Bootstrapped vs. VC-Backed Companies Analysis

December 12, 2022

Bootstrapping and venture capital (VC) funding are different ways that a business can finance its operations and growth. Bootstrapping refers to the practice of starting and growing a business with minimal external funding, typically by using the founder's own resources and generating revenue from early sales. VC funding, on the other hand, refers to the practice of raising capital from venture capital firms by selling equity in the startup. 

2022 was a tough year all around, and a study comparing SaaS performance for VC-backed and bootstrapped found bootstrapped businesses outperform their investment-backed counterparts across almost all of them. Here are the specifics behind the findings of Capchase research.

3 line graphs illustrating the bootstrapped companies leading the way in efficiency (particularly in the US) for EU VC, EU not, US VC, and US Boot. Each graph illustrates the pre and post for R40, Net margin, and monthly expenses/MRR

Below are five interesting findings that indicate bootstrapped companies have outperformed the VC one in 2022:

1. Growth Efficiency: Bootstrapped SAAS companies in the US have painted a picture of exceptional growth and efficiency when compared to their VC-backed counterparts. Such businesses, historically known for being fiscally conservative with their spending habits, are investing heavily in sustainable revenue generation practices that have seen remarkable results even amidst economic slowdowns. This indicates a greater emphasis on efficiency and long-term stability - strategies that have been successful so far.

2. Growth: Pre-downturn, venture capital-backed companies in the US and Europe enjoyed significant growth compared to their bootstrapped counterparts. However, this trend has reversed significantly since the global economic downturn, with those who had relied on venture capital seeing a sharp drop in performance. In contrast, bootstrapping firms have recovered much of their pre-downturn momentum. The reversal indicates the shift from traditional investment models towards more conservative approaches that prioritize sustainability over short-term gains.

Chart illustrating pre-downturn vs post-downturn in both US bootstrapped and S VC-cked segments for revenue growth, growth efficiency, R40, margin, expenses, runway, and retention.

3. Rule of 40: By judiciously monitoring expenses and investing in measured, smart growth, these companies can be profitable without overspending or relying solely on venture capital investments. Recent data indicates that while the growth achieved by bootstrapped and VC-backed companies is comparable, bootstrapped companies have a considerable margin advantage.

4. Margin & Expenses: Although all cohorts saw increased expenses, bootstrapped companies have managed their costs more effectively, keeping net losses limited. This is due to their ability to be more mindful of the funds that they have on hand and make calculated decisions about where to spend them. By contrast, the expenses of VC-backed companies are already at a higher level and have now reached even greater heights. VC-backed startups are often under pressure from investors to show growth in a reasonably short period and typically engage in increased, aggressive spending activity.

5. Runway: One reason why bootstrapped companies have protected their "runway" (i.e., cash flow on hand) better than VC-backed companies is that they are not under the same pressure to grow at an extremely rapid pace. Because they are currently not utilizing external capital investments, they can live without taking risk or be overly aggressive to appease investors and meet the expectations of a VC firm. Instead, they can take a more measured and cautious approach to growth, carefully conserving their resources and ensuring they have enough cash flow to sustain the business. 

It seems that bootstrapped companies were able to achieve impressive revenue growth and compete with their VC-back counterparts in a downturn. By being careful with their money and using it efficiently, these companies achieved higher returns on investment than VC-backed companies in 2022. This shows that successful businesses don't always need large investments from outside sources to thrive. Instead, focusing on efficiency and innovative money management can be just as effective in driving growth and profitability.

While the long-term effects of the slowdown may still not be fully reflected in the market, the authors of the study seem optimistic about the SaaS ecosystem. If history is to serve as a guide here, some of the world’s largest and most resilient businesses have come out of previous recessions (Microsoft from the 1975 oil embargo recession, Electronic Arts from the 1982 recession, and Slack, AirbnB and Square from the 2009 recession). Only time will tell which future unicorns are born through this time period, but rest assured that those companies exist and are busy consolidating their market position and spending on growth right now.

Source: https://www.capchase.com/blog/saas-global-data-trends-on-startups

Monogram Case Study - DealMaker (Embed)

When VCs said no, Monogram turned to retail investors. That decision powered their rise from startup to publicly traded company—and even helped them raise an additional $13M privately after their Nasdaq debut.

