Learning the ‘art of bootstrapping’

Jan 28th, 2006

There’s a good article on ‘the art of bootstrapping’ a startup on Guy Kawasaki’s blog that hits right on with what we’re trying to do. The basic premise is that when it’s hard to get venture capital funding (for whatever reason) entrepreneurs need to ‘bootstrap’ their venture to get it going. This basically means “get it going with whatever resources you have.” I won’t try to summarize the whole article, but I’ll make a few comments:

Minding your cash: Now, it’s a scary thing starting a company with your own money. When you are using someone else’s money, things just don’t seem so urgent (see: extravagent spending of dot coms a few years ago). With your own money, you question whether every purchase is really necessary to get the company going. This focus on cash is also the reason you need to find a way to bring in more cash as soon as possible. You can do this by releasing your product earlier to start getting customers, provide consulting services along the ways, or even trying to blog your progress and try and make some money with Google Adsense On the other side of the coin though, a smart entrepreneur also needs to know when to deploy cash to more effectively get to market - it can be disadvantageous to keep sitting on your cash hoping to extend your lifetime by putting extra sweat in. Use your cash effectively and bring it in as soon as possible.
Realistic forecasting: Forecasting new business is a tricky art. When you want to make a case to an investor or make yourself feel better, you tend to shoot for the top down forecast and look at the whole market potential. While this gives you a fantastically large number that serves as a great stretch goal, it’s not realistic to expect that you’ll be bringing that in anytime soon. Instead, do some realistic and incremental forecasting. Think about what markets you can realistically hit first and what kind of business you can expect from them. Then create a roadmap showing growth corresponding to what you need to do to hit your vision. This way you can still feel good about having that pie in the sky goal and still have realistic short term expectations.
Understaff until you really do need it: Now, we’re not starting with too much money so it’s not even an option to overstaff - that is, unless they work for free. This usually means that bootstrapped ventures have folks that work pretty ridiculous hours with their venture becoming their life until it start making money. But really, that’s not all that bad. When it’s your baby and you want to see it succeed, you’re willing to put in that extra effort. You can hire tons of people and relax when you get that Google buyout offer