Note - Bootstrapped vs Backed

> 2022-03-01

Startups can generally finance via bootstrapping or venture capital backing or some combination of the two (ignoring straight debt financing as it’s atypical in this scenario).

Going forward, pure software and SaaS companies are likely to start to focus on the former while hard-tech startups with a physical component will likely dominate the later.

The former has increasingly lower barriers for entry (hosting, tooling, etc.) - this means it’s a more highly competitive field with lower expected upside potential for each startup. Given tools like Stripe [1] or Pipe [2], bootstrapping is highly viable for software-based startups.

Hard-tech has significant upfront costs, requiring “jump starts” from capital infusion investments but also maintain substantial upside potential - there are still moonshots in the space. This makes them attractive to outside investment.

Basically, I expect investor money to begin to flow towards the latter while the former focuses on building sustainable businesses from day one.

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