If Raising Capital Is Taught, Why Isn’t Bootstrapping?

Second in a series of posts on the state of entrepreneurship education.

OK, here’s the data from 2011:

  1. The number of startups in the U.S. was about 800,000.
  2. The number of angel investment deals was slightly over 66,000, roughly 8.25% of that.
  3. Approximately 4,000 venture capital deals were done, about one-half of one percent of the total.

Of course, the timing of angel and VC investments aren’t necessarily in the same year as the startup’s founding (especially VC deals). But my point isn’t to be exact from a timing perspective, especially since these numbers fluctuate only slightly year-to-year.

Instead, my objective is to show how few startups raise outside capital. And this isn’t just about one data point. A few years ago, I wrote a post with a different set of numbers but with the same point.

So how are the remaining 90%-plus of startups funded?

I’m confident a significant percentage raise money from family and friends, others get equity-free funding from government grants or winning competitions, a fair number (although probably declining) use credit card debt, and a tiny handful get bank loans.

Of course, the vast majority of that 90%-plus use their own money, whether it’s savings or cashing in other assets such as 401(K) plans, home/auto equity, etc. And because it’s their own money, I can also assure you that they try their hardest at preserving it, using it wisely, and extending it as long as they can.

From my experience, those businesses also engage in other practices that make up for a lack of funding: using their own time and that of family and friends, finding unpaid interns, bartering, using open source and free technology solutions, etc.


Study any entrepreneurship program at a major university, especially those that are ranked by either U.S. News & World Report or Entrepreneur Magazine and the Princeton Review. What you’ll find in their curricula are numerous courses on entrepreneurial finance and venture capital, both of which I believe are important and necessary in a top-flight program.

The problem is that few cover the other sources of financing, especially the two that are most common: family/friends and self-funding, also known as good old fashioned bootstrapping.

If those are the financing methods most often used by  – and most often the only option for – young entrepreneurs, why aren’t they being taught? I don’t mean as topics in a class on entrepreneurial finance, or as a topic by a guest speaker who built a company on bootstrapping.

I mean as the basis for an entire course or, better yet, an entire program. Rather than having class sessions or whole courses on angel capital, venture capital, entrepreneurial finance, term sheets, valuations, etc. with just token mentions of bootstrapping and family/friend capital, shouldn’t it be the opposite?

Shouldn’t our programs reflect what actually happens in “real life”? What the numbers tell us?


  1. Pingback: Bootstrapping in Philadelphia: why focusing on revenue, rather than investment, fits here [VIDEO] — Technically Philly
  2. Paul

    I am new to the site and love the post. I have seen a few books out there on bootstrapping but I would have to say I couldn’t see it being more than a lecture or two with some great case study. When you hear the story of Dell starting in a College dorm and Apple in a garage.
    I would also like to see more on the late bloomers who started after forty like Ray Kroc who was 53,Kentucky Fried Chicken where Col. Sanders was 65,and Julia Child was 46when she first was on T.V.

  3. Edward Domain

    As an entrepreneur that has won a grant and raised a small seed round, the vast majority of my efforts for my business have been bootstrapped and I agree across the board.

    All too often in the digital/bioscience entrepreneur space, it can feel like everyone around you is raising million dollar rounds left and right and the message in the media seems to be be the same- media focuses on huge exits and massive raises, but often ignores the small bootstrapped companies until they are giant.

    Even then, many of those businesses got started- and stayed running- for a long time by bootstrapping until they became attractive to investors.

    Teaching entrepreneurs some of the skills effective bootstrappers use would be an excellent idea- learning how to do with less than nothing breeds a smart entrepreneur- if they can survive.

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