These 10 Companies Didn't Need VC Money - Business Insider

Sophia Amoruso bootstrapped Nasty Gal for 5 years to profitability and more than $30 million in revenues.

When you start a company, you have to decide how you're going to get it off the ground.

The question every entrepreneur faces is how to fund operations before money starts coming in the door.

You have three broad options:

• Bootstrap:?Fund it yourself, or with other members of the founding team.

• Friends and family:?Ask those closest to you for a little financial help either as a loan or in exchange for a stake in the company.

• Angel investors or venture capital:?Go to semiprofessional or professional startup investors.

The stories you hear the most about are about the entrepreneurs who take outside capital. For some reason, tech media has a tendency to celebrate the act of fundraising.

It makes a certain amount of sense, in that the dollar figures can be eye-popping, there's a concrete event to write about, and there's built-in controversy: How can this brand-new business be worth so much?

But that's pretty twisted. It's really like celebrating someone going into debt. Even equity investors expect a payback.

"I'm concerned a little bit with the culture of celebrating the fundraise," angel investor and wine entrepreneur Gary Vaynerchuk has said. "My dad taught me that when you borrow money it's the worst day of your life."

Other tech founders agree.

"In the eye of the public, and specifically the tech community, funding is thought to mean much more that it actually does," Ben Kaufman, the founder of smartphone-accessories maker Mophie and manufacturing startup Quirky, has written. "The world views funding as a badge of honor. I view it as a scarlet letter. I?m continually disturbed, insecure, and uncomfortable about what it means to raise money, and what it means to boast about it."

A few startups have become really big, valuable companies without taking outside capital at the start. Some were started by founders who had money to burn from earlier ventures.

But others were really scrappy entrepreneurs who figured out how to to make ends meet.

A few examples of successful, entirely bootstrapped companies:

• PlentyofFish:?Markus Frind founded one of the largest dating sites in the world from his apartment. He worked for a few tech startups prior to PlentyofFish. His site now has more than 38 million users and has 6 billion monthly pageviews.

  The service is free, but it has made a lot of money from advertising. In July 2003 Frind received his site's first Google AdSense check?and it was for $1,100.

  In 2007, ReadWriteWeb wrote that the one-person company might be worth $1 billion. After that, Frind began hiring a team, but he grew his site to hundreds of million in revenues, investor-free.

• Gawker:?Nick Denton founded the media company in 2002 after selling an earlier startup, an events business called First Tuesday. Denton's home was Gawker's headquarters for years; he rented a modest storefront for his bloggers before building out a real office in 2008.?Now Gawker Media is worth an estimated $150 million.

• Storm8:?Former Facebook employees founded this mobile-gaming company in 2009. Storm8's games have been downloaded more than 300 million times on more than 100 million devices.

  CEO Perry Tam worked on Facebook Credits and, after witnessing the success of Zynga's Web-based games, figured mobile games would have a lot of promise.

  Storm8 was one of the first gaming companies to market on mobile devices, and the lack of initial competition helped the company take off.

• TechCrunch:?Founded by Mike Arrington and Keith Teare in 2005, TechCrunch became one of the most-read tech websites in the world. When AOL purchased it in 2010 for ~ $30 million, Arrington reportedly owned 85% of his bootstrapped company. Before creating TechCrunch, Arrington was a tech lawyer. He also worked for a number of startups, including Achex, an online payments company acquired for $32 million.

Some other startups bootstrapped for a long time and proved their businesses before taking outside capital. Some examples:

• Nasty Gal:?Sophia Amoruso bootstrapped her clothing startup, which began on eBay, for five years before raising outside capital. She grew her e-commerce company to profitability and mor than $30 million annual revenues. Now Nasty Gal has raised about $50 million. Before NastyGal, Amoruso had a "litany of shitty jobs," according to PandoDaily, such as checking student IDs and standing around in shoe stores waiting on customers.

• Braintree:?Founded in 2007, the payments company was bootstrapped until 2011, when Accel put in $34 million.

• Github:?The social coding company was founded in 2007 and bootstrapped itself until earlier this year, when Andreessen Horowitz invested $100 million.

• Indeed:?Paul Forster and his cofounder sold a company before they created and bootstrapped Indeed, a search engine for jobs. A few years in, the pair raised $5 million. It just had a monster exit last week, selling for an estimated amount?between $750 million and $1 billion.

• Behance:?The design site was bootstrapped for six years before founders Scott Belsky and Matias Corea raised $6.5 million. 1 million projects were published on Behance in the last 6 months; it took four years for the first 1 million to be uploaded. Two million published projects have been viewed more than 1 billion times on Behance; 75 million views occurred in just 30 days.

• Thrillist:?Ben Lerer and Adam Rich pretty much bootstrapped the media and e-commerce site for guys until last month. It was founded in 2005. It will generate about $60 million this year. (Full disclosure: Ben's father, Ken Lerer, is a Business Insider investor.)

We'll see more stories like these ones?and maybe we'll pay more attention to them, rather than the startups which take money early on.

"Look at what the top stories are, and they?re all about raising money, how many employees they have, and these are metrics that don?t matter," 37Signals founder Jason Fried says.?"What matters is: Are you profitable? Are you building something great? Are you taking care of your people? Are you treating your customers well?"

Source: http://www.businessinsider.com/bootstrapped-companies-2012-10

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