Bootstrapping means starting and growing a startup from scratch without anyone’s financial help. It is a process wherein a new business gets started with its operation without any external funding.
Entrepreneurs all around the globe are shooting for the stars in an attempt to raise funds to fuel their ventures. And then, there are some who wish to do the business all by themselves. ‘Bootstrapped’ is the term for the latter.
If you are the one who in search of questions like:
- What is bootstrapping?
- How business owners manage to succeed without getting funded?
- What are the pros and cons of bootstrapping?
…and so on, then this article is for you.
What is bootstrapping or what is a bootstrapped startup?
Bootstrapping means starting and growing a startup from scratch without anyone’s financial help. It is a process wherein a new business gets started with its operation without any external funding.
This means a bootstrapped startup is responsible for its own survival. The growth and scaling up of these startups is purely based on the revenue obtained.
How to bootstrap your startup?
No matter how beneficial bootstrapping seems, it isn’t easy to roll all the money back into the business and not in your pocket. Here are a few tips that might help you while you plan to bootstrap your startup:
Limit expenses by using homes or co-working spaces
Make a note here: ‘land’ is expensive. While a fancy working space with ping-pong tables is cool, they just add to unnecessary expenses in the early stages (especially if you are going to be bootstrapped). The money you spend there can be used for customer acquisition and marketing, for example.
Consider working out of your home or look for a coworking space to cut down on costs significantly. These places will allow you to focus on testing your MVP in peace, without getting bothered about the rent to be paid every month.
Don’t take the credit route
Credit has probably made life simpler, but if you are on your way to bootstrap your business, put all your credit cards aside. Research says credit cards affect the buying psychology of a person blurring the consequences as a whole.
You definitely don’t want a long bill at the end of the billing cycle, do you?
Remember, the best part of bootstrapping is that you have the ownership of the entire company. And since you are not raising any capital, you want to remain as debt-free as possible. Piled up credit card bills might require an investment in order to bail you out.
PS: The key is avoiding those calls that suggest you to increase your credit limit!
Be a public magnet
These days, PR agencies are constantly in search of creating a buzz for startups. There are a number of ways to generate valuable press for your business if you are willing to roll your sleeves up and get to work. Make time to reply to queries and build an immense network with journalists that focus on publishing stories related to your business.
Since emails can get lost sometimes, get active on Twitter and try to get your foot in that door. Twitter is short and sweet and many journalists monitor the platform on a daily basis. Hence, more chances of being seen!
Evaluate every expense carefully
Right before you plan to spend an amount for something, run a quick check: Is it really needed? What benefit is it going to fetch?
Bootstrapping is one of the most valuable stages a founder goes through. At a point when every single payment is scrutinized, it gets crucial to find creatively conventional ways to execute things.
The key is to not directly run into action but to experiment and see what works best for your business.
For example, before you plan to roll out a campaign on Facebook, spend a little amount and see what results it gets and then project a bigger picture!
Outsource wisely
Certainly, in the early stage of your startup, you are going to wear and change a lot of hats. From product managers to HR to marketing specialist, it is just you and your co-founder (if you have one!).
But as you grow, it is important for you to know when should you start outsourcing for the tasks that do not need your personal attention. Hiring a full team too soon can lead to negative cash flow and chances are, you might have to lay everyone off and pack up your own desk too!
Pro-tip: Go for freelancers over full-time employees!
Go virtual
Technology has been blessing people from all folds and startups are the most privileged. Use cloud-based services and social media channels to avoid simple expenses like those of travel, rent and so on.
On the other hand, make the best of the internet to market your product or service on different channels. The world indeed has become a small place, thanks to the world wide web.
Importance of bootstrapping in an early age startup: pros & cons of bootstrapping
Each coin has two sides and so does the road to bootstrapping! Some of the pros of bootstrapping involve:
- Sole ownership of your business: As a bootstrapped business owner, you (and your co-founder) have complete authority over your business. Even if you are a team of 3-4 co-founders, you will have a larger share of the equity when compared to taking your business through multiple rounds of funding and diluting your ownership.