Monogram at NASDAQ celebration

The Challenge: Raising Capital on Their Terms

The Challenge: Raising on Their Terms

Monogram Technologies was founded with a bold vision: to revolutionize orthopedic surgery with a robotic joint replacement system using custom 3D-printed joints. The market for this technology is massive—approximately $19.6 billion, with over 1 million knee replacements per year. But it's a capital-intensive, regulation-heavy space—and traditional VCs weren't biting.

Instead of compromising, co-founders Dr. Doug Unis and Ben Sexson went all-in on a different path: retail capital. Why?

  • Control and ownership: Not only were they able to raise the capital they needed to grow the business—they did it on their own terms.
  • Long-term asset: They wanted to build an army of true believers who wanted to see the company succeed and would continue to reinvest over the years.
  • A value-add network: Raising from retail allowed Monogram to amass a waiting list of thousands of patients eager to participate in future trials.
  • Aligned incentives: Their mission to improve patient outcomes and build a better future for those struggling with joint pain resonated with retail investors.

The Power of Retail: Monogram's Capital Journey

Start Date End Date Type Platform Amount Raised # Investors
3/13/193/31/20A+SeedInvest$14,588,6686,000
11/16/201/16/21A+StartEngine$2,965,5018,000
1/17/212/18/22A+StartEngine$23,647,85314,082
7/15/223/16/23CFDealMaker$4,673,0002,249
3/1/234/8/23A+Republic$232,275120
3/1/235/23/23A+DealMaker$15,958,3645,198
5/18/23-Nasdaq listing
7/2410/24Unit OfferingDealMaker$12,990,1032,745

Monogram Capital Raise Timeline

Monogram's first direct-to-investor raise was a $14.6M round in 2019. Since then, Monogram has raised retail capital six additional times, using Reg A+ as a springboard to a Nasdaq listing in 2023.

Each raise brought in new believers—and more importantly, kept bringing them back. That's the long-term power of retail capital. It's not just one campaign—it's a compounding asset that grows with the business.

$80M+
Raised across seven campaigns
~40,000
Investors championing Monogram's vision
20%
Of each raise came from previous investors

Marketing Excellence

DealMaker Reach provided strategic investor acquisition services, helping Monogram connect with the right audience through high-impact channels.

Premium Publications

Targeted campaigns in premium publications like Morning Brew captured qualified investors

High-Engagement Webinars

Engaging events that generated over $4.3 million in investments

Community Building

Strategic approaches that fostered a loyal shareholder base

Investment Momentum

Innovative approaches that amplified investment momentum

Monogram's Journey to Success

Monogram's journey has been defined by relentless innovation, strategic fundraising, and breakthrough advancements in robotic-assisted joint replacement. From early-stage research to a Nasdaq listing and beyond, Monogram's milestones reflect its evolution into a pioneering force in orthopedic surgery:

  • Filed its first patent application in 2017
  • Conducted clinical studies at UCLA and University of Nebraska
  • Expanded the team with key hires
  • Attracted a top-tier advisory board to guide clinical innovations
  • Signed their first distribution partnerships
  • Made headlines with cutting-edge live demonstrations
  • Secured 501(k) FDA clearance for the mBôs surgical system

Nasdaq Debut & Beyond

In May 2023, Monogram Orthopaedics successfully listed on the Nasdaq—a significant milestone offering liquidity and growth opportunities for the company.

For most companies, that would be the end of their story in the private markets. But for Monogram, it was just the beginning of a new chapter.

Public perception says you can't raise privately post-IPO. Monogram proved that wrong.

Defying conventional fundraising norms, Monogram raised an additional $13 million from private investors, powered by DealMaker. This move highlighted the power of a dedicated investor community and provided additional strategic growth capital. Meanwhile, strategic digital marketing for the private offering helped boost the public share price—a win-win for the company and its investors, both public and private.

This was retail capital at its best: strategic, repeatable, and aligned.

One vision. Zero compromises.

This wasn't a one-time raise. It was a multi-year capital strategy.

Retail capital helped Monogram:

  • Go from concept to commercialization without relying on VCs
  • Retain ownership and control in a high-burn industry
  • Build a base of loyal shareholders who invested not once, but over and over again
  • Uplist to the Nasdaq, and still keep raising post-IPO

This is what makes retail capital different. It doesn't expire—it compounds. And DealMaker is built to maximize that long-term value.

Dr. Doug Unis Quote
Ben Sexson Quote

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