Are You Really Bootstrapping Your Startup?
“Be sure to lock your car; don’t leave anything valuable in it, and you might want to go to the bathroom before you come to the office.” This was advice passed along by an entrepreneur I met with last week, and it made me smile. That one sentence was a great start to an unusual meeting. Unusual because few entrepreneurs really understand what it means to bootstrap a startup and he was living it – he got it.
In startup circles, you hear the term bootstrap, but few entrepreneurs seem to truly embrace the meaning. So what exactly is bootstrapping? In the context of a startup, you’re bootstrapping a company when you hang on to every dollar like it’s the last one you’ve got, because you know it just might be, and you only let go when you’re confident that dollar will move the product and company forward.
The bootstrap company understands the difference between necessity and luxury, between “nice to have” and “must have.” Do you need an office? Maybe. Does it need to be in the nicest part of town? Unlikely, and that’s a bootstrap decision. Do you need office furniture? Sure, but why buy a new conference table when you can use the ping-pong table gathering dust in your garage, or put a sheet of plywood on a couple of file cabinets?
The point of bootstrapping is to give your vision a fighting chance. It takes time and money to develop a concept, build something from nothing, engage with potential buyers, and perhaps even acquire a customer. To survive you need to understand that bootstrapping is a critical skill. You need to embrace economy and efficiency over image and expense.
Seed money and bootstrapping are two sides of the same coin. In The Startup Survivor, I define seed money as “…the absolute minimum it will take to move from idea to provable concept or prototype.” Given that definition, bootstrapping is the key to success. When the only money you have is what you and the co-founders can spare while juggling contract work, selling extraneous personal items, and driving right past Starbucks, you quickly learn the value of a dollar and what is and isn’t directly on the path to success.
The entrepreneur that impressed me with his office warning continued to impress me with the team he had assembled. They spent two years developing a first generation product, using their own money. The product had direct customer involvement during the development and test phases, and that led to a purchase agreement. Now, armed with a real product, their first major customer and a bootstrapping attitude, I’m confident they’ll attract their first round of angel funding.
Bootstrapping is not easy, and that’s precisely why it’s so highly valued by investors. The entrepreneur often goes down the bootstrap path out of necessity, but those that survive are battle-hardened. The lessons learned, and the skills acquired will serve them well when the money does arrive, and they know exactly how to ensure that every dollar adds real value to the product and the company.