- Control over direction: When you and your team are the sole owners of the company, your mutual decisions are what matter. But if you have external parties funding your startup you might have to end up compromising on some of your plans, values and so on.
- Longer age of business: If your idea is to keep your business for your lifetime and keep it running for coming generations, then bootstrapping is the way to go. Usually, if the external stakeholders have an upper hand over your business, chances are that you will exit the business in the longer run.
- Sense of accomplishment: If you are the person who wants to look back and say ‘I did it!’, you definitely should go for bootstrapping. You might miss this day if you get into multiple rounds of funding!
These are some of the major pros bootstrapping gets. The cons of bootstrapping involve:
- Chances of survival: One of the major reasons for business failures is lack of money. Even if your idea is unbeatable and has potential to get acknowledged in the market, you will not be able to move bricks if you do not have enough budget.
- Limited growth: The reason businesses go for funding from external stakeholders is to scale big and fast. External capital assistance gets you visibility and takes the bar off from the marketing that you can otherwise do.
- Assistance from experts: Raising money is just one of the benefits of fundraising. Inviting others with an interest in your startup can help you get guidance and assistance as you scale. Board members and shareholders can guide you with ideas you might not think of.
Bootstrapping or funding: What should you go for?
With the basics in place about bootstrapping, the next question is, What is better: bootstrapping or funding?
While bootstrapping allows a lot more freedom in decision making and a closed knit group is easy to work with, sometimes you need guidance from experts as well. When you are a bootstrapped company, you have no time to waste and each little decision you make goes a long way. You are in a stage of hustle and it is observed that bootstrapped startups are more effective in ensuring positive cash flow.
With all this said, the fact is that raising a couple of rounds of funding can accelerate your growth and give your business the visibility it deserves. With funding comes in a lot of money and time to bid goodbye to money crunch, eventually opening doors for new initiatives.
To conclude, one of the suggestions is to get started as a bootstrapped company and push as hard as you can: cut down on costs, experiment and see what works the best and what needs iterations. You can choose to reach out to investors once you have quality insights and a strong roadmap, or maybe you can touch skies even without a single round of funds!
It’s all about the product or the service you provide, the founding team and at the end, marketing and tech efforts!
Related Read: What is a Unicorn Startup and How to be One?
Some famous bootstrapped startups
- Apple
Founded in 1976 by Steve Jobs and Steve Wozniak, they started building the device in Jobs’s parents’ garage. The motive, Wozniak says, was not to make money but to build good computers. They started with an MVP and it was named Apple I. Soon after that, they got an offer to build 50 computers, for which the duo fought hard to gather enough funds.
Fast forward to the present day, Apple is valued at $1 trillion dollars.
- TechCrunch
One of the important aspects of a successful startup is the correct timing. That is what TechCrunch has nailed! While technology was booming, founders Michael Arrington & Keith Teare tapped into the potential that tech gossip and business news had. Clearly, this made TechCruch a leader in its time. Not to mention, their impeccable commitment to quality journalism is what helped them grow.
Takeaway? Even if you do not have enough capital, information and knowledge can fill up the gap and get you to a point that your competitors cannot easily reach.
- eBay
Like many founders, Pierre Omidyar started eBay’s operation from his home. His mission statement read ‘dedicated to bringing together buyers and sellers in an honest and open marketplace’. Omidyar continued to grow his business in alignment with the growth in internet usage and consumers’ demands. What eBay managed to do was create a sustainable revenue model that would keep growing continuously for years.
With a futuristic strategy, correct timing and right approach in place, build a team that is ready to hustle and design a USP that is limited to your startup. With the basics in place, you are all set to kick off your startup and go places.
Now that you know all about bootstrapping, the choice is yours when it comes to one of the biggest decisions that entrepreneurs have to make: bootstrap or raise funds!
Also read: Non-disclosure Agreement: Meaning, Importance & Benefits
