownership over the code.
When I ran an agency, a client once paid us six figures to build him an extranet, and we retained the IP so we could then offer instances of that same product to other customers. We never ended up pursuing it, instead focusing on Proposify, but I’ve seen this work before.
Pre-Orders
Many startups were funded through platforms like GoFundMe or Kickstarter. When Oculus turned to Kickstarter in 2012 to develop its product, it quickly blew past its $250,000 fundraising goal. The crowdfunding campaign was just the beginning for the nascent VR company: In March 2014, while Oculus was still in the prototype stage, Facebook agreed to acquire it for $2 billion in cash and stock.
You can also just directly raise funds from customers as you run discovery and show them prototypes. Getting a credit card upfront is one of the clearest ways to validate your startup idea; if customers are willing to hand over cold, hard cash when the solution isn't even built yet, it's proof that you are on the right track.
No-Code Platform
Use a no-code platform like Bubble to build and validate the solution.
A lot of startup founders aren't programmers, and so require partnering with or hiring developers to build their solutions.
That isn't the only way now. No-code platforms let non-technical people build applications with a point-and-click solution.
I haven’t personally used any of these, but you can read Bubble’s showcase to learn more about how other startups have built prototypes taking this approach.
No code solutions aren’t going to be the best long-term solution as your business scales, you’ll need an engineering team to build custom software and infrastructure, but no code can get you an MVP to validate with paying customers you can use to later build a better solution.
Government Programs
This depends on where you live, but in Nova Scotia, Canada, where I'm from, we have many different government programs startups can tap into, like IRAP, SRED, ACOA, NSBI, and a number of other acronyms that basically come in the form of government grants, rebates, and interest-free loans.
Channel Partnerships and Affiliates
Of course, you can sell yourself, but many founders I know who do all their own sales find this to be a grind over time and eventually need to bring in reps to sell for them so they can focus on other areas of their business.
You can also run marketing in a similar fashion, with pure elbow grease, and no hard costs. Content marketing is a common way to build brand awareness and demand without spending money on ads, but this is also a long game and a lot of work.
A different possible way to grow your customer base is with partnerships. If you offer a high-priced SaaS product that requires sales, a channel partnership could work.
ISVs, or Independent Software Vendors, sell software they don’t make in-house. Salesforce and Hubspot, for example, are sold by channel partners. This works when you can offer them a meaningful cut of the software revenue and give them a way to upsell services to customers on top of the software.
Another way is through affiliate marketing. You can get involved with an affiliate program, where independent affiliates market your product with a unique link. They get paid when someone signs up for your product through the link. This tends to work with lower-priced SaaS solutions, where it’s a volume game, and individuals with high-traffic sites promote your product to their audience. There’s still an acquisition cost of course, but you only pay when you have a customer, versus advertising, where you front the cost and aren’t guaranteed ROI.
What are some other ways you can bootstrap your SaaS?