Building a profitable business during a period of economic uncertainty is nothing short of intimidating. But contrary to popular belief, it’s not impossible. Bootstrapping a startup is one of the effective means of building a self-sustaining and successful business, especially as VC investments slow down.
If you’ve been considering bootstrapping, now is the time to commit. To help you set your business up to thrive during economic turbulence and beyond, I’d like to share some of the strategies that proved successful when building Hotjar, the company I lead. It all starts with creating a product, testing it and finding the right market fit.
The journey to $40M ARR
Building a business from the ground up comes with its fair share of learning experiences and missteps. But, one of the greatest challenges we were able to avoid was starting with a finished product. We decided before even coming up with a name, that the most important thing would be to start with a minimum viable product (MVP). In other words, the bare minimum required for someone to use it and get value out of it.
From previous projects, the team knew that waiting to finish the product and then releasing it would invite challenges. Had the team waited to finish the product and then attempt to collect feedback, we would have risked spending a long time moving in the completely wrong direction. Creating our MVP allowed us the flexibility to build and release as we learned, and it proved successful.
Since our founding in 2014, we’ve reached $40 million in ARR through bootstrapping. From there, it was off to the races.
Since our founding in 2014, we’ve reached $40 million in ARR through bootstrapping. From there, it was off to the races. We continued to see exponential product-led growth (PLG): When we officially launched, we had 27,562 users (including customers), and we were growing at a steady 10% per month with a PLG strategy.
The influence of the larger product insights market and our relationship with customers enabled us to move quickly and pivot regularly.
When beta testing, don’t start with a finished product
Product-led growth should play an important role in any business model for bootstrapped startups. If you’re depending on yourself to raise the funds from the ground up, your product should meet a specific demand in the market to essentially sell itself.
To create demand, even in a saturated market, listen to the people who matter the most — your target users. Developing and iterating your product based on feedback from target users is the best way to ensure you’re building something they will commit to.
It’s easy to rush product development, but starting with a finished product won’t do you any favors. Six months is an adequate time frame for beta testing, because it builds trust with a set of users who can provide constructive feedback to troubleshoot and advance the product.
One piece of feedback we received during beta testing that helped change the course of our business was a request to introduce sub/cross-domain tracking. In retrospect, this was an obvious improvement, but until our users asked for it, we hadn’t realized how common this need really was.