“Build your business; not your slide deck.”

Let’s talk about a taboo topic in the indie world: funding.

I’ve spoken with lots of indie hackers about it over the years — most of us prefer bootstrapping, but plenty are open to (and even enthusiastic about) the idea of getting an influx of cash.

With the rise of funds that are more indie-hacker friendly, I think it's worth taking another look at our options, so I caught up with bootstrappers and funded founders to hear both sides of the debate.

Along the way, they told me how to do funding right. 👇

What bootstrappers say

👤 Jevon Shaw of Metracker:

I will always be a bootstrapper. It's kind of like captaining a boat: A large ship is impressive. Grandiose. Conspicuous. But you can easily lose control. It's hard to steer. It's hard to get people off if you need to. Small boats are fun. Easier to maneuver. Easy to get people off/on if you need to. Easier to sell if you want. You get the metaphor.

👤 Andris Reinman of EmailEngine:

I'm not against VC money, but there needs to be a reason to take it. If I had a grand plan that would require a lot of money, I'd go meet some VCs. I don't have a grand plan. I just want to slowly grow my business and see where it ends up, so any VC money would not help me at all. VC money is not some simple business loan; it comes with strings attached.

👤 Nicolas Jeanne of Talknotes:

VC funding is selling your liberty for money, so it’s no different than having a job. The moment you report to someone other than your customers, you’re an employee. So, no. Not interested.

👤 Spencer Patterson:

Bootstrappers are using their hard-earned money to build a project that they are truly passionate about. I feel like you work much harder and with a greater sense of purpose when your own money is on the line.

👤 Caspar von Wrede of Keep The Score:

I want a life where my only boss is my customers. I want the freedom to make my own decisions and choose how I spend my time. I do not want employees. None of this would be possible with venture funding. Some businesses (1%) should take VC funding. The rest should either take indie funding (9%) or bootstrap (90%).

👤 Javier Velazquez of Formwise:

We’re looking for funding and have already talked with VCs.

👤 Simon Hamp of Laradir:

There's a time and place for VC. Having been at a VC-backed startup, though, I'm aware of some of the unnecessary pressures this adds to the biz and the team

VC brought runway that was desperately needed for a consumer hardware startup, but it came with outsized expectations, which then led to poor decision-making, and ultimately resulted in the need for severe cost-cutting measures, i.e. layoffs.

Not saying that we shouldn't have gone the VC route, but you have to be prepared for some hard work when you do and that might not end up being net good for your product, your company's profitability, your people, or the planet.

What funded founders say

👤 Josiah Mann of Brave Gym Marketing:

Funding helped immensely. I underestimated the amount of responsibility I was taking on in the niche I was in and what the cost of running a very business-critical software really is; super late nights fixing bugs, time away from family, and very stressful customer service.

If I had not been able to support it full-time during that period, the company may have failed due to slow support times and technical bugs.

👤 Frank Sondors of Salesforge:

The goal is to make a company as big as it can get, and without external funding, you just won't get there. Bootstrapped companies tend to be smaller and less exciting to run, I find.

👤 Pangratios Cosma:

It was not a great experience at all, though I learned and grew immensely from it.

How it helped: Growing the team, marketing campaigns, accelerated development, and most importantly, we had the capital to actually form a plan and execute to get a solid understanding of whether our app had product-market fit.

How it did not help: We did not sign on the best terms — we were in a very difficult situation and it was a case of getting the funds or closing the company. This created a toxic environment which obviously impacted our partnership.

👤 Sina Meraji of Learning Loop:

I couldn't have started my company without external financing, so it helped massively. I view fundraising as a method for buying time to solve an important problem with tech that, once solved, will generate enormous financial value for shareholders.

This is a very San Francisco way of thinking about fundraising, and many investors may almost find it insulting for someone to describe fundraising this way.

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If you do it, here’s how to do it right

Focus on your business

👤 Rob Walling of TinySeed:

Build your business, not your slide deck. Raising investment involves telling a story of where you are headed, and nothing tells a better story than an MRR graph that's headed up and to the right.

