According to Celeste Perez, growing a business without venture capital funding is a bit like that scene in "The Dark Knight Rises," where Christian Bale (playing Batman) tries to climb out of prison. At first he tried with a rope tied around his waist; but it’s not until he attempts the dangerous ascent without any kind of safety net that he’s finally able to succeed.

Perez is the founder of Droplet, an adaptogenic drinks brand that launched in March 2020 – just as the pandemic hit. She had been working on the business since August 2019, before anyone had even heard of the word COVID-19.

“Then six months in, it’s the pandemic, and all our money is tied up in this production of drinks and cans,” she says, explaining that she decided to move out of her apartment and sell her car to save money. These were difficult personal sacrifices – but it was worth it to keep the business afloat.

While many of the most well-known direct-to-consumer brands have been able to grow their profiles and secure customers thanks to the helping hand of venture capital investors, not all brands pursue this route. “Some of us bootstrap because we can, some of us bootstrap because there is no other option,” Perez says, pointing out that in the U.S. just 2% of women receive venture funding, while founders who are women of color receive less than 1%.

Slow and steady wins the retail race?

According to CB Insights, direct-to-consumer brands raised more than $1 billion in venture funding between them in 2018. And they continue to secure huge sums of money: in October, Allbirds raised a $100 million round, last month Glossier secured $80 million in funding, and just last week Brandless added another $118 million to the bank.

But while the direct-to-consumer world may appear to be awash with venture capital activity, the reality is that the vast majority of brands that sell products online do so without pitching investors. Without large sums of cash in the bank, the founders of bootstrapped direct-to-consumer brands have to take a different approach to building their businesses, often choosing to prioritize slower routes to profitability over building rapid awareness through paid advertising.

A common strategy, therefore, is to focus on striking retailer partnerships as early as possible. Droplet’s drinks are already stocked in 300 stores across the U.S. and Canada, while superfood brand Golde had secured retail deals with Sephora, Urban Outfitters and Target within two years opening its digital doors.

The brand launched in 2017 with just $2,000 in savings that founders Trinity Mouzon Wofford and Issey Kobori had pooled together, along with a few personal credit card loans along the way. “We built the business through our retail partnerships and organic word of mouth,” Wofford explains. “We didn’t have the resources to spend $20,000 a month from day one on Facebook.”

John-Thomas Marino, the founder of mattress brand Tuft & Needle says it can be “frustrating” to witness the hype surrounding venture capital-backed competitors, who have money to spend on public relations campaigns and social media advertising.

“When you take capital from an investor, the number one goal of yours is to grow,” Marino says. “And you can afford the top agencies to put on a skin around your product – so [it] looks and feels like it’s really good, but it doesn’t necessarily need to be.”

In 2018, it was estimated that Tuft & Needle had managed to swipe a 5% share of all online mattress sales in the U.S., while its competitor Casper was sitting at 10%. But while it may have had fewer customers, Tuft & Needle was already turning a profit. Casper, by comparison, recorded a $92 million net loss that year. The company raised almost $340 million in VC funding before its IPO in 2020. It has yet to turn a profit.

How to grow a bootstrapped brand

Who Gives a Crap, an Australian toilet paper brand that is fully bootstrapped, has generated a profit every year since it launched in 2012. To achieve that so early, the company’s founders Simon Griffiths, Danny Alexander and Jehan Ratnatunga agreed to forgo a salary from the business right away and took on other jobs. They scaled their involvement in the business up and down depending on what they could afford. “I moonlighted and worked other jobs to be able to pay rent, and after a year and a half of trading I eventually took a salary,” explains Griffiths.

This balancing act is not the only compromise that founders have to make when building a business with limited capital. While a VC-backed brand can use the money raised from investors to tackle multiple business objectives at once, bootstrapped brands will need to prioritize those that will make the most money.

“We realized we could either do new product development (NPD), or global expansion. So in 2016 we said we would put NPD on hold, and invest heavily into [going] international,” Griffiths says, explaining that while new products could help Who Gives a Crap to notch revenues up by a percent or two, international expansion would be a revenue “multiplier.”

Who Gives a Crap has since launched across Europe and North America, and has 135 employees across six countries.

There will, however, most likely be a time in a business's life where some form of external capital is needed to help it reach the next stage of growth. Producing huge volumes of products to stock up the shelves of a big retailer like Target, for example, isn’t something that can be done on the cheap.

But this scenario still doesn’t have to mean pursuing venture capital. Platforms like Clearco (previously known as Clearbanc) and Outfund, that provide revenue-based financing, are becoming increasingly popular with brand owners that don’t want to give up a stake in their business. In 2020, Clearco provided more than $1 billion in financing to 3,300 businesses, according to Digiday.

While Marino launched Tuft & Needle with cofounder Daehee Park in 2012 with $6,000 in savings, the pair also took out a $500,000 loan in order to fund the launch of their first retail store.

No turning back?

Indeed, some bootstrapped brands find that once they are ready to approach venture capital investors – having built a robust, profit-generating business – they can struggle to get a deal.

Marino says that while Tuft & Needle did have meetings with VC investors, it was unable to secure funding “because we didn’t want to sell very much of our business.” In September 2018, Tuft & Needle merged with mattress giant Serta Simmons in a deal which gave the company access to a nationwide retail distribution network.

In July 2021, sports nutrition brand Athletic Greens raised an undisclosed sum of money from private equity investors, following a similar move made by U.K. fitness apparel Gymshark in August 2020. Gymshark’s deal valued the company at over $1.3 billion; in the year to July 2019, the business recorded a 156% increase in profits, making it among the fastest-growing businesses in the U.K.

Golde, which is profitable, has raised “less than $1 million” in funding across two investment rounds, the most recent of which was a seed round that closed in April 2021. It was a difficult process, Wofford says, with investors often seeming unwilling to back a brand that had deviated from the “growth at all costs” model they were used to seeing in pitch decks.

“It appears to be so much easier to start on that track from day zero than it is to get yourself funding when you’ve already started to build a business,” she explains. “I think it’s difficult for most venture capital funds to look at businesses that have been bootstrapped for several years, because they have no experience tracking those metrics.”

Some investors are willing to break the mold, though, and Wofford says that her cap table – which is made up of 90% women and people of color – “speaks a lot to who is paying attention to creating an equitable system within the venture capital world.”

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