Starting and scaling a business in South Africa presents a unique set of challenges. One of the biggest decisions any entrepreneur faces is how to fund their venture—do you bootstrap and grow with your own resources, or do you raise capital and scale with external funding?
What is Bootstrapping?
Bootstrapping is when you build and grow a business using your own money, reinvesting profits rather than taking on outside investment. It often means operating lean, wearing multiple hats, and scaling at a slower but more controlled pace. Many successful businesses—from tech startups to service-based businesses—start out this way, relying on revenue rather than outside funding.
What is Capital Raising?
Capital raising is when you secure funding from external investors, typically venture capitalists (VCs), angel investors, or private equity firms. Instead of relying on cash flow, you receive an infusion of capital in exchange for equity (ownership in the business). The goal is often to scale quickly, capture market share, and exit at a much higher valuation—whether through acquisition or initial public offering (IPO).
The South African Landscape
In South Africa, the VC ecosystem is still developing, and raising venture capital isn’t as accessible as it is in Silicon Valley or other global hubs. Investors here tend to be more risk-averse, favoring businesses with proven traction over early-stage ideas. This makes bootstrapping a necessary reality for most entrepreneurs—at least in the beginning.
There’s a scene in HBO’s Silicon Valley that perfectly captures the absurdity of venture capital in the U.S. One of the characters excitedly explains that once they launch their subscription revenue model, they’ll finally start generating income and move toward profitability. But instead of celebrating this, the seasoned investor in the room is horrified.
Why on earth would they do something as reckless as showing revenue? Revenue, in theory, is the whole point of business—but not in Silicon Valley. The investor explains that no matter how much revenue you generate, it will never be enough. But if you stay “pre-revenue,” your company has unlimited potential—which is exactly what excites American investors.
This couldn’t be further from the reality in South Africa. Here, investors don’t throw money at potential—they back proven earnings and tangible results. A startup without revenue is seen as a high-risk gamble, not an exciting opportunity. South African investors need a track record, profitability, and a clear path to sustainable growth before they even consider parting with their money. Unlike in Silicon Valley, where uncertainty fuels excitement, in South Africa, certainty is king.
However, capital raising is becoming more common, especially in industries like fintech, e-commerce, and SaaS. There are local VC firms and angel investor networks actively funding high-growth startups, but competition is fierce, and securing funding often requires a strong track record, clear scalability, and a compelling pitch.
Bootstrapping vs. Fundraising
I’m a bootstrapper. When I started Friing Digital, I didn’t have capital to invest, nor did I look for funding. The only thing I put into the business was my time—and to this day, I’ve never put a single cent of my own money into Friing. Every expense, every hire, and every investment in the business has been funded entirely by the revenue it generates.
There are obvious advantages to this approach. I have full control over my business, and in an industry like digital marketing—where startup costs are minimal—it made perfect sense. There were no upfront costs or major overheads that required external funding. Friing could grow organically.
However, bootstrapping comes with its own set of challenges. One of the biggest is the Catch-22 of growth. Here’s how it played out at Friing:
- We were growing fast.
- We needed to expand the team to handle the increasing workload.
- We didn’t have enough money to hire, but we didn’t have enough team capacity to take on new work.
Cash solves this instantly. This is where VC funding comes in. Instead of waiting for the business to build up enough cash reserves to fund expansion, external funding allows you to scale in real time. The trade-off? Investors will want a piece of the pie in exchange for their capital.
So, the question isn’t whether one approach is better than the other—it’s about what makes the most sense for your business. If you can grow without external funding, you keep full control and ownership. But if speed and scale are critical, outside investment can be the fuel that accelerates growth.
At the end of the day, it all comes down to what you’re willing to trade: equity for speed, or patience for control.
The Era of ‘Seed-Strapping’
Seed-strapping is a hybrid approach between bootstrapping and seed funding. It involves using a small amount of external capital—often from angel investors, family, or personal savings—to kickstart the business, but then operating like a bootstrapper by relying on revenue for growth instead of continuously raising more funds.
Unlike traditional venture capital funding, where businesses raise multiple rounds of investment to scale aggressively, seed-strapping focuses on minimizing dilution and maintaining control. The initial funding is just enough to cover essential startup costs, and from there, the business is expected to sustain itself.
For example, a startup might raise $50,000 – $250,000 from friends, family, or angel investors to cover initial product development and marketing, but after that, the company operates without further funding, relying on revenue to grow.
Essentially, seed-strapping gives you just enough of a financial boost to get off the ground while still keeping the bootstrapper mindset of running lean and prioritizing profitability.
In today’s business landscape—where investors are becoming more risk-averse and founders are realizing the dangers of overfunding—seed-strapping could be the smartest way to build a company. You get enough capital to move fast, but not so much that you become dependent on outside investors to survive.
Could this be the new way to win in business? It’s starting to look that way.
