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2 Startups That Succeeded Without Angel or Capitalist Venture Funding

Let’s face it, beginning a startup takes guts. A lot of times, we often believe startups need angel or capitalist venture funding in order to succeed. However, this isn’t always the case. In fact, the statistics tell a different story; according to Entrepreneur, only .91% of startups are funded via angel investors while even a smaller percentage (.05% to be exact) receive funding from venture capitalists. So how do the other startups sustain themselves? Yes, that’s right, personal loans and credit (57%) and funds from family and friends (38%). What this shows is that you don’t need to spend a huge amount of time trying to get the attention of a venture capitalist or angel investor—actually, what may be surprising is that several successful companies were self-funded in their startup days and went on to thrive. Read on to learn more about successful companies that took the self-funded route, plus how you can bootstrap your way to the top. (That and why you may need to do a Georgia business entity search.)

Shutterstock Is More Than an Image Database

According (and as reported by) Inc., Shutterstock went public, which made it the first New York tech firm to do so since 2010. What many may not know about the tech company was that Shutterstock, being the hugely successful business that it is, wasn’t always that way. In fact, founder, Jon Oringer told Inc. that Shutterstock began with an idea and an $800-dollar camera. And he ran with it. The concept of a database of images for consumers to pick and choose from hadn’t been talked about, much less conceived of. Oringer didn’t discuss whether this original idea made it hard for him to get outside funding or whether he tried to get funding in general. What he did tell Inc. was that the company was completely self-funded. He admitted to spending more money on the business than on himself when first starting out.

What This Shows

While some may scoff at this process, with no outside funding, Oringer had full range of freedom and ownership. With no one to report to (and comply with), Oringer could make all decisions—which may be a contributing factor why the company became so successful. The company did end up going public with $76.5 million. Whether you are for or against self-funding measures, you have to tip your hat to Oringer’s determination and success.

Nasty Gal: Clothing Startup Bootstraps to the Top

As reported by Business Insider, founder, Sophia Amoruso, had a number of odd jobs before starting (and profiting from) clothing startup, Nasty Gal. Having always had a love for fashion, Amoruso started the clothing company from eBay. Five years after that, she was able to raise outside capital and, as stated by Business Insider, the company racked in $30 million (and counting) in annual revenue.

What This Shows

Sophia Amoruso using eBay, to launch Nasty Gal shows the power e-commerce (and social) platforms have if used wisely. If you are thinking about going the self-funding route, you might want to consider using these platforms as a springboard, as Amoruso has done.

Bootstrapping May Be for You: 3 Questions Give Insight

In general, bootstrapping is a business term used when an entrepreneur works hard, pulling his or her company from the startup phase to becoming a successful company. In case you are wondering where the term came from, think of the common saying “pull yourself up by your bootstraps”—which, according to Investopedia came about in the 19th century. Investopedia goes on to state that bootstrapping isn’t just about working hard and seeing your company rise above the startup ranks. It’s a process that uses very little resources (money included), and is accomplished without angel or venture capitalist investments. If you are deciding whether bootstrapping is for you, ask these questions to find out.

1. Are you at a place where you can work your day job and create a business?

One of the first phases of bootstrapping (as indicated by Investopedia) is the side business phase. During this phase, your business probably hasn’t earned enough for you to quit your day job. Still, you are able to put in the hours in order to bootstrap your company to the next customer-funded phase. (As the name suggests, this phase is where your customers help the company stay afloat.)

2. Do you have the discipline and determination to see the bootstrapping phase through?

Both Sophia Amoruso and Jon Oringer didn’t begin companies that were instant successes. It required a large amount of time and energy into getting them off the ground—again, bootstrapping. With this in mind, know that your company probably won’t be off and running with instant profit. As indicated by Harvard Business Review, the growth process often times isn’t steady and straightforward. With that in mind, can you ride out the period of stagnation and even negative growth?

3. Are you ready to take on debt?

Yes, self-funding isn’t always pulling from your savings. A lot of times in order to grow you need to take on debt (of course, with the intention of paying it off when the company profits more). This can be frightening to some but is a necessary bootstrapping step (as indicated by Investopedia). If you are willing to do this, bootstrapping may be for you.

Final Thoughts

Contrary to popular belief, self-funding is not a life sentence. Not receiving funding from angel and venture capitalists does not mean your startup is destined to fail. As Amoruso and Oringer show, it may be quite the opposite. Still, you have to ask yourself the tough questions in order to determine whether you can bootstrap. What tips do you have for entrepreneurs interested in self-funding? What’s your experience been and how has it shaped you from a business and personal standpoint? Be sure to leave a comment below in the comments section.

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