Drawing the Line of Difference: Bootstrapped & Funded
By analysing the data about numerous start-ups obtained from the Crunchbase website and industry professionals some distinctive insights about the level of performance of bootstrapped (self-funded) start-ups as compared to the funded ones on the grounds of exit amount and strategy, founder backgrounds, gender and the teams were registered.
The Exit Strategy
It has been observed that while bootstrapped start-ups have a sooner exit, the average acquisition value for funded start-ups is comparatively higher. It took the bootstrapped start-ups 3.7 years on an average from the time of inception to the time of exit while it is 4.4 years for the funded ones, until last year. Though the bootstrapped ones exited sooner, the acquisition amount for them went up to $199 Mn, which was 60% less as compared to funded start-ups which stood at an amount of $320 Mn.
It might be that the figures suggest that bootstrapped leave money on the table while it must also be considered that their ROI is higher because of their sole proprietorship in the company. Akhil Saraf, CEO, Loyalie expressed, “My personal opinion remains that you should keep your company bootstrapped for at least a couple of years before getting outside funding. That gives you enough time to build something that is worth getting funded, a version of your product that is up and running and some performance data for investors to evaluate giving your company a greater leverage.”
The Acquisition Value
On an average, the acquisition values for funded teams are significantly more than those of the
members in the founding team outperform the solo founders by a shocking average of 32 percent.The average exit amount for solo founders is a little over $160 Mn as compared to over $212 Mn for bootstrapped teams. It has also been observed that funded solo founders have a level of significant under performance when compared to other types of founding teams which also include bootstrapped solo founders but it was the funded teams that exited with the highest value of up to $390 Mn.
The Gender Equation
Further, it has been observed that in most cases, bootstrapped female entrepreneurs outperform male founders. The performance level of male founders is slightly lower than bootstrapped female entrepreneurs. The acquisition values have consistently been 5 percent higher in case of bootstrapped women as compared to bootstrapped male founders. As further numerical data imply, it is $220 Mn in case of women and $209 Mn for men.
The acquisition values have consistently been 5 percent higher in case of bootstrapped women as compared to bootstrapped male founders. As further numerical data imply, it is $220 Mn in case of women and $209 Mn for men
Bootstrapped founders from technical backgrounds have been observed to outperform their non-technical peers. Huge difference in exit amounts appear with further research. Founding teams with only one technical founder are comparatively better at bootstrapping with an average acquisition value of $342 Mn which is really high compared to $98 Mn in case of completely non-technical teams.