Bootstrapping: The under-rated route to business success
Bootstrapping your business is one route to business success that gets very little attention and is hardly tallked about. This is not minding the fact that several very successful companies that exist today started as bootstrapped entities.
To pursue success with limited resources and with the help of others.Bob Reiss -Bootstrapping 1010
This definition properly expresses what a founder should be doing while bootstrapping his business. The founder already has limited cash to float his business and should not hamper the growth of the business further by refusing help from others.
Bootstrapping is a path to business success that asks the question – Do you really need Investors?
A Harvard research by Shikhar Ghosh reveals that about 75% of VC- backed startups in the US fail- they are unable to return investors capital
There are many startups today concerned with generating media attention more than creating great products. This behavior is not the best practice for bootstrapped ventures owing to the limited resources available to the founders.
Seeking help is major part of bootstrapped entities. Due to the limited funds, all the help around must be harnessed to ensure the journey is easier
If you are someone who would not even ask for directions from people when lost, you might find it hard to grow your business through bootstrapping.
Side Story: After spending 3 hours searching for my exam venue on a university campus and almost missing the exam, I am now very open to asking for directions.OAU and I, 2012
There is so much fuss around venture capital backed funding in the startup world today, overnight billion dollar valuations fueled by deep pocketed investments and over ambitious investors. this buzz could make venture capital funding seem like the hallmark of success and play down the fact that there are several other founders making a lot of sense with little or no outside help.
How do you keep cool in the midst of so much noise to while building your business?
Answer – Bootstrapping your Business!
Envato is one of the creative world’s most quietly influential companies.
Envato started as a small idea in a garage and today has generated over $600 million in revenue.
Premature Scaling is one of the number one reasons why startups fail, there is pressure to give investors the outward signs of accomplishments, fancy offices, full teams, expensive PR, and marketing campaigns.
Venture capital Backed startups have very stiff obligations to meet, they have to meet abstract timelines and/or show hockey stick growth charts. This pressure can cause the startup from veer from its initial focus and begin to chase shadows in a bid to impress its investors.
Examples of Bootstrapped Businesses
Ben Chestnut and Dan Kurzius in a bid to help their customers. launched MailChimp back in 2001.
For many years, MailChimp was a side project for them alongside their web design business, until 2007 when the founders decided to focus on MailChimp full time.
By 2016 they had built a business with 14 million users and $400 million+ in revenue.
Github was developed in 2008 by Chris Wanstrath, P. J. Hyett, Tom Preston-Werner and Scott Chacon using Ruby on Rails. Github in its first years provided enough revenue to be funded solely by its three founders.
January 2013, Github had 3 million users and hosted more than 5 million repositories which doubled by the end of the year.
Github was acquired by Microsoft in 2018 for $7.5 billion
TechCrunch began in 2005 with Michael Arrington publishing his first blog.The company was located at his house and he was blogging on a part time basis.
In 2006 he covered the YouTube acquisition by Google and this became the turning point for TechCrunch. TechCrunch grew to $10 million in the annual gross revenue and was later acquired by AOL for about $40 million
Sometime in 2006 in a garage somewhere in Sydney, three young entrepreneurs, Collis and Cyan Ta’eed, and Jun Rung created something-
A marketplace called FlashDen, selling items compatible with Adobe Flash player, a plugin used by almost every website on the internet at the time. This went on to become Envato.
Envato is a mission to help creatives earn a living from selling in a marketplace.
September 2014, the Envato Community hit $200 million in earnings and by May 2016, the Envato Community hit $400 million in earnings and surpassed 10 million registered users
Other Bootstrap successes
Advantages of Bootstrapping
1. Financial management
I’ll wait for you to show me a better was to learn financial management other than when your own money is on the line.
Bootstrapped businesses have to develop very efficient methods to carry out their business operations and solve problems. This helps the business to to save costs and reduce the clutter that could possibly surround the business model.
2. Skill acquisition
The average bootstrapped founder has to learn almost all of the processes associated with the running of his business. UI/UX designing, handling social media accounts, making deliveries, taking orders,handling refunds etc. These tasks can be overwhelming in the earlier stages but provides the advantage of understanding every aspect of the business and as the business grows these serves as useful information in hiring individuals to do these tasks.
3. Low Risk Pivot
Pivoting is a common and almost required phenomenom for early stage startups as it is near impossible to get the right product right off the bat.
The Product/service development process often requires a lot of feedback, optimization and pivoting in order to arrive at the final product. A bootstrpped venture affords you the ease of pivoting till you arrive at what works for your venture rather than yielding to the pressure from your backers and trying to force a failed product down the throat of your prospective customers – which more often than not fails to produce the desired results.
Slack swas originally a support the disconinued game GLITCH. Stewart Buterfield later realizes that it was the internal messaging app held the true value of what he has built.
4. Concentrate on Building the business
When your startup is a funded venture, you more often than not have to meet the ego status of those backing you up, mostly requiring you to move into big fancy offices, hiring a lot more hands even when you have not fully defined their roles.
Recommended: Lessons from Nature: Delaying Gratification
5. Total control
Founders of venture capital backed startups usually the equity and control diluted and could mean the business no longer moves in the line of the direction of the founders vision.
Bootstrapping helps you focus on building your business rather that the gruelsome task of raising capital from hostile venture capitalists.
Raising Capital can pose significant distraction considering that in the earlier stages of your business more than 99% of those you pitch to might just say No
This distraction prevents you from focusing on your business and growing something truly valuable.
Disadvantages of bootstrappng
1. Financial strain
Bootstrapped ventures can be a high rish on the personal finances of founders and might run into problems in the process of developing the product and in the earlier stages when the number of customers and sales are limited.
This can be easily tackled by proper planning in the days leading to starting up the venture.
2. High Failure risk
Bootstrapping holds a great risk as the full weight of losses and
Adapting to the many responsibilities of the typical founder of a bootstrapped venture can be particularly demanding and put a lot of the strain on the health of the founder.
How to properly start a bootstrapped business
1. Ask for help
The fact that you have decided to go on your own does not mean you cannot ask for help
You have to reach our to get all the help you can get, knock on doors, get used to being rejected
2. Develop a passion for what you are building
Take not of the Lingua; Develop a passion for what you are building
In practice, it is require that you do not build around your passion rather you build in line with the problems that needs to be solved, this is the fool proof way to consumer acceptance
Recommended: Product-market fit: Hacking consumer acceptance
3. Share and get feedback
It is important as you try to grind on your own to not keep to yourself, Even though you might not be getting all the attention the startups at the top of TechCrunch charts are geting, you sure need some form of validation as you go on.
Reach out to people to tell them what you’ve been working on and get feedbacks on how it can become better.
There is no point where it is too early to begin to get feedbacj from your prospects and those aroung you.
The process of getting these feedback helps you
a) Build a following of people anticipating your product
Unbounce started their blog before launching out and till today their blog remains their biggest way of acquiring customers
b) Develop your Ideas
You most likely will not have everything figured about your business right off the bats and the feedback from consumers can serve as free business advice to pivot, grow and scale rapidly!
c) Gain the trust of your customers
Consumers naturally buy from those they trust and gaining their trust takes time. This is the more reason why you dont want to be caught in the loop of having a completely finished product before you launch. That prototype is your story and testament of growth and you will earn their trus by sharing those amazing moments
Bootstrapping your business is not a fail safe way to build a business and it also carries its own risks.
However, Bootstraping your business is a way of getting your business off the ground when