Know whether your product is likely to get funding

👤 Rob Walling of TinySeed:

Typically the best products are those that scale well and have recurring revenue, like SaaS. But there are investors who specialize in two-sided marketplaces, hardware, etc.

The only class of product where I haven't seen investment is info products and courses. There doesn't appear to be enough upside to make them investment-worthy, and the typical reliance on a single person is also a challenge.

One-time sale software products could feasibly garner investment, but you'll have an uphill battle convincing investors if you don't have recurring revenue.

👤 Sina Meraji of Learning Loop:

The types of products that get investment depend on whether you're raising from SF-like investors or investors with a different mindset. When you understand an investor's goal, you can sell accordingly.

Wait until the right time

👤 Rob Walling of TinySeed:

Unless you have friends/family who know you, most investors will not invest pre-revenue. As a bootstrapper myself, I'd say bootstrap it as long as you can. The further you get, the higher the likelihood you'll be able to raise funding, and at a higher valuation.

👤 Pangratios Cosma:

We went out to secure funding when all that we had was an idea and a few thousand lines of code. This already put us in a very weak spot. Any valuation, projection and business plan was all theoretical. It took us more than a year to finally secure our funding, and one year is a lot in the startup world.

👤 Josiah Mann of Brave Gym Marketing:

I think it totally depends on the market you’re trying to enter, your existing network or ability to reach a given network, and your vision for the company. If you feel like your network and ability to raise money and build a team will make you more competitive, go for it. That is a potential path to success. If you feel like bootstrapping until you reach 1M in MRR to prove to investors you have product market fit, go for it. That is another potential path to success.

But, as an indie hacker, beware of entering an emerging market slowly without a plan for how you’re going to stay in the game for the long haul.

👤 Sina Meraji of Learning Loop:

In San Francisco, you are encouraged to raise money as early as possible, which is usually at the "problem definition" stage. Not when you have a solution ready, not when you have a product out, not when you have usage, not when you have revenue. Problem definition stage. The idea is that hard important problems that can potentially be solved with tech at scale will make a ton of money.

I'm not from the US, but I appreciate their approach to financing startups, so I optimized for it. It doesn't mean it was easy. It was excruciatingly hard, because when you raise early, you and your case need to be incredibly believable. I've obsessed over my problem space for a decade and it took me months to fundraise, but it had to be done.

Educate yourself

👤 Sina Meraji of Learning Loop:

Read Paul Graham's article about how to raise money and these tweets (1, 2) from Andrew Chen.  

Drop your other projects

👤 Rob Walling of TinySeed:

I don't know a single investor who will invest in a founder who wants to launch and operate multiple products at once. It's an anti-pattern for growth and if you want to go that route you should do that, but don't take investment.

Run the numbers

👤 Sina Meraji of Learning Loop:

If you want to raise to increase growth, clearly show how much money it's making now and how the new investment will multiply the output without multiplying the costs proportionally.

Seek the right kind of funding

👤 Rob Walling of TinySeed:

We (TinySeed) fund companies starting around $1k or $2k MRR, and if you are that early and want funding, I'd encourage you to apply to accelerators. Once you are further along (think $10k-ish MRR), angels are not a bad idea.

👤 Sina Meraji of Learning Loop:

Small angel checks from founders and hackers who angel invest as a hobby. They can be found on ProductHunt and Twitter. They invest anything from $2k to $100k and can bring other friends to invest in you.

The emotion that comes with their money is ambition and optimism and support; not fear and pressure. They've acquired their wealth through tech and understand they can lose the money they invest, but of course they look forward to getting lucky and getting an ROI.

👤 Caspar von Wrede of Keep The Score:

Indie funds (TinySeed, Calm Fund, etc.) have a different business model. They know that instead of 9 out of 10 ventures failing, maybe only 3 or 4 will fail. This changes their whole outlook and how they deal with their investments. These guys want your business to be slow and sustainable. With VC funding, you are either the 1 in 10 and have to endure incredible pressure to return 100x on the investment or you are written off.

