Tips for Bootstrapping Your Startup

Tips for Bootstrapping Your Startup

By Scott Burkett on Monday, September 11, 2006

Bootstrapping is a sort of "Holy Grail" for entrepreneurs. Those that do it well swear by its power. The disbelievers, as adamant as they are in their opposition to it, are often left behind as the more agile bootstrappers start hitting those critical early milestones. In this piece, I'll dive into some of my own tips and strategies for bootstrapping your startup.

First, we should actually define the term bootstrap. Besides, I'm a bit of an etymology buff, so I always enjoy doing this. A lot of folks toss this phrase around, but to truly understand the spirit of bootstrapping, one must understand the origin of the phrase.

There are actually several varying accounts of the origins of the phrase "bootstrapping", but both are attributed to Baron Karl Friedrich Hieronymus, Freiherr von Münchhausen (or simply, Baron Munchausen.) In the first account, he found himself mired in a swamp, and unable to escape. Being the resourceful tall-tale-teller that he was, he used his "bootstraps" to pull himself out of the muck. Merriam-Webster defines "bootstrap" as "a looped strap sewed at the side or the rear top of a boot to help in pulling it on."

Another account also involves the swamp, but instead has the good Baron using his own hair (and the hair of his horse) to pull them both out of the goop. Still another has the Baron using his bootstraps to pull himself back up onto his horse. 

In any event, the end result (and the metaphor) remain the same. Bootstrapping, at its core, is the art of being resourceful. In the startup world, it simply refers to the ability of the entrepreneur to leverage whatever assets he or she has available to get a new venture off the ground.

Nolan Bushnell is perhaps one of the world's foremost bootstrapping entrepreneurs. He founded Atari with $250 and a lot of resourcefulness. Recently, he gave a presentation where he offered the following tidbit:

So how do you bootstrap? Well, you take all the money in your hind pocket, all the credit on your credit cards, and see if you can't get a customer that will pay for your products or services before your bills come due. That is what bootstrapping is all about. Or, you can become a consultant, and work for hire. Can you actually find someone that is willing to hire you, and charge them a whole bunch of money so that you can actually pay for somebody else, while you're sleeping on the floor somewhere, and make the cash flow that you need? One of the good things you can do is not hire yourself, but knock down 8 hours a day for someone else, steal as much of their time as you can, i.e. close your door and work on your business while they're paying you, and you do as much as you can that way. That is, until you get found out and fired. But it is a strategy! Persistence is really important.

Now, I am not recommending that you exploit your employer in quite the same way that Nolan jokes about, but nevertheless, working two jobs is perhaps the most common bootstrapping technique, at least as far as making ends meet.

The goals of bootstrapping are the same, irrespective of what approach you take:

  1. You gain a time advantage.
  2. You gain momentum, and hopefully traction.
  3. You reduce the need and/or amount of outside capital required, which preserves founder's equity.

Ok, so enough about what bootstrapping is. On with the tips!

Building technology:

So you are building a new technology startup, but you aren't a "hands-on" technologist. You are probably frustrated as all hell. You have a great idea, and feel as if you are missing the opportunity to make a run at your dream. You feel like flinging yourself off the nearest roof. What can you do? Plenty!

  • Find a technical friend who can help you pro-bono, or for a piece of the action – now is not the time to be greedy.
  • Use online service-bid portals, such as eLance. You would be surprised at how cheaply many staple technology services can be purchased. Don't let some numbskull charge you $10,000 to design a web site that you can get from an equally qualified vendor for $750. The proliferation of service markets on the Internet has made these types of mistakes uncalled for.
  • Here is one I recommend a lot to people. Call down to the computer science department of your local college or university (or whatever department makes sense for your specific need). Ask to speak to one of the professors. Describe to him/her what you are doing with your business, and how you are looking for an "intern", and allow the professor to steer you to one of his/her students. The toughest thing that college graduates face is the lack of practical experience when entering the workforce – big surprise, you are in a position to provide the lucky student with something that will look great on their post-graduation resume. You can often get a relatively affordable employee (or contractor) this way. Some of them can even earn credits toward an "internship", so they may have an even bigger motivation to help you. A six pack of Red Bull, coupled with some reasonable expenses (and/or a minority equity stake) will go a long way when building technology this way.
  • Offshore the work. Even if you are an opponent of offshoring (for whatever reason), this is a viable option for some folks (and some tasks). Read my post on offshoring for startups first, though.
  • Pool resources with a fellow entrepreneur to use their staff for certain things. Remember, other entrepreneurs have bills to pay as well. For example, if you need a graphic designer, approach a fellow entrepreneur about tapping on their resource. It may be worth the tradeoff to have you pay half of their salary. Or get very creative and offer your accounting services for 10 hours a week in exchange for 10 hours of their designer's time. Also, consider the opposite. Offer your resources to other entrepreneurs, so you can offload part of their cost burden to your venture.
  • Strive for the 90% solution. The last 10% of functionality is generally saved for last for a reason – it represents the majority of the effort (and subsequently, the headaches.) Figure out what really matters to your customers. Build that. Resign yourself to the fact that bells and whistles can come later. As I've said before, if you have a pounding headache, would you rather have an aspirin that got rid of 90% of the pain now, or wait a year until you can get one to get rid of 100% of the pain? That last 10% stretch to get to the "ultimate" product could cost you more time and money than it is worth initially.
  • Forget lengthy requirements documents. The creation of lengthy requirements documents often costs more than the application they describe. Instead, go to the store and buy a cheap #2 pencil and a steno pad. Make a list of what the app is supposed to do, find someone to build it, and start pushing code. Total cost = $2.75 (assuming you bought a pack of 5 pencils).

