Bootstrapping a company takes a lot of courage, especially when you’re going up against industry incumbents in an increasingly-crowded SaaS market. Those successful companies have time and experience on their side. They know the industry better than you, and they’re likely more tuned in to the audience. They also have deep pockets for comprehensive marketing campaigns and investors backing their growth strategies.
But that doesn’t mean success is impossible. I’ve bootstrapped two successful SaaS startups, Link Texting and Narrow. Much of that success can be attributed to careful planning, practical growth strategies, and clever marketing to reduce expenses.
If you have an idea, don’t rest on your laurels. Get out and get started. If you need more inspiration, here are five well-known SaaS startups that overcame the odds and bootstrapped their way to tremendous victories.
Grasshopper is a popular VoIP phone system aimed at startups and entrepreneurs. Its low cost of entry and reduced subscription costs compared to other major VoIP providers allows Grasshopper to keep up and oftentimes surpass its competitors.
What you might not know is that Grasshopper grew without any outside funding or seed capital.
The company was started by David Hauser and Siamak Taghaddos while they were still in college. Their aim was to solve a common problem that many entrepreneurs faced when promoting a professional image as a startup. The idea was to give startups a virtual phone number, complete with extensions, so that they seemed like larger organizations than they actually were.
The co-founders started Grasshopper with $250,000, but that money came from personal savings and credit cards, along with a little support from family members. Despite having decent startup capital, the duo grew the company from a negative cash-converting financial model. Essentially, they didn’t spend money until they had money.
After gaining their first few customers through narrowly-focused keywords and AdWords targeting, acquisition grew.
“Once we had a few customers, we were getting about 30% of our new customers through word of mouth,” says Hauser. “The customers that we had gotten through advertising were telling their friends.”
With a focus on customer service, a unique product offering, and a quirky social campaign that involved chocolate-covered grasshoppers, the company was profitable within two months. Grasshopper generated $423,000 in revenue during its first year, and revenue grew to $8.8 million by 2007.
Use case and UX testing can be a time-consuming process when you have to review your work across multiple devices. To simplify this process, founders Paul Farnell, Matt Brindley, and David Smalley created Litmus in 2005. The platform allows customers to test designs on all major email and mobile clients.
Rather than spend time trying to generate seed funding, the trio launched the system in a single weekend with a used computer and just $800. Within just 90 days, Litmus gained a stream of positive feedback and had acquired more than 100 paying customers.
They listed features that they planned on adding soon, but ended up changing course after listening to customer feedback. “These were the things that we thought were cool and we thought people would be excited to use, and, to an extent, people thought they were cool ideas,” said Farnell. “But they would say, yeah, they would be good, but what we really need is this other thing, which we maybe had considered but had ruled out as not being that important.”
The team continued to develop the system based on users’ feedback and expanded features based on recommendations from customers. Today, Litmus has grown to more than 30,000 customers with revenue exceeding $1 million annually.
When you want to know what content topics are receiving the most traffic, shares, and engagement, one place to look is BuzzSumo. The application lets you search for content topics by keyword, domain, or influencer, and it will present you with a list of content that closely matches your search query. The results are sorted by total shares, with stats divided between the major social networks.
It’s a groundbreaking SaaS for content marketers, and it was fully bootstrapped. The company was formed in March of 2014 by Henley Wing, and James Blackwell. They launched a Pro version of BuzzSumo in September of that same year.
Rayson provided the financial support for BuzzSumo’s launch and development, and even without outside investors, the team acquired 2,000 premium subscribers, 160,000 freemium subscribers, and an annual revenue exceeding $2.5 million by the end of their first year.
“The important thing to remember with any business is that luck plays a part,” writes Rayson in a blog post for BuzzSumo. “We were lucky to launch a content marketing tool as ad-blocking grew and businesses focused more than ever on content to engage with their audiences.”
GitHub was founded in 2008 by Chris Wanstrath, Tom Preston-Werner, and PJ Hyett. The platform served as a solution to a problem they all shared: they had a passion for Git, but sharing code with others was impossible. There just wasn’t a cloud solution.
The platform grew over time, as the trio didn’t seek outside funding to grow GitHub. Instead, they worked side jobs (Preston-Werner had a full-time job) and used their personal income as a means to finance GitHub’s growth. It didn’t take long for them to reach 100,000 users. Today, GitHub has over 14 million users and more than 35 million data repositories, making it the largest source code hosting platform in the world.
Rob Walling’s story about growing and launching Drip is an inspiring one. Not only did Walling manage to bootstrap his email automation platform through the development phase and into launch, but he also used creative marketing to generate buzz for the platform before a single line of code had been written.
Another lesson to be learned from Drip’s launch is the out-of-the-gate stall that occurred. Despite the warm initial reception, churn was high and conversions were low. Drip was only generating about $9k per month in revenue even several months after it launched.
To refine the system, Walling turned to the customers they had lost. While listening to their feedback, he discovered that in order to keep up with the incumbents, he needed to add more value.
And that’s exactly what he did.
Walling said Drip gambled on the requested implementation of automation, but it was a gamble that paid off: “We saw a 50% lift in trial-to-paid conversion rates within 30 days, and churn rates cut in half in the first 30 days, as well.”
By bootstrapping and maintaining ownership in the company with his co-founder and developer, Derrick Reimer, Drip has grown into a seven-figure SaaS business.
Startup capital is just one component of launching a successful business. Don’t put too much emphasis on having all the cash you need before you take action. Find creative ways to bootstrap and start building connections with the people and resources that will help you get off the runway.