The small software startup funding problem seems like a very hard nut to crack. First I think its best to stop thinking of yourself as a "startup" and start thi

The small software startup funding problem seems like a very hard nut to crack. First I think its best to stop thinking of yourself as a "startup" and start thinking of yourself as closer to a normal business. PG's Startup = Growth article really explains this, and all the VC madness and overfunding comes from this expectation. So you've moved the problem from getting VC funding to getting a bank loan like a normal business. But now the problem is that your small software business is still a higher risk proposition than a donut shop, because we've clearly validated that there's a market for donut shops, but your software company still needs to validate that it even has a business. Now your software company sits in this murkey middle where your lack of potential is too risky for a VC, but your lack of market validation makes you too risky for a traditional bank loan. Why then start a small software business? Because its the lowest risk proposition for the founder. Get 2 founders together and bootstrap a 2M ARR, with the appropriate development a business experience and a decent understanding of your market, there's a very high chance you can pull this off. Now you're looking at a $750,000 annual income and half an asset that is worth at least 10M at a 5x multiple. Point being, given that the whole point of a small software company is to minimize founder risk in order to give the founders the best chance at a very substantial income, it shouldn't be surprising that the most realistic way to fund such a company is bootstrapping. I doubt there's a better answer to the problem since the whole reason you're in this situation is that you the founder wanted to keep all the gains while removing all the long-term risks to yourself. To make that happen you the founder are the one who has to front the cash.