‘The rise and fall of easy money’: How founders are bootstrapping new startups

Some founders are choosing to operate a consulting business on the side, to help them stash away more cash for their new startup, and, potentially save on marketing or PR costs. Others are spending a longer time working in banking or finance before launching their own business, to learn more about what it takes to build a sustainable runway for their own venture. All of this impacts early decisions like hiring, wholesale expansion, and even choosing which paid marketing channels are worth investing in. Put together, these decisions are reshaping what the profile of a typical consumer founder looks like, as growing sustainably and profitably becomes a bigger focus.

“I’m hoping we see a new breed of entrepreneurs arise and thrive in this new era,” said Manica Blain, an angel investor and founder of Top Knot Ventures.

A shift in mindset 

Catherine Zhu, founder of Modern Dose, said she spent years working in financial services with roles at private equity firms before publicly launching her new startup last month. Modern Dose is a daily drink supplement that aims to simplify health and wellness goals, Zhu said, “because it’s gotten so complicated and confusing.”

Zhu said she’d wanted to start a business for years after graduating college but decided that first, she needed skills and settled on getting financially savvy. “It is a rigorous job, but I learned more than I could’ve imagined working at a great private equity firm,” Zhu said. 

At that time, Zhu also began doing research on ingredient pricing and utilizing her family’s manufacturing business background, which focuses on supplying raw materials for supplements, to learn about creating formulas. Post-Covid, Zhu said supplement ingredients have become highly commoditized, which has led to fluctuating prices.

“I’m lucky enough to have done a well-paying job that allowed me to save up for starting the business,” Zhu said, who ultimately worked at an investment bank and PE firm for a combined five years before starting Modern Dose. “Not a lot of founders are able to bootstrap using personal funds.”

Still, “whether you’re venture-backed or not, founders still have a motivation to build something that works,” she said. “But when it’s your own money and you’re not pursuing VC funding in the immediate term, there is an element of being diligent of every dollar spent from day one.” That impacts every single decision a founder may make, like when to test paid influencer marketing or whether or not to lease office space.

“Knowing it’s challenging to be profitable in a competitive industry, we have to have a daily mentality of thinking around that concept,” Zhu said. For example, Modern Dose is sticking right now to outsourcing jobs like social media management and web development instead of hiring a full in-house team. “Not having employees is not a terrible thing,” Zhu said.

As for profitability goals, Zhu said the goal is to sell out of the initial batch of inventory within one year, before the shelf life of two years arrives. “But we have to be prepared for a number of scenarios and how to handle them when it comes time,” she said. If needed for future expenses like retail launches, Zhu said she would consider raising capital to help fund Modern Dose. 

Leveraging existing resources 

Aside from injecting their own cash, some founders are using their existing marketable skills to operate a new brand from the ground up. Dryft Sleep, a DTC brand that launched in 2022 and focuses on the TikTok-popular mouth tape, is another bootstrapped brand.  

Dryft co-founders Jess Windell and Lindsey Rosenberg operate PR and marketing consulting firms respectively. They used their personal savings to start Dryft, and are able to pay themselves through their consulting businesses, so that they can put the revenue generated by Dryft back into the business.

 “We both work with CPG brands in our own businesses and watched the rise and fall of easy money,” Windell said. Rosenberg also previously ran her own natural food brand, Cherryvale Farms, that was sold at Whole Foods and Sprouts. 

“Having gone through fundraising for my last company, I was familiar with the effort and challenges that come with raising outside capital,” Rosenberg said. “I’ve been through the lifecycle of owning a brand which was helpful with the decisions when forming this company.”

The duo met through LinkedIn at the height of the pandemic, when better sleep became a focus for many people. That was also when mouth tape use was trending, and the two started Dryft as a lifestyle brand, to differentiate the brand from the more clinical mouth tapes on the market.

Aside from being able to front cash to get the business off the ground, Windell said bootstrapping Dryft “brought together our expertise and resources was a perfect storm.” For instance, Windell’s own PR agency handles Dryft’s media and marketing, helping keep costs down. 

Since then, Dryft launched on Amazon and received interest from URBN-owned retailers Urban Outfitters, Anthropologie, and Free People. “We saw profitability within our first year which was so exciting,” Windell said. “We attribute so much of that to our ability running a lean business, and using our own skills and the teams we had assembled on our own.” Currently, Dryft has a team of six, a mix of part-time workers and freelancers when needed, such as part-time sales representatives. The company doesn’t have concrete plans to take venture capital, but Windell said they would consider bringing on key investors to set up capital-intensive wholesale launches.

“We want to be set up for when a retailer like Sephora comes knocking on our door,” she said. “But we’re not looking to raise millions and millions of dollars.” 

That underscores the reality many bootstrapped companies face: at some point, they may need to raise strategic capital to fund expensive strategies, like wholesale expansion.

Blain, the angel investor, said today’s CPG fundraising landscape is “relatively healthy” for proven brands with solid metrics like growth, margins, and repeats. However, Blain said most VCs aren’t as keen to invest off the promises made in pitch decks. “And it’s probably not in the best interests of founders to take capital – or much capital – at that stage either because valuations have come down so dramatically,” she added.

“With funding no longer as accessible, these new founders building something from the ground up today are very aware of what they are up against,” Blain said. “If they go down this path they will have drive, dedication and perseverance built in their DNA.”

Indeed, bootstrapping through a startup’s first year or two of operation doesn’t mean a founder won’t consider raising capital at some point.

But as Modern Dose’s Zhu said, once a startup takes outside capital, the focus naturally shifts to hyper-growth with a timeline for an exit. “There are a lot of benefits to partnering with VC but I’m not jumping into it just because it’s available,” she said.