For those uninitiated, bootstrapping is the art of building a business via one’s own financial means. That is, not taking external investment, or at least not taking significant or professional external investment. (It’s still bootstrapping if you borrow $10k from mom to build your $1b web business.)
In addition to personal funds, bootstrappers aim to reach a level of cash flow profitability to reduce any personal burden and help the business grow itself. This is very much a major competitor to private equity, as I discussed in my last post, The competitor without a face.
I’m discussing this again because today I came across a few very prescient blog posts that discuss this bootstrap method:
Dharmesh Shah at MIT Startup Bootcamp – this is a video of Dharmesh presenting to MIT on startup marketing. In the video he suggests he’s not so much anti-VC, but anti-VC process. He thinks the likelihood of getting funded is relatively very low, yet the likelihood of wasting an inordinate amount of time on the process is relatively very high. Sage words.
Seth Godin on a Middle-Ground between Debt and Equity – this post discusses an angel-backed royalty scheme for funding. So, rather than complicate the funding process with term sheets, he recommends offering an investor x% of your revenue for $y capital. Sounds simple, maybe too simple, but it’s a good middle-ground nonetheless. The premise is that it not only simplifies the funding process, but also the ongoing reporting process. And while you may lose out big time if you hit the big time, you may also give up the chance to hit the big time with overly complicated funding agreements.
Jessica Mah on Raising Money – this is an absolutely fabulous post from a thoughtful young entrepreneur in the States. Jessica discusses conversations with Customer Development guru Steve Blank, and suggests that many VC-backed startups burn cash on untested and unproductive initiatives. I think she’s absolutely right; there’s often too much pressure on getting big immediately, rather than creating something worthwhile immediately. Her post discusses many other topics, so it’s worth the full read.
In addition to checking out these great posts, consider following these blogs indefinitely.