How to cultivate capital: 6 tips from developer tools founders and VCs

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In the complex landscape of startup financing, many founders find themselves at the pivotal crossroad between bootstrapping and fundraising. So, we’ve made a quick guide with handpicked, experience-backed tips (inspired by a number of industry rockstars) which provides a roadmap to successful fundraising for developer tool founders.

The insights in this post were collected based on conversations I had while hosting Dev Propulsion Labs, a podcast I created since I felt that we’ve been accumulating a mass of knowledge tightly focused around the topic of developer tools.

It’s been a source of inspiration, tips, and high-level strategy inputs from industry leaders. If you haven’t already, please check out Dev Propulsion Labs! Now, without futher ado, let’s jump in and share some of our findings.

#1: Choose the right financing strategy for your developer tool

Before diving into fundraising, take a step back and assess the magnitude of the problem your developer tool is solving, as well as the skills that are going to be crucial for the founding team to have.

Ask yourself: Can I tackle this alone, or do I need a co-founder? If you do, carefully select a partner with the skills that complement yours.

With the right founding team, you’ll have a much better chance to experiment and validate your product idea before seeking external funds. This will strengthen your investment case and help you maintain ownership of your company.

And when you do fundraise, you’ll have a better position to choose an investor who brings deep industry expertise, connections, and strategic advice.

Remember, fundraising isn’t your only option. Take inspiration from success stories like Mike Perham’s Sidekiq, which has been flourishing without external capital.

#2: Set realistic goals

Be honest about what you can achieve with your current resources. Not every business model is scalable or suitable for venture capital, which often looks for a large addressable market.

For example, solving a very specific problem within the boundaries of a single programming language might be too small of a niche (although that’s completely OK; building a niche profitable business is an undervalued opportunity), on other hand, considering a more broad issue, founder Peer Richelsen sees an open source scheduling solution as part of a still quite ripe and valuable market.

#3: Recognize the power of community

Sometimes supporting open source community may seem counter productive, but be strategic about this. The presence of a strong community around your product not only validates your idea, it also promotes adoption through word-of-mouth and user advocacy.

Many VCs find developer communities with strong engagement and growth a green light for investment.

#4: Be scrappy, but not crappy

Cost-efficient collaboration and innovation in commercial open source is all about setting boundaries, managing expectations and building the right set of tools. Invest in documentation, contribution guidelines, and in supporting and active mentoring community members who are motivated to support others.

#5: Set boundaries!

Set clear expectations and constraints, even if you’re a one-person company. Decisions (like accepting only credit card payments) can streamline operations and focus your business model. And remember: in software development, the team itself is often the most significant expense, so be capital efficient about hiring until you’ve found your product-market fit.

#6: Work with engineers who can write

In developer tool startups, engineers should be at the forefront of technical marketing; their deep understanding and passion for the product resonate more authentically with potential users. A great example of this would be Brad Gessler who is building a future cloud with in public, or Vladimir Dementyev who writes about building AnyCable.

Of course, 37signals quite openly credits writing quality as a key to their success and even advises hiring the better writer when choosing between two candidates.

A blend of discipline, ambition, self-awareness, strategic planning, and community engagement helps to make informed decisions that align your long-term vision with operational capabilities.

This is never a “one-size-fits-all” thing; it’s about finding the right balance that works for you and ultimately inspires you for decades down the line.

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