There’s a widespread belief among founders that venture capital is a precursor to success. VC is a common denominator of the most successful tech startups, ..
Venture capital is a hell of a drug, and it’s possible to overdose on VC, but for most founders that is a champagne problem. More often the question investors hear is “how do I get a VC to back my startup?” These founders aren’ t worried about how overcapitalization will make their IPO prospects trickier — they’ re scrambling to get someone, anyone, to sign their first term sheet.
There’s a widespread belief among founders that venture capital is a precursor to success. VC is a common denominator of the most successful tech startups, but it isn’ t a prerequisite, especially at the early stages.
Entrepreneurs can prove out quite a bit with little to no capital. Capital won’ t make your company insightful. If you can’ t creatively turn $1 into $10, why do you expect to be able to turn $1 million into $10 million?
To help illustrate how startups can move forward, here are 35 examples of companies that started with a few thousand dollars, or even just sweat equity, and went on to become exemplars of what I call “efficient entrepreneurship.”
Many of these companies have subsequently earned billion-dollar valuations, some even have billions of dollars in revenue, but none started with anything other than what would be considered a seed round. Most of these startups raised money from VCs, but only after they established the fact that their success would come with or without a wire transfer from an investor. Even now, many of them aren’ t widely known — they are the invisible unicorns of the tech industry.
So before scrambling to schedule meetings with investors, read these stories. They provide a counterbalance to the VC-centric outlook held by many founders, and provide alternative ways to think about funding.
What follows are brief and simplified descriptions of these companies (categorized by approaches they share) and links to stories where you can read more about them. Remember, taking venture capital should be a choice, not a compulsion. These companies show how it’s done.
You don’ t need venture capital to get started in most industries if you can solve a real problem for customers and charge money for it. Here are three ways to think about this:
Automate your workflow
The easiest way to build a useful product is to automate some part of your daily workflow. This will ensure you’ ve got proven demand for what you’ re building and a pre-existing funding source for your project.
MailChimp: Co-founder/CEO Ben Chestnut was running a design consulting business in the year 2000 and had a stream of clients who wanted email newsletters created. The only problem was that he hated designing them. So, to spare his team the tedium, he decided to build a tool that would streamline the process. MailChimp, a $400 million run rate business, was born.
Lynda: Lynda Weinman started as a teacher in need of tools to instruct web designers in the late 1990s. The offerings at bookstores were bland, so she began producing training films that better educated her students. Tutorial by tutorial her company helped software developers and designers improve their skills. She spent two decades building a content library and tech assets that had enough scale to entice LinkedIn to pay $1.5 billion to acquire the company.
Start with a capital-efficient product
Many entrepreneurs make frontal attacks on industry leaders, usually resulting in failure. This is especially true in the case of hardware. Instead of trying to compete with a company like Apple, these scrappy startups filled the gap left by RadioShack and built businesses worthy of respect and emulation.
AdaFruit Industries: Limor Fried started her DIY electronics e-commerce empire as a student at MIT by assembling DIY kits comprised of off-the-shelf parts. Fried merchandised the same building blocks found at electronics stores, but also crafted quirky content that made the prospect of soldering a replica Space Invaders cabinet seem reasonable. Now she has 85 employees and earns $33 million per year.
SparkFun: Similar to AdaFruit, Nathan Seidle started SparkFun out of his dorm room by selling electronics kits and oddball components to a coterie of engineers who wanted to explore exotic new sensors and systems. Now his e-commerce empire employs 154 and has revenues of $32 million per year.
Solve an existing problem and leverage an existing business model
Startups don’ t have to be particularly innovative in terms of business model. Building a better mousetrap on top of a more modern technical platform, or with a UX layer, can be enough. None of the companies that follow reinvented the wheel, but all wound up creating real value.
Braintree Payments: Exchanging money online, without being fleeced by fraudsters, is one of the oldest problems on the web. All parties to a transaction happily agree to pay a fair “tax” for a superior experience. Braintree built a better tech solution and survived on the proceeds of those transactions for four years before raising $69 million in two rounds of venture capital, which preceded an $800 million acquisition.
Shopify: Shopify’s founders were looking for a shopping cart solution when they were starting an e-commerce site for snowboarders. Unable to find one, they decided to scratch their own itch and built a bespoke solution on the then red-hot Ruby on Rails framework. It turned out to be a perfect solution for plenty more people, and the founders ran the business independently for six years on the revenue they generated. They ultimately raised money from VCs and later IPOed, which rewarded them with a billion-dollar valuation.
Many entrepreneurs waste their time “playing CEO, ” crafting a strategy and drawing up a dream org chart for what their business might become. Don’ t do that. Instead, figure out what you can do, today, to advance this idea using only the resources you have.
Ipsy: Sending boxes of makeup to amateur beauticians has become a growth industry thanks to pioneers like Birchbox. YouTube star Michelle Phan didn’ t have first-mover advantage, but she leveraged her online celebrity (8 million+ YouTube subscribers) , relationships with cosmetics brands and

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Gaming firm Razer has filed to go public through an IPO in Hong Kong as it looks to raise more than $600 million to go after growth opportunities. The..
