Backbase is an Amsterdam-based SaaS scaleup that provides legacy banks with the software they need to digitise. And almost two decades after founding, it's still bootstrapped. As the fintech funding climate gets rockier, founder and CEO Jouk Pleiter told us in our weekly Fintech newsletter why he thinks this tactic is the way to go right now.
Was your decision to bootstrap a deliberate one, or did you struggle to raise at first?
I always wanted Backbase to be independent, with our customers as our primary stakeholders. It was an intentional decision to avoid venture funding. Over the years, a number of investors have approached us about investment, but we’ve consistently declined.
I chose to bootstrap from the beginning based on my prior experience with startups. In my last startup, I saw how venture capital shifted the management team's priorities away from customers and products.
In the current macroeconomic environment, and with what we know about it getting harder to raise from VCs, is bootstrapping on the up?
The advantages of bootstrapping are being rediscovered out of necessity now, but they’ve always been true. First, bootstrapping requires a founder to build sound unit economics from the start. We have always invested in successful projects as they scale and prove themselves, but we don’t buy billboards in Silicon Valley. Bootstrapping keeps founders from vanity projects.
Second, it requires you as a founder to develop an efficient engine for testing and perfecting product-market fit. This emphasises entrepreneurship and attention to customers over unsustainable spending on customer acquisition and achieving scale without loyalty, while the product-market fit is still immature.
Third, when you bootstrap, a founder can focus on where to have the most impact and not just where the largest possible total addressable market (TAM) is. Backbase has pivoted over the years, but we’ve done so based on where we can help customers in a profitable way, rather than simply chasing a massive TAM and the red ocean competition that typically accompanies it.
How does bootstrapping now set you up for success further down the line?
Until now, bootstrapping allowed us to have a healthy balance sheet even before Covid and the current funding environment. In this macro environment, it has given us the stability to continue our aggressive investments in new products and services knowing we aren’t exposed to the short-term thinking that comes from having a short runway.
This sets us up for success further down the road by preserving independence. Instead of scrambling to extend our runway, we have the freedom to follow the path of profitable, organic growth that's so far led us to more than $100m ARR.
This interview first appeared in our Fintech newsletter — sign up now!
