We have been doing this for years and have bootstrapped all of our B2B startups (SaaS products). We have had VC's contact us and turn them away because it is not a good fit. We haven't fallen within the "ramen sense" profitability in a very long time and are comfortably profitable with employees. We simply keep re-investing profits from successful products into new products and over the years have been able to acquire hundreds of thousands of users. We are at a point where we are able to leverage our current user database for new product launches, feedback and ideas. Bootstrapping forces us to think about profits and launch products that our existing customers and new users will pay for. It gives us no choice. I would like to see more tech startups consider bootstrapping. I think too many read Techcrunch and hear about the very few that make or have been acquired for millions and have VC backing but don't look at the thousands that die off. I have always looked at it as wanting to build and grow a successful business that is around for a long time.
We're doing the bootstrapped / self-funded approach as well. It is frustrating sometimes, to look around at some of the opportunities that we can't pursue due to lack of resources, but so far I don't see a big need to go and jump on the "institutional capital merry go round".
On a somewhat ironic note, however, we recently applied for an NC IDEA grant[1], and didn't get accepted... one of the reasons cited in the feedback letter was something like "concerned about the commitment of the founders as they have only invested ~$5,000 to date". Um, hello... we hadn't needed more cash up to that point. It's just the two of us sitting in our homes, or coffee shops, writing code on our laptops. All the expenses we have had so far were basically: 4 Slicehost slices for various purposes (a demo server, our wiki, SugarCRM, website, etc.), a paid Github account for code, and a little bit of printing and random stuff.
So, somehow, the fact that we've run lean and been very capital efficient so far, is seen as a negative. I don't know whether to laugh or cry.
Don't let that discourage you. $5k is the average we invest on a new product launch (not including our time of course). We do however re-invest most of the sales right back into it for the first year. This approach has allowed us to grow multiple products to a very nice monthly profit within the first year. We always focus on releasing things our customers and target users will pay for though otherwise we would never be able to keep funding it.
Perhaps you should modify the way you're accounting for your cashflow : Show that all the P&L gets dividended out, and that you then put it all back in the business. That way will show far more than $5,000 commitment on your parts. (They don't have to be literal dividends, just internal allocations to the partners, and an internal reinvestment).
Stopped reading it awhile ago. It doesn't portray the reality for most startups and tech companies and I think gives the wrong impression that you need to be heavily funded to be successful.
Really great article and very refreshing to read. We recently adjusted the pricing on one of our services http://www.advantly.com to include a lower price monthly package and 2 other value added packages that require annual subscriptions. It has proven to be successful for us and the subscriptions to our annual packages have increased.
One thing I found really confusing : On the gold package what does select features mean ? What can I select ? ( I later realized that it's the select package features but it took me a few minutes :) )
