How to Bootstrap Your Company

September 5, 2017

This article first appeared on the Founder Institute blog. To check out the original post along with a ton of other great articles, click here.

While raising some outside funding for your startup can certainly give it a boost, there are numerous benefits to bootstrapping, at least in the beginning. In fact, with the right mindset and plenty of careful planning, you can build a very successful startup without any outside funds or resources.

If you are getting ready to launch a company or are considering raising funds for a preexisting startup, this blog post is for you, as it outlines why and how bootstrapping your business is one of the best decisions you can make.

What is Bootstrapping?

“Bootstrapping” might be trendy startup word and is often thrown around by people who don’t fully grasp the actual meaning of it, but it does have a clear definition: when an entrepreneur launches a company with little capital, usually with their own personal finances.

And while bootstrapping a company might seem like a risky proposition (which it is), nearly every startup was bootstrapped at some point. In fact, many of today’s biggest companies came from humble origins of being financed primarily by its own founders. Below is just a short list of companies that bootstrapped before becoming worldwide names:

  • Airbnb

  • Apple

  • Dell

  • eBay

  • Facebook

  • GoPro

  • Microsoft

  • Oracle

  • TechCrunch

Why You Should Bootstrap Your Startup

Bootstrapping Your Company Makes You a Better Entrepreneur

Starting a company from scratch and without outside resources and funds is an incredibly difficult endeavor, but one that ultimately builds character. While doing something simply because it “builds character” may seem like a weak reason, this time it’s actually true. Here are a couple of ways that bootstrapping your company can benefit you personally in the long run:

  1. It makes you more scrappy. By relying on your own skills and knowledge to solve problems, you are building your stress tolerance, which is essential for launching and running a successful business. Because of the multitude of challenges you’ll face on the path of entrepreneurship, you won’t always be able to fall back on others to help, so learning how to find solutions by yourself is one of the best skills you can cultivate during the formative stages of your startup. See “50 Bootstrapping Hacks for Every Stage of Your Startup” for more details!

  2. It makes you more creative. Without the benefit of extra money and resources, you’ll be forced to think up unorthodox solutions to the seemingly countless problems you’ll encounter when turning your idea into a company. Developing your creativity early on will enable you to make more innovative and original later on, which can lead to better business models, better products, and more.

Bootstrapping Your Company Makes You Focus on What’s Important

Raising funds for your startup can certainly open up numerous opportunities for growth and expansion. However, before you even reach that point, there are still plenty of tasks for you to accomplish prior to reaching out to investors, tasks that will help you make the most of any funding you raise. Below are a couple of considerations for you to keep in mind:

Outside funding won’t solve your startup’s problems.

It’s easy to assume that simply raising funding will assuage any and all issues your company has, but that’s not as true as you might think. For example, having extra cash won’t:

  • validate a weak idea

  • fix your business model

  • help you define your target customers

  • determine your company’s ideal revenue model

  • make a boring product better

Make sure that you have these aspects, among others, covered before you even THINK about setting up meetings with investors.

Find Ways to Make Money Before Raising More Money

If you’re company isn’t profitable as it is now, you’re going to find that impressing investors with a company that’s not making money is just about impossible. Too many founders focus too much on meeting goals that will lead to funding, when they should instead focus on making their company profitable.

How to Bootstrap Your Startup

One of the biggest benefits of bootstrapping a startup is that just about anyone can do it. That’s not to say that aren’t any obstacles that must be traversed. However, by putting your resourcefulness, creativity, and intelligence to good use, you’ll find that bootstrapping your company is far from impossible. Here are some tips to help you get started:

Pick a Co-Founder with Complementary Skills

Having a co-founder is a good idea in general when launching a startup, but finding one whose skills and expertise are focused on aspects that are outside of your purview means you’ll be able to split tasks easier. For example, if you are better at interacting with complete strangers while your partner is better at tech, you should focus on sales and partnerships while your partner should focus on building the product. If each of you home in on a different aspect of the company, you can dramatically cut costs and reduce the need for hiring outside help.

