There’s no “right” way to fund a company

People fetishize venture capital, but it’s a misguided obsession. 

Your company isn’t worse or less interesting if you haven’t raised venture capital. In fact, just as fundraising doesn't equal success, VC funding isn’t right for everyone, and that’s not a reflection of your worth or an indictment of your caliber as an entrepreneur. 

It just depends on what your objectives are. Yes, you’re probably not going to be able to build a billion-dollar company while bootstrapping, but that doesn’t mean it can’t be a successful business or a life-changing outcome for you.

Case in point: my first company, Ksplice, didn’t raise any venture capital at all. My cofounders and I started it right after graduating MIT, with some initial funding we got from winning some business plan competitions and with a grant from the National Science Foundation. We paid ourselves nothing at first, and all lived together in a crappy little house in Cambridge, where we huddled around the dinner table every night eating meals I had prepared from discount groceries. (Which, of course, we bought in bulk.)

If we wanted to hire additional employees or buy equipment, we first had to—imagine this—make the money by selling our service to customers. Having to be frugal was frustrating, but it instilled in us some very healthy discipline—an instinct that has served us well in our subsequent companies.

Fortunately, our customers were excited about what we were doing, and we grew the business to seven figures in revenue before it was acquired by Oracle.

To be clear, the “don’t pay yourself and eat ramen” model is not going to work for everyone, and it’s important to say that explicitly: we were incredibly fortunate and had significant structural advantages. We could afford to pay ourselves nothing because we didn’t have families that we needed to support, or crushing student debt that we had to pay off. 

But if you are in a position to bootstrap and are considering it, don’t buy into the idea that it’s somehow less legit. Ksplice was a life-changing company for me, despite being far from a billion-dollar exit: it gave us a very significant financial cushion that served as a launching pad to start even more ambitious projects. (In fact, around 60% of unicorn companies are founded by repeat founders).

My point is this: If the market truly wants your product, it’s possible to build your company without VC funding. Yes, it may be harder and slower, but as a founder, what matters isn’t how you fund your company, it’s whether you’re staying focused on building a thing your customers want and are willing to pay you for.