Business strategy

Why Australian startup founders should bootstrap if they really want to succeed

- March 21, 2024 3 MIN READ
Kids on bike with rockets
Photo: AdobeStock
Australia’s startup world glorifies venture capital as the holy grail—the insider’s ticket to fast scaling and billion-dollar valuations.

FOMO sets in when headlines splash record-breaking funding rounds, fuelling a culture that views VC backing as the singular metric for success.

As an ecosystem, we fixate on spinning the VC roulette wheel. Even founders who don’t necessarily need funding feel compelled to pursue investors, fearing their rivals will get ahead if they miss the boat. 

But over-reliance on external capital early on is a high-stakes gamble. VC funding means ceding control and charting a course not entirely your own. Pressure mounts to deliver hockey-stick growth and sky-high valuations to satisfy investors seeking a timely, lucrative exit.  

Startup success gets conflated with investor success. But should things go off track, impatient financial backers won’t hesitate to replace founders and disavow any link between the failure and their investment decisions.

VC funds in Australia have a track record of putting founders into a pressure cooker environment, demanding the impossible and harassing them when they can’t deliver to unhinged milestones.

I’ve worked with and spoken to founders who know how it feels to be the flavour of the month VC darling, only to have been utterly ignored and even publicly derided by investors who pivoted their goldfish attention spans to AI as soon as OpenAI dropped ChatGPT.  

And despite their world-changing, universe-denting aspirations, VC funds in Australia repeatedly back ideas that are legless, gormless and passionless copies of US marketplaces and services while ignoring or downright disparaging Australia’s vital green and eco-tech industries.  

Once you take VC money, the addiction takes hold. The more you raise, the more you need to justify soaring valuations.

Lofty expectations

VC-injected capital and lofty expectations feed each other, compelling companies to hit the afterburners. Operators become disconnected from underlying business fundamentals, drunk on funding and expansion for its own sake. Forget sustainability—it becomes growth at any cost. 

Contrary to prevailing narratives, neither VC financing nor exponential growth are inevitable or even desirable outcomes for most startups.

Bootstrapping—funding your own way by reinvesting revenue rather than pursuing outside investment—may lack VC’s illustrious aura and glamour. But startups that bootstrap build sturdier foundations for sustainable, resilient business models tuned to market signals rather than VC demands for rapid expansion.

They retain flexibility over their direction and room for ongoing experimentation. Constraints breed creativity and close customer connections. And without constant fundraising distractions, leaders can focus wholly on business building.  

What will it take to rebalance perspectives? Founders can help by being transparent about the tradeoffs of VC funding rather than just touting fundraising victories.

Journalists should cover more sustaining journeys and outcomes, not just unicorn obsession. And instead of worshipping Australian blue-chip VCs, we should scrutinise their failures as much as their successes.  

Rather than pushing founders prematurely towards VC, assistance programs should guide new entrepreneurs to evaluate diverse funding strategies aligned with their vision and risk appetite.

Alternative funding

Grants or incentives tailored for bootstrappers could support more patient growth paths. Adjusting R&D and entrepreneur programs to better assist smaller self-funded companies may more evenly distribute innovation gains. And providing platforms showcasing bootstrapping journeys would inspire more founders to consider self-determination over VC acceleration.  

Yes, venture capital has fuelled Australia’s greatest startup success stories. But to be frank, we can’t rely on Canva as the sole guiding light for our tech and startup industry.

Nor can we continue allowing our paths and destinations to be dictated by VC funds who have built their entire narrative of venture success on their contributions to multiple Canva funding rounds. Business history shows countless remarkable companies forged their own paths without chasing external capital and the pressures that privilege entails.

As Australia’s next generation of entrepreneurs build for the future, we should celebrate and support diverse funding models that allow businesses to grow sustainably on their own terms.  

The risks of venture roulette are real, and viable alternatives exist for those wishing to play a different game. Making space for both VC-fuelled rockets and bootstrapping gradualists may lead to fewer casualties and fuller economic gains from Australia’s startup scene. 

  • Joan Westenberg is a writer focused on tech and economics.