For the last decade, scoring a big round of venture capital funding has been the yardstick of success for startups across the ecosystem. After that, startups can finally get out of fundraising mode, focus on growth, reach scale and generate millions (billions?) in annual cash flows. But for many startups, venture funding isn’t necessarily the best option — for some, it’s no longer an option at all.
Now, with global venture funding in decline, bootstrapping is an increasingly important and viable way to launch and grow a startup.
Moreover, it seems like the pendulum has swung back to a time when technical innovation (as opposed to business model innovation or regulatory arbitrage) is happening in nascent spaces such as crypto, climate and generative AI. Venture capitalists may feel reluctant to invest in companies without a product they can prove is already successful with a growing customer base.
Founders of consumer tech startups can use the current market downturn as an opportunity to focus on revenue generation by building products that customers are willing to pay for.
We launched NordVPN from Lithuania in 2012. Back then, there was a lack of accessible venture capital — that year, Baltic startups merely raised $54.4 million combined compared with $2.4 billion in 2021 — which we had to factor into our corporate growth plans.
Here are three key principles bootstrapped founders should keep in mind for conceiving, launching and scaling a successful consumer product, based on our ten years of bootstrapping experience.
Double down on a key focus and do it well
When your customer is king, it usually pays to develop product thinking, which is the skill of knowing what makes a product useful to — and loved by — people. But what happens when you are building a product for a market segment that doesn’t even exist?
Use the current market downturn as an opportunity to focus on revenue generation by building products that customers are willing to pay for.
The answer: double down on a key product focus rather than explore multiple options — do one thing very well (at least initially). Your attention to detail will become a competitive advantage in time.
In the early 2000s, VPNs were mostly associated with businesses and the public sector. Consumer VPN technology was still nascent and the average online user was not familiar with it. In short, there was a lot of white space to be filled.
In 2012, it was important for us to educate people on the importance of using a VPN and why they should pay for one — and it was equally important to build a product that the ordinary internet user could, and should, use daily (addressing both functional and emotional needs).
The huge vacuum in the consumer VPN market at that point meant it was tempting to ship out any and all features, especially since the industry was still maturing then. However, our limited capital meant we had laser focus on revenue generation, which meant building a product our users loved. By prioritizing control, convenience and speed, our customer loyalty was built up over time and retention remained high in both the good and hard times.
By focusing on a user-friendly experience, consumers were willing to pay for our product and we were able to build on this market segment.
Once your first customers are acquired, know when to listen to them (and when not to)
When you acquire your first customers, it is of course crucial to listen to their feedback. As your customer base grows, so will the amount of positive and negative feedback you receive. While you should listen to your customers as much as possible, don’t base all your practical decisions on customer feedback.
A few years ago, our customers were continuously selecting the same set of servers merely out of habit or superstition, which increased server load and latency and worsened their overall experience as they weren’t always the optimal server for that connection.
Instead of allowing customers to choose and select their own servers under “Favorites,” we switched to categorizing services under a list of a customer’s most recent connections, automatically arranged by how often they needed them. Users were skeptical about the changes at first, but over time realized that the servers would reflect their preferences and therefore enhance their overall experience.
You don’t have to pivot your product roadmap if it doesn’t contribute to your broader vision or your bottom line. Soliciting feedback when you need to keeps you focused on building minimal viable products and refining the features that are having the biggest material impact on your business and early sales.
Limited resources are your biggest advantage
The fragmented landscape of user research tools leads to long, expensive insight-gathering cycles, and the tools themselves are often disconnected from product management, design, or work/note suites like Figma, Jira and Notion, meaning that user feedback often lives (or languishes) in a silo.
Bootstrapped companies, while limited in capital, have a much greater capacity for creative solutions and experimentation. So, at the beginning, we said no to tools and sought out more creative approaches to collecting feedback.
One of the more unconventional avenues we used to collect product insights and feedback in the early 2010s was Reddit. There was a core of early adopters there who basically functioned as our user testing group and would provide feedback on existing features, as well as suggest new ones. We realized early on they were the right people with the right incentives to have those types of conversations.
These direct conversations also allowed us to better understand the problems our customers were facing and if we were still solving them adequately. Additionally, it meant we could get to know a core group of users. We’ve fostered these relationships over several years — there is a lot to be learned from the changing perspective of a customer, and our sustained interactions also helped drive brand loyalty and advocacy at the user level.
Bootstrapping is once again a viable option
Bootstrapped companies can use the current funding downturn as an opportunity to create a product their customers truly love, particularly in more nascent industries that investors find riskier to invest in, but with more potential for innovation.
Without having to manage investor expectations and relationships, bootstrapped founders can and should have a laser-like focus on generating revenue by building a product that users love enough to pay for.
Both VC-backed and bootstrapped startups now face an extended period of profound economic uncertainty, but in the principles outlined above, at least bootstrapped founders have a foundation upon which to conceive, launch and scale a successful consumer product.