I did a survey of founders and CEOs of startup companies. I asked them the question: When did you get outside investors, excluding friends and family? After you had some satisfied customers who provided some revenue? Before? At some later stage of your company?
There was a total of 13 responses. 10 bootstrapped, 3 never raised capital from 3rd party investors to grow. No-one raised 3rd party capital if they were at a stage with no satisfied customers and no revenue.
Bootstrapped means: only received capital from 3rd party investors to grow the business, once there were some satisfied customers, providing some revenue. Sometimes family and friends provided capital. Sometimes part of the company was sold to enable co-founders to monetize some of their equity.
A panel of five investors commented on what they look for in startups. The investor perspective is the same as the results of my survey.
- The vision has been customer validated.
- Founders have used sweat equity to build the company.
- Founders need money to scale, not to start the company.