👤 Rob Walling of TinySeed:

I think equity, rev share, and profit share, can all be founder-friendly.

👤 Javier Velazquez of Formwise:

We prefer strategic partner investors with large distribution channels. Someone with an audience that compliments us. This is a vertical growth strategy. The money a VC can give us, we can get in loans and keep equity.

👤 Justin Gordon of Just Go Grind:

There are a number of investors who invest in early stages, where many IHers are. I know Charles Hudson at Precursor Ventures invests really early, as does Jyri Engeström at Yes VC. Typically they will be at smaller funds.

There are a number of angel investors that invest in early stages as well, and some don't expect the typical VC-level exits. They’re okay with a 2-3x return. Source

Find investors

👤 Josiah Mann of Brave Gym Marketing:

At the end of the day it’s really about picking up the phone and having a lot of conversations. Who exactly you call depends a lot on your existing network and the type of game you want to play.

There’s an entry cost either way, but I think it’s a good idea to start with what’s comfortable (maybe local investors or founders) and ask them to “review your pitch”. Then branch out to bigger fish once you feel confident that you have a great pitch.

👤 Pangratios Cosma:

We cold-emailed tens of investors (didn't work), then contacted people from our network.

If I did it again, though, I’d try a startup accelerator.

👤 Rob Walling of TinySeed:

Reach out to bootstrapper-friendly funds. Ask around Indie Hackers or MicroConf and you'll hear the same names over and over.

Also, work your network or audience — who knows you that might be willing to write a check?

👤 Sina Meraji of Learning Loop:

Building in public is helpful. Also, go through your existing network. If you have friends who work in tech, you can offer them to invest in you.

Very early-stage fundraising either happens with a deck, or via relationships. I prefer relationships, and I think a lot of indie hackers may have more leverage there, too, than making slides and financial projections.

👤 Pangratios Cosma:

Start with immediate friends and family.

👤 Josiah Mann of Brave Gym Marketing:

If you’re not connected to a VC network, I’d recommend starting by talking to successful businessmen and investors in your niche without any expectation of receiving funding. Maybe offer to buy them coffee and ask them questions about their business.

You can also ask them about how they might go about raising funds if they were you, but do so without expectation that they will invest. Maybe ask who they know that would invest in something like that.

Be flexible

👤 Josiah Mann of Brave Gym Marketing:

I’m in the Midwest and had zero connections to VC investors. Additionally, the investors that I eventually found in my tertiary market are not Silicon Valley or NYC investors. Both their expectations for the company and ideas around funding are completely different, but you have to learn to play the game however you can play it.

Don’t be desperate

👤 Pangratios Cosma:

Don't put yourself through this process if you don't have strong negotiating power for your idea/product/service.

Don’t rush into it

👤 Simon Hamp of Laradir:

Don't rush into it - plan things out, do your due diligence

Be okay with rejection (and make founder friends)

👤 Sina Meraji of Learning Loop:

Believe in yourself, believe in your competence and potential, and overcome the fear of sharing what you're creating with others.

This process involves a lot of rejection, so you have to remain confident throughout the process. Having founder friends that you can talk to daily does wonders, as they'll remind you of your potential on the days that you yourself may struggle to see it.

Set expectations

👤 Rob Walling of TinySeed:

It's all about knowing the expectations of the investors. If they expect you to sell for nothing shy of $100M, but you would sell at $5M, that's a mismatch. If they want grow-at-all-costs and you want to code from a beach in Bali, that's a mismatch.

My best advice is to be clear about your goals and expectations and understand your investor's expectations.

Test the waters first

👤 Josiah Mann of Brave Gym Marketing:

After some negotiation, we agreed on a very small investment for 5% equity so we could test the waters of the working relationship. Then, after three more months, I brought him on as a longer-term partner for 25% equity in exchange for a couple years of funding.

Offer; don’t ask

👤 Sina Meraji of Learning Loop:

I say "offer" and not "ask". As an indie hacker, your biggest fundraising risk is you thinking you're asking people for money. In reality, you're offering them an opportunity to make money with you.

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