Does launching a technology project without venture capital seem impossible? In fact, over 80% of startups are initially financed with the founders' own funds. We will tell you how to correctly calculate the starting capital and find alternative sources of financing for your IT project.
Does launching a technology project without venture capital seem impossible? In fact, over 80% of startups are initially financed with the founders' own funds. We will tell you how to correctly calculate the starting capital and find alternative sources of financing for your IT project.
Bootstrapping is the art of creating and growing a company without selling shares to investors or taking out large loans. The founders use their own savings, sales proceeds, and creative ways to raise resources. Unlike the classic venture capital scheme, where the company receives millions of dollars right away, here every penny is earned through their own labor.
The advantages of bootstrapping include 100% control over all decisions. No one will dictate the terms of product development or go-to-market strategy. Independence from investors means the freedom to experiment with the business model and quickly adapt to market changes. A stronger position in the future is evident when it comes time to attract investment — you will have a proven business model and real customers.
Disadvantages and risks start with slow growth compared to competitors that have raised venture capital. High personal risk for founders in investing their own savings with no guarantee of return. Limited resources can hinder scaling and development of new features. Not suitable for capital-intensive projects that require significant investments in infrastructure or research.
Determining key cost items starts with the team that takes the lion’s share — 60-70% of the total capital. These are developers, designers, product managers, and marketers. Infrastructure and software cost 10-15% of financial resources.
This includes servers, software licenses, domains, and hosting. Marketing and sales require 10-15% of the funds for hypothesis testing, advertising campaigns, and attracting the first customers.
Administrative and legal expenses take up about 5% — business registration, contracts, accounting. A reserve fund is a must. Set aside 15-20% of the total for unforeseen situations.
These numbers may seem large, but compare to the cost of a single Series A round, which typically costs founders 15-25% of the company.
Personal savings remain the most popular way to finance. 80% of companies start this way, using the personal savings of the founders. The advantage is complete control, but the risk of losing your own money is high.
«3F» — Friends, Family, Fools — involves raising funds from friends, family, and enthusiasts of the idea. This approach allows you to raise $10-50 thousand without complicated presentations to venture funds. The main thing is to clearly agree on the terms of returning the funds and maintain good relationships.
Government and international grants open up new opportunities for technology projects. The Ukrainian Startup Fund plans to increase average funding checks, especially for military-tech solutions. Google has allocated $10 million through its Support Fund in Ukraine, providing $100,000 in non-equity funding to each winner. The European Innovation Council announced the allocation of €20 million under the Seeds of Bravery program to support Ukrainian projects.
Bank loans and microloans are becoming increasingly accessible to technology companies. You can get an online credit card to cover urgent needs in the amount of up to $10-15 thousand. Such funds are suitable for quickly covering cash gaps or financing marketing experiments.
Agree, it’s familiar — when you know for sure that the product will sell, but you literally lack a few thousand dollars to complete the development? In such cases, quick financing can be a lifeline for a young company.
According to Forbes, the Ukrainian ecosystem is estimated at €28 billion as of spring 2024. Globally, AI companies raised $19 billion in Q3 2024, accounting for 28% of all venture capital investments. This shows the active development of the market and the creation of new funding opportunities.
The reality is that most successful companies started with limited resources. GitHub began as a weekend project by the founders, who paid for the domain and initial servers themselves. Today, the platform is used by over 100 million developers worldwide.
And you know what’s most interesting? Self-funded companies have cleaner capital tables and more realistic valuations, which makes mergers and acquisitions easier and more attractive to buyers.
