3 Ways to Seedstrap

And why you shouldn't just raise VC money and then decline next rounds

👋 Hi, it’s Zdenko, and welcome to Seedstrapped, a newsletter about funding and building profitably growing SaaS businesses in the age of AI.

If you’re new here, start with some of the most-read issues:

• Seedstrapping: The Smarter Way to Fund Your Startup in 2025?

• Who’s investing in seedstrapped businesses?

• Seedstrapping Success Stories: From $500k Raises to 8-Figure Exits

• Stop selling to everyone. Start building for someone.

• 7 Underrated Cold Outreach Tactics for Seedstrapped Founders

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Last week I received a comment on one of my Linkedin posts that touched on a fundamental topic:

"When is the best time to 'seedstrap'? And can't you just raise VC money, then simply decline the next investment rounds?"

It’s a fair question. On paper, taking the cash and then closing the door to future rounds sounds like the ultimate founder hack. But in my experience, the reality of "one and done" funding is rarely that linear.

I don’t think there is one single way to land on this route; instead, I have seen founders getting to seedstrapping through 3 distinct paths:

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1. Accidental seedstrapping - the historical default

While it’s very difficult to get a good data on this, I’d argue that most of the “raise once” success stories were historically born out of necessity rather than intentionally. (covered some of them here and here)

Until recently, the choice was binary: you were either a bootstrapper or you were on the VC path.

The accidental seedstrapping story usually followed a familiar pattern:

1. Founder sets out to ride the VC rocket ship

2. Raises a respectable seed round

3. Hires a team

4. However, the “escape velocity” traction required for a the next round never quite materialises

5. Perhaps the market was shallower than the initial research suggested, or the unit economics didn’t scale as expected

Faced with a “default dead” trajectory, these founders make a choice: let the company fold, or pivot toward sustainability.

They cut the burn, focus exclusively on high-margin segments, and fight their way to break-even.

It’s important to understand what happens on the VC side during this transition. Traditional VCs effectively write these investments off. In their internal spreadsheets, the company is often treated as a zero - not because it isn’t profitable, but because it isn’t a 100x outlier.

Furthermore, because the investment team must focus on the outlier bets in their portfolio, they often stop providing support. The founders are, essentially, on their own.

While that may sound harsh and most likely not perceived as a win for VCs who invested, it can often be a win for the founder. You keep control of a sustainable, cash-flowing business that provides a high-quality life and total optionality.

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2. Intentional seedstrapping - the new shift

What used to be a survival tactic is now, I believe, becoming more of a conscious strategic choice. More founders are realising they can skip the “trauma” of the “accidental” pivot by planning getting to “default alive”, from Day 1.

The core mindset shifts from “How much do I need to raise to get to the next round?” to “How much do I need to raise to reach profitability?”. While there is no formal rulebook (yet), the $500k to $1M range should work for most SaaS businesses.

A massive unlock here is AI. Advancements in automation mean that founders no longer need the massive headcount (and subsequent investment rounds) traditionally required to build and scale a “real” product. So, for a founder, the math of seedstrapping makes total sense.

What about the VCs? How do they make money here?

This question keeps popping up every time when seedstrapping is discussed.

The answer is: They don’t. Seedstrapping is not a VC game. The venture model relies on “power law” where a few massive winners must pay for dozens of total losses. A steady, profitable business that earns $10M ARR and stops raising is, mathematically speaking, a “failure” for most VC funds (€100m+).

To walk this path intentionally, you have to be transparent about your plan to hit profitability in 12-18 months. This requires aligning yourself with capital providers who value sustainable growth over pure hypergrowth - investors who:

• are ok with 2x - 5x return coming from both growth and cash flow

• value profitable growth and dividends (or secondaries)

• don’t need every bet to turn into a unicorn

• do smaller checks (€100k–€1m)

So who are these investors?

I see the people who fund seedstrapped businesses fall into these 3 groups:

1. Angels & operators (often ex-founders) - individuals who’ve built and/or exited companies themselves and now back others taking a similar path

2. Micro / alternative funds - smaller, nimble funds (often <$50m) that tend to write early checks, move fast and stay hands-on.

3. Family offices - patient capital with more flexibility than institutional VC. Many family offices now actively invest in early-stage companies, preferring sustainable growth and dividends over forced exits.

I wrote more about this here - if you have any more good names to be added to that list, just hit reply to this email.

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3. Opportunistic seedstrapping - the danger zone

Finally, there is a route where a founder may be tempted to pitch a “unicorn” narrative to secure a VC cash, while secretly intending to settle into a quiet, cash-flow business once the capital is in the bank.

In fairness, I can see this happening mainly because there simply aren’t enough “seedstrap-friendly” investors in the market yet. Founders feel they have to play the VC game just to get the doors to open.

However, I find it difficult to recommend this approach. It creates a fundamental misalignment that usually ends in friction. VCs don’t just provide cash; they take board seats and secure legal rights designed to force hyper-growth or a liquidity event.

If you take their money under false pretenses, you aren’t buying freedom - you’re likely buying a decade of conflict. It can permanently damage your reputation and, in some cases, lead to serious legal complications.

That said, you should still approach VCs if you’re seedstrapping - just do it with your cards on the table. Be upfront about your strategy; you might find a partner who is willing to support a more sustainable path, but at least you’ll both be starting from a place of honesty.

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If you genuinely feel that seedstrapping is your preferred route, my advice is to skip the “unicorn hunt” and reach out to investors who are fundamentally aligned with this way of building.

You’ll not only increase your chances of getting funded, but you’ll also ensure you’re building on a foundation of transparency rather than friction.

What would you respond to the questions at the beginning of this article?

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PS: If you’re currently building with a seedstrapping mindset or exploring this option, let’s connect. At Flying Founders, we’re looking to invest $100k–$500k in 1–2 companies this quarter.