Cut Back on Personal Costs

If you currently have a job, try to work on your company on the side rather than quitting to focus solely on your startup. This will ensure that you have money coming in while you’re building a business. If you have a co-founder, consider moving in with them so you both can save money on rent (plus you’ll have the added benefit of being able to focus on your company even more during your spare time). Only spend money the necessities (food, bills, rent, child support, etc.), and the rest towards your company.

Learn New Skills Whenever Possible

There are plenty of affordable and free online tutorials and resources for nearly every skill you can think of, with more coming out all the time. There’s never been an easier, cheaper, and faster way to develop one’s expertise, so take advantage of these opportunities to develop your abilities to build an app, promote your startup, and manage your company’s finances, among many others. It’s certainly cheaper than hiring someone else to do it, and having these skills will be useful later on as your company grows.

Be Creative When Promoting Your Company

There are plenty of cheap and free tools and resources that can help you build buzz about your company. And there will always be a place for press releases in the world of startup marketing. However, don’t be afraid to think outside the box when it comes to getting your company’s name out there. For example, if you have physical product, a great way to get it into people’s hands is to showcase it at street fairs. This is also useful in handing out business cards and flyers about your company, collecting email addresses, and meeting customers in person and getting their immediate reactions to your product.

Narrow Your Scope

So many budding entrepreneurs decide to build a product that has countless amazing features, and while that’s not necessarily a bad thing, it’s certainly not something that you should do when you’re financing your own company. Make that whatever you’re building does only one thing, and does it well. Not only does it make it easier for potential customers to understand how it works, it also lays the foundation for a product that can evolve into something better later on. However, the biggest benefit it has for bootstrapping founders is that it’s cheaper to build. The fewer features something has, the less money you will spend building it.

Focus on the Perfect Revenue Model

Remember, you’re building a business to make money (although that shouldn’t be your only reason). If you’re company isn’t capable of being profitable, it won’t be able to sustain itself, and it certainly won’t attract investors. Pick the one revenue stream that is best suited for you company, and make sure it’s easy for your customers understand and, ultimately, give you money.

When You Should Stop Bootstrapping and Start Raising Capital

While bootstrapping can take your company a long way, there’s a chance that the only way to continue growing and expanding is to seek outside funding. But then that raises the question: How does a company know when it’s time to stop bootstrapping and start seeking funding? Below are a few considerations to help you determine if your company is ready for investment:

  • Raise funding when your company can no longer grow on its own. Many founders take the money they’ve raised from investors and spent it on things they didn’t need, like t-shirts, a fancy new office, cushy chairs for employees, etc. However, your startup needs funding in order to, say, acquire more customers or expand to a new region, then it’s probably time to seek investors.

  • Raise funding when your startup has a compelling story to tell. If you’ve put together a team of experienced experts that can realize your vision, then you’ve got a compelling story to tell. If the demand for your product is large enough to sustain your company in the long-term, then you’ve got a compelling story to tell. If your product is effectively solving a problem that many people have, then you have a compelling story to tell.

  • Raise funding when you have a strong customer growth rate. Once your company has built up enough traction, that’s a good sign that you’re ready for outside funding. Having built a working model of your product usually isn’t enough for investors, who want to see that customers are using your product and recommending it to others, and most importantly, if your product is being adopted at a rapid rate, like 10% per week for several weeks.

  • Raise funding when you’re ready to make tough decisions. Getting funding from investors is a great opportunity, but is not without its share of responsibilities and tradeoffs. For example, when seeking funding, you have to consider such topics as finding the right type of investors, the amount of equity you’re willing to give up, how much investment your company needs to thrive, what you should spend your funding on, and many more. If you’re not ready to address these issues, you’re not ready to raise capital.

Final Thoughts

Doing anything is always harder when you’re doing it alone. But moments of desperation and confusion are usually the ones that teach the best and most meaningful lessons, forcing you to grow beyond your limits and come out of your dilemma stronger than before.

Is that reason enough for going out and launching a company all by your lonesome? For some, yes. However, for the rest of you considering venturing into the great entrepreneurial unknown and building something valuable, there might be a better reason: If ya want something done right, ya gotta do it yerself.

Want to find out more about building and bootstrapping your startup? Cincinnati Founder Institute is currently accepting applications for their Fall Semester. Learn more here.