Why More Startup Founders Are Embracing ‘Seed-Strapping’ in a Tight Funding Market

The Rise of Seed-Strapping Amid VC Market Challenges

In an increasingly uncertain venture capital (VC) landscape, startup founders are adopting a new funding strategy called “seed-strapping.” This hybrid approach involves raising an initial round of funding and then scaling profitably without relying on additional investments. With artificial intelligence (AI) improving efficiency and reducing costs, many startups can bypass traditional VC dependency.

For years, launching a tech startup was synonymous with raising institutional funding. However, today’s founders challenge this norm, proving that businesses can succeed without continuous VC backing.

Bootstrapping vs. Seed-Strapping: What’s the Difference?

Bootstrapping—using personal resources to build and scale a business—is not new. Successful companies like Spanx, Craigslist, and GoPro started this way, proving that financial discipline can lead to long-term success.

Seed-strapping, conversely, sits between bootstrapping and full-fledged VC funding. It allows founders to secure an initial funding round while maintaining financial control and focusing on profitability rather than excessive growth fueled by multiple funding rounds.

Why Seed-Strapping Is Gaining Popularity

Seed-strapping has gained traction as a direct response to the downturn in venture capital funding, particularly following the economic shifts following the pandemic.

Economic Shifts and Investor Retrenchment

After the 2008 financial crisis, low interest rates encouraged investors to invest in high-risk startups. This trend continued until the COVID-19 pandemic, which saw record-breaking VC investments. However, funding dried up once the economic climate changed, leaving many startups scrambling for alternative financial strategies.

The Benefits of Seed-Strapping for Startups

Many startup founders who have embraced seed-strapping highlight several advantages:

1. Financial Independence and Control

Wade Foster, co-founder and CEO of Zapier, is one of the early adopters of seed-strapping. His company raised a $1.3 million seed round in 2012 and operated solely on revenue. 2014 Zapier was profitable; by 2020, it had reached $100 million in annual recurring revenue.

According to Foster, avoiding additional funding rounds allowed his team to stay in control of their business decisions. They were not pressured by investors demanding aggressive expansion or unsustainable growth targets.

2. Profitability Over Rapid Scaling

Unlike startups that raise multiple funding rounds and focus on hyper-growth, seed-strapped companies prioritize financial sustainability. Josh Payne, founder of StackCommerce, raised just $750,000 in a seed round in 2011. He ran the company for a decade, maintaining profitability before successfully exiting TPG’s Integrated Media Company. Early investors saw a 10x return on their investment, proving that profitability can be as rewarding as rapid scaling.

3. Avoiding Founder Burnout

Many founders undertaking extensive VC funding experience intense pressure to deliver exponential growth. This “growth-at-all-costs” mindset often leads to unsustainable business models, high-stress levels, and even founder burnout.

Jeremy Tan, co-founder of Tin Men Capital, warns that prioritizing valuation over long-term success can be detrimental. “There’s no point making all this money if, in the end, you realize you’re alone,” he said. Seed-strapping gives founders the breathing room they need to build a business on their terms.

4. Leveraging AI for Cost-Effective Scaling

AI is revolutionizing startup operations by enabling automation, reducing the need for large teams, and minimizing costs. According to Zapier’s Foster, AI allows startups to grow significantly without requiring extensive funding. This means early-stage companies can reach profitability faster with fewer resources.

Seed-Strapping in Southeast Asia vs. the U.S.

While seed-strapping is gaining traction in the U.S., it is even more prevalent in Southeast Asia.

1. Market Fragmentation in Southeast Asia

Unlike the U.S., which has a large, unified market, Southeast Asia consists of 11 countries with diverse languages, cultures, and regulatory frameworks. This fragmentation makes the traditional VC model less effective, as rapid scaling across multiple markets is more challenging.

2. Funding Drought and Investor Caution

The post-pandemic funding drought has hit Southeast Asia hard, leading to a slowdown in VC investments. With fewer exits and increased investor caution, startups are re-evaluating their reliance on venture capital and turning to seed-strapping as a viable alternative.

3. Shifting Founder Mindsets

Many Southeast Asian founders are questioning whether they need VC funding at all. Jx Lye, CEO of Acme Technology, describes VC investment as “setting fire to gasoline.” While it accelerates growth, it also pressures founders to justify high valuations.

Instead, founders are prioritizing longevity over short-term growth. “What you need is not just money, but time,” says Lye. He emphasizes the importance of having the freedom to refine a product and explore market fit without the constant pressure of investor expectations.

The Future of Seed-Strapping

With shifting economic conditions, increased AI-driven efficiencies, and a growing desire for financial independence, seed-strapping is poised to become a dominant funding strategy for startups worldwide. Founders increasingly recognize that raising endless funding rounds isn’t always the best path to success.

By securing a single seed round and focusing on profitability, startups can scale at their own pace, retain control, and build sustainable businesses without the burden of excessive dilution and investor pressure.

As the startup ecosystem evolves, seed-strapping may become the new norm—giving founders the best of both worlds: access to initial funding without the long-term constraints of traditional venture capital.