5 financial hacks for bootstrapped founders

In a conversation with Clark Lagemann, founder of Avidon Health, we dive deep into the world of bootstrapping, exploring everything from funding alternatives to financial hacks. Lagemann shares his wealth of experience in building a successful healthcare technology company without traditional venture capital, offering invaluable insights for aspiring entrepreneurs.

Play video13:04

The power of patient capital: A different perspective on bootstrapping

For Lagemann, bootstrapping isn't just about using personal capital—it's about leveraging your own money or customer revenue to drive business growth without external funding.

But what makes this approach particularly powerful? Time.

"Usually people take VC money and think time is their advantage—they can go faster. But, with bootstrapping, time is also your advantage. You can go slower,” Lagemann explains. You can take a more methodical approach to truly understanding your customers and achieving product-market fit without the pressure of artificial deadlines from investors who want to see a return on their investment.

But, if you forego VC funding, what are your options?

Alternative funding sources: Getting creative

For entrepreneurs without substantial personal savings, Lagemann outlines several creative funding approaches:

1. Angel investors from outside your immediate network

2. Friends and family funding

3. Interest-free credit cards

4. Asset-based loans

5. Customer funding through a pre-sale

6. Revenue-based financing

7. Strategic investments from companies in your industry

8. Non-dilutive grant funding

The #1 mistake bootstrapped founders make

Perhaps surprisingly, the biggest pitfall isn't financial—it's psychological. "The biggest problem I see is when bootstrapped founders are not okay being bootstrapped founders," Lagemann reveals. He often encounters founders who believe they must raise capital despite having a growing, profitable business. But in reality, this can often make the business harder to manage and bring more external pressure. If a company is doing well as a bootstrapped startup, then don’t force the use of outside capital just because it seems like the right thing to do.

The best startups run on Rippling Spend

See Rippling

5 critical lessons from a bootstrapped founder

1. Follow the money: While winning pitch competitions and getting media attention might feel good, they don't necessarily translate to business success. Lagemann emphasizes that sustainable growth comes from focusing on real revenue rather than vanity metrics that look good but don't pay the bills.

2. Customers are your superpower: Understanding your first 10 customers deeply can show you the path to acquiring 300 more. Lagemann stresses the importance of understanding exactly why these early customers chose your solution over legacy alternatives. These insights reveal the critical pain points you're solving and help identify similar customers who share the same challenges. As he puts it, "If you know your customers, they'll tell you exactly what the pain points are, and you use that to market yourself."

3. Hire slowly: Lagemann warns that bringing on the wrong people can severely disrupt a business. He emphasizes that careful hiring isn't just about skills—it's about finding people who align with your company's culture and can contribute to its long-term success. Being extremely intentional with hiring decisions helps preserve both resources and company culture.

4. Embrace resilience over perfection: Success isn't about being perfect; it's about being resilient. In the bootstrapped journey, not everything will go according to plan, and that's okay. Lagemann emphasizes that the goal isn't to win every battle but to stay in the game and keep moving forward. This mindset helps founders weather the inevitable ups and downs of building a business.

5. Manage your budget with extreme prejudice: Every expense should directly correlate to winning more business or improving operations. Lagemann advocates for ruthless prioritization when it comes to spending. He recommends regular evaluation of whether each expense directly contributes to business growth or operational improvement. This disciplined approach to spending ensures that limited bootstrapped resources are always deployed effectively.

Financial hacks for bootstrapped founders

Without VC funding, bootstrapped founders often need to get creative with their finances. Here are a few savvy hacks from Lagemann:

1. Leverage low-code or no-code tools: Modern technology eliminates the need for massive initial development investments. There are now extremely low-cost tools that can build software for your business that can dramatically increase your working efficiency.

2. Implement pre-sales: Pre-sales not only provide immediate capital but also help validate your product market fit. As Lagemann notes, pre-sale customers tend to be more forgiving and willing to provide valuable feedback since they understand they're getting in early at a discount.

3. Consider bartering: Consider exchanging services directly with certain vendors instead of paying cash to one another—a practice known as bartering. Not only does this create a tax-free transaction, but it can also build stronger business relationships that may lead to referrals and future opportunities.

4. Outsource strategically: Consider hiring for fractional positions instead of full-time hires. This approach allows you to access specialized talent without the commitment and overhead of full-time employees. It's particularly valuable for bootstrap founders who need to maintain flexibility while scaling their operations.

5. Stretch your payment terms strategically: Negotiate extended payment terms (up to 90 days) with vendors while aiming for shorter payment terms (net-30 or even net-0) from customers. This approach to managing cash flow, as Lagemann explains, creates a longer runway with your existing capital and helps maintain healthy cash reserves for when you need them most.

About Avidon Health

Avidon Health helps people change unhealthy habits through a unique combination of cognitive behavioral training and health coaching. The company provides employee wellness solutions to organizations, helping create positive workplace cultures and ensuring employee well-being.

Looking ahead to 2025, Avidon Health is expanding its reach by introducing a mobile-friendly experience and making its solutions accessible to smaller companies with under 1,000 employees, broadening its impact beyond its traditional enterprise client base.