Bootstrapping: what is this really about at our Startup?
(*) “Trying it too” means doing things like the picture you will see by the end of this post. Hint: if you want to get a sneak peak of our first office space (or an attempt of it), scroll until the end right now! But come back here again… 🙂
Bootstrapping is the act of pulling up your company by your own bootstraps.
Ok, bootstrapping is the act of self-financing or building up your business relying on your own money and revenue to operate and expand. Of course, with pros and cons, but I’m leaning towards the pros nowadays, I said.
Well, is not that easy I said. Perhaps one of the most delightful definitions I’ve read until now is:
Many successful companies had their humble beginnings being bootstrapped. Of course, behind the scenes, there were brilliant entrepreneurs with great ideas and relentless passion but when starting-up, they didn’t rely so much on outside investment to take their business off the ground.
Again, I was asked.
Thinking about this post, I tried to recall the entrepreneurs I’ve met that have succeeded without getting big injections of money from Angels or VC. They are doing extremely well nowadays. The opposite goes with the ones that received too much too early; they are not doing or didn’t do so good.
Many of these conversations made me reflect on how I wanted to approach seeking for funding for a-change. In here, I want to dig a bit deeper on the rationale behind why bootstrapping could be a good approach for your startup and how it could benefit you when you are on an early stage.
But first, I have a confession to make:
Yes, without even starting anything, I thought it was the right way to go. To be honest, I think this was one of the most exciting times when I started ideating about a platform for innovation services and validating the idea pitching it to colleagues, friends, consultants and investors. Needless to say, I failed.
I failed on my approach, the timing and it failed my discerning of the people I decided to pitch to. I raised zero money but… I raised hundreds of learning boiling down to this:
There’s something magical about bootstrapping. For me, it has a different meaning and flavor building a company when you know that resources are very limited. You’re responsible for all crucial decisions, it’s your responsibility to be super efficient and lean and, ultimately, you must be aware that time is running out so you have to make your business model work ASAP (it’s super exciting too though!). I’m a fan of Seth Godin’s Bootstrapper’s Bible, where he mentions:
And that’s the way we approach Bootstrapping. It helps a lot to know until when you’re able to play the game and how you set up the dial to go faster or slower. It helps to know: cash coming in, cash going out, money in the bank right now, and (at the current rate) how many months until no cash left. We know very good the bootstrapping game we are into and how we measure progress stressing the fact that a cash burn rate of 1,350 EUR would allow us to find business model validation within 4 more months. Otherwise, we don’t get to keep playing. Game over.
But above all, I’ve come to realize in the past months that bootstrapping is not a business approach to starting a company without a lot of money. Instead, it is a state of mind, a way of thinking (thank you Seth Godin!).
I believe that the fact that resources are limited, makes you push the boundaries and innovate on a constant basis.
There are two things that we’ve been following for Bootstrapping mentioned by several experts: the kick-starting and the getting going.
Starting-up demanded me around two years of corporate work to gather savings and settle legal situation in Germany. As a result, a small stack of money, in my case 12K EUR, cleaning up credit cards and creating a credit profile gives me the clear overview of how much I can financially sustain myself when the moment to continue or raise money comes along. Therefore this first step is crucial so you know where you stand.
This is a big one. I can’t stress enough how important this is. I’m very lucky that the past years I’ve met incredible people who are there to provide me guidance, support and to challenge our ideas. It is important to have this person next to you when bootstrapping; a person you know that have done it before and can connect you to the right people you need to talk to. This is invaluable for a Bootstrapper.
It’s important to consider that bootstrapping would not fit to any type of business. Here is important to point out that capital intensive businesses that require large influxes of capital are not suitable for this approach. We’ve met entrepreneurs with amazing hardware projects and bootstrapping can apply in some areas of their business but injection of capital is a “must have” so their business model can eventually work.
For this second part, I want to be very visual of how we are approaching bootstrapping.
We are networking as much as possible (more than 20 people and counting). We are constantly talking, iterating and experimenting different approaches for the business model. I’ve heard all the different pains Entrepreneurs have and making sure I can focus on the right one that is a “must to be solved” with our first product. Our approach is not focused on selling anything (yet), rather listening what hurts the most nowadays. Bootstrapping here means making the most out of your time and money to learn as fast and as much as possible, by listening. Even if it means cycling for the whole day!
Bootstrapping allows you to set up the pace you want and need to make progress. There’s no time to write a lengthy business plan that nobody is going to read because, at early stage, if you do have something to write (at least not in our case) it would be just emails to meet more people from point 1). The chances to write a “realistic” business plan can maybe help you develop your fictional writing skills, just that. Instead, having a scorecard of your business model and iterating once you talk to more and more people is the right approach for a Bootstrapper.
Very important when Bootstrapping: keeping the lights on. We have almost closed our first gig (yey!) and it would help us keep playing and think about point number 3 and 4 below. As for now, our first official Hands-On learning experience is enabling a company adopt and embrace OKRs for the next half of this year and a-change is joining them in this journey.
And this where our latest bootstrapping approach comes into place: our new office. Our team would increase double the size next week!! :O ! (yes, we would be now two people… Hahaha).
So, after almost two months since we launched Agents of Change, I proudly present to you where innovation will happen, day in and day out.
So finally, Bootstrapping has helped me to:
What are we ultimately aiming at? Get customers and repeatable orders before getting big injection of money, the whole purpose of Customer Development and Lean Startup.
And the best part:
When you’re starting up, you’re small, you’re the underdog and you don’t have a lot to loose. So I’ve felt that if I fail with something, who cares? Very very different would be if my business is up and running and money must be paid as soon as possible without no business model validation (salaries, suppliers, investors, etc).
Of course, Bootstrapping doesn’t fit any type of company but in our case, we feel it makes sense for now. Especially because this time I’m thankful that pitching for 200K EUR was a successful failure.
Thanks so much for reading! 🙂
Are you bootstrapping your business too? How do you approach it? Tell me below… 🙂
Do you have a challenge doing this? Please share with us and let us know at a-change!
Bootstrapping: what is this really about at our Startup?
Research & References of Bootstrapping: what is this really about at our Startup?|A&C Accounting And Tax Services
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