Reciprocate services:

Reciprocating services is another strategic way to get things done. If you are an accountant needing technical services for your own startup, find a tech startup that needs an accountant. Or vice-versa. Services that are desired or needed by most entrepreneurs: graphic design, web development, accounting, legal, marketing, etc. Granted, you won't be earning money for your services, but then again, you aren't paying for the services you are receiving either. The good news, however, is that you'll be making progress!

And don't forget about lending your domain/market expertise. If you are a real-estate professional and are building a new business in the Llama ranching industry, and a fellow entrepreneur is a Llama buff who is building a real-estate portal, then this is a match made in heaven. It is rare that this sort of arrangement pops up, but stranger things have happened.

If you are hesitant about approaching someone on this level, remember that most sales efforts fail because the salesperson (in this case, you!) didn't ask. You'll be surprised what sorts of arrangements people will agree to. Just give it a go!

Raising money / Paying the Bills:

Assuming you've asked yourself the obvious question (do I even need money?), there are some alternatives to angel and/or VC financing.

  • The obvious choice – the 3 F's: friends, family, and fools. Now, not everyone's family or friends has the idle capital to hand over to the family entrepreneur. The good news is that there are plenty of fools out there, so focus on finding them instead. :)
  • The other obvious choice – Leverage your personal assets. This is probably a last resort for most folks. I mean who relishes the idea of ponying up the pink slip to the house in order to "be their own boss." However, if you truly believe in what you are doing this may be an option. Of course, there is always the "family CEO" to deal with (i.e. your other half, if you have one.) Sorry, I have no advice there. You're on your own when it comes to getting the spouse to buy in on digging into Junior's college fund.
  • Another option is to try and convince some of your early customers/clients that since they loved your product/service so much, they should pony up some cash and invest in what you are doing. You'll never know until you ask. This happens more than you may think.
  • It is also entirely possible to obtain capital from your competitors! For example, if you are creating a product or service that is targeting a niche market that one of your competitors has left alone, they may find it feasible to invest in you first. I will admit, that this can be tricky, but if you can successfully convince a competitor (current or future) to invest cash in your business, then that is the first step for lining them up as an acquirer for your big liquidity event at the end of the rainbow.
  • If you are living in a non-venture-capital-happy market (example, a city that starts with an "A", ends in an "A", and sounds like "Tlant" in the middle), don't fret. Go outside of your local market for capital. Good ideas attract investors – the origin of your capital is not important.

Don't be an island:

Find a support group! For starters, check out the Gang of Five. Pooled together, a small band of entrepreneurs can do a lot together. Find your Balmer, Wozniak, or other soul mate, as Guy Kawasaki says. Speaking of Guy, he blogs on the subject of bootstrapping here .

The Ultimate Bootstrapping Tip:

Well, if you've managed to read this whole article, I feel compelled to reward you with something. After all, your time is probably far more valuable than mine. So, you want to know the ultimate secret for bootstrapping your startup? Be relentlessly resourceful. By this, I mean wake up each morning with the idea that your back is against the wall; that you are cornered. Toughen up. Start viewing the world through a predatory lens. When you start thinking that each day will be your last, because two guys in a garage are hot on your tail, or that the big 800 pound gorilla in the Fortune 500 is going to step into your space with a better solution, the better off you'll be. Trust me. You'll be surprised at how resourceful you can be once you start operating in this manner.

Look around, take inventory of your assets, and your challenges. Map your assets to those challenges. How do your current resources help you solve those challenges? See where the gaps are, and move on them. Never stop seeking solutions to the challenges you face.

Hopefully, some of these rambling tips have been useful for you. Go change the world!

>BackTrack <

Leave a Reply