As a founder, it’s important to consider the different approaches you can take to build your SaaS business, specifically when to raise capital and how much. If you’re thinking about bootstrapping your SaaS business, like Qualtrics, you should keep a few things in mind:
- Focus on planned growth: It will take you longer to get to a level of ARR where you can spend for growth. This may be obvious but if you take on venture funding, you can aggressively spend this capital on hiring and growth. If you’re a revenue-backed company, you’ll likely be capital constrained until $10–15M in ARR and will want to keep a close eye on competition. Once you hit $10–15M in ARR, you’ll likely be in a position to start spending incoming cash flow more aggressively and ultimately fuel faster growth.
- Start with SMBs: Your go-to-market will likely start with SMBs (small and medium-sized businesses) and move up market over time. At the bottom of the market, sales cycles are typically shorter and you need less experienced sales and marketing talent to close deals. This strategy is less expensive and works well for bootstrapped companies that don’t have much cash on hand.
- Look beyond the valley for talent: You should consider building your team outside of the San Francisco Bay Area. Talent in the Bay Area, especially engineers, can be 2–5x more expensive than other locations. It’s not a coincidence that the shining examples for bootstrapped SaaS companies, Qualtrics and Atlassian, were started outside of the Bay Area.