Gaming firm Razer has filed to go public through an IPO in Hong Kong as it looks to raise more than $600 million to go after growth opportunities.
The U. S.-based company, which traces its origins back to Singapore, filed initial paperwork on Friday. Certain details — such as how much Razer is looking to raise, its valuation and the timing of the IPO — are not disclosed in the 345-page filing, but a source close to the company confirms it’s likely to be upwards of $600 million (earlier in the year, it looks like Bloomberg reported $400 million) . Razer’s last round of venture capital investment valued the firm at $2 billion.
The filing sheds some light on the company’s financials and details of previous M&A that it hadn’ t disclosed.
Razer makes money selling gaming peripherals and laptops, but it hasn’ t been profitable lately. It posted a $59.6 million loss in 2016 on revenue of $392.1 million. It was profitable in 2014 — to the tune of $20.3 million — but dropped into the red with a $20 million loss a year later, which the company put down to an aborted effort to list in the U. S. and increased stock options for staff.
Around half of its revenue comes from the Americas, with the remainder split roughly between Europe and Asia. China, where it claims to be the top games accessories brand, represents 13 percent of sales, the firm said in its filing. (Being established in China is a good reason to go public in Hong Kong, too, by the way.)
The company’s slogan — ‘For Gamers. By Gamers.’ — reflects its focus on building aspirational products for the global gaming community, which Razer estimates was worth $101 billion in sales last year and is primed for major growth.
Razer makes most of its money through the sale of peripherals, which counted for 76.2 percent of income last year and include items for PC and console gamers such as customized headphones, mice and joypads outfitted for gaming, colorful keyboards and large scale screens. Its other main source of revenue is highly specced laptops built for gaming, which cost close to $2,000, but it also offers a range of software services, which it claims have attracted 35 million registered users. Recently, Razer introduced a virtual currency aimed at connect the dots and generating more revenue from its loyal community of games lovers.
Razer is primed to enter new areas in the future, however.
It acquired smartphone startup NextBit earlier this year for $15 million in an all-share deal, as the prospectus reveals for the first time, and Razer also confirmed for the first time that it plans to launch its first mobile device by the end of 2017, or in early 2018. This is not too surprising considering that the core product released by the next bit team was its Robin smartphone. From what we understand, it’s not clear whether the mobile device will be a smartphone, although that’s one logical guess. Razer also acquired Ouya, which made an Android TV games console, and that deal could form part of this upcoming “mobile” product.
The company also hinted in filings that it may enter the games console space in the future. Again, as with Razer’s potential move into mobile devices, would be a logical move for the company, although one that will put it in closer competition with the likes of Sony and Microsoft.
Another product area where Razer plans to put more focus is audio, audiovisual products and services, and especially those that might see the company extend beyond gaming into adjacent areas of entertainment. In 2016, the company acquired THX, the iconic audio company founded by George Lucas in 1983 that focuses on developing premium audio and visual set-ups and providing audiovisual certifications. The filing reveals that Razer again paid around $15 million for the asset — this time in a combination of cash and shares.
“We believe the THX business will improve our ability to deliver premiere audiovisual products and allows us to extend our product offering for the broader entertainment segment, given the convergence of games, movies and music, ” Razer wrote in its filing.
The Razer sales model is divided between resellers, retails and its own direct sales. The latter comes primarily via Razer’s online store. The company has also developed a handful of concept stores — but nearly 80 percent of all revenue comes via distributors (50 percent) and third-party retailers like Amazon.
The company has 749 staff primarily in Asia and the U. S. and counts some big name investors including Foxconn, Intel, IDC-Accel and Hong Kong’s richest man, Li Ka-shing, who invested via his Redmount Ventures fund in Razer’s Series D.
And here is some more interesting detail on that Series D: when it was announced in May, we reported (per an interview with Razer CEO and founder Min-Liang Tan) that the investment was made through Ka-Shing’s Horizons Ventures and was for between $50 million and $100 million. The filing notes that the Series D, in fact, was for around $43 million and also included backing Binary Capital, the firm co-founded by Justin Caldbeck and Jonathan Teo which has been embroiled in a harassment scandal that is now kicking off a much bigger unfolding of related events across the VC world.
The IPO is likely to be a big win for angel investors in Razer CEO Min-Liang Tan’s native Singapore, who backed the young entrepreneur when he started his company in 2005. In its Series A, shares were valued around $76/share; and in its Series D, each preferred share was valued at over $2,304/share, a 30-fold increase.
Li Ka-shing’s involvement, in fact, is likely a major reason why Razer has picked Hong Kong for its listing. The Hong Kong Stock Exchange recently welcomed its largest tech IPO since 2007 when selfie app-maker Meitu went public. However that also provides a cautionary tale: the listing raised $629 million, but it ultimately underwhelmed.

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