Art of the Start 9
Bootstrapping
Talking before the session, Bill said send him tips about starting up bootstrapping if you have them. reichert at garage dot com. They’re looking for resourceful entrapreneurs who can do more with less, who can stretch a dollar. Send in your ideas and Bill will share them with the community.
There are different models - garage, university, service to product (start out as consulting and develops a productized offering), core customer/partner (build a technology for a big partner and keep the rights).
Characteristics for success - low capital requirements, low cost of customer acquisition, rapid cash flow and cash up front, recurring revenue.
Alternate sources to financing - day job, credit cards and mortgage, 3F (friends, family, fools), founding angel, government grants, incubator, license rights (sell to someone servicing a market you’re willing to give away), core customer (develop on someone elses dime and keep the IP), version 1.0 (there is no better financing source than customers).
Bootstrap economics - its all about payback not ROI. 2 dollars today is better than 3 dollars in a year. Pick the minimal set of features, marketing and promotions is going to have to be at the right level, sales expenses have to be kept down, overhead minimal.
Product development, how do we minimize it? Work nights and weekends, use PhD students looking for dissertations, tap offshore resources, productize a consulting project/NRE (nonrecurring engineering), license a finished product (NOTE from author: or open source!!), import a finished product. Get your product to market fast.
Bootstrap selling, frequently overlooked. Doesn’t fit into acounting well, there is no established business process to measure it. Rifle shot selling (make sure you know your first ten customers. This is hand to hand combat, be prepare to get bruised), comunity selling and viral marketing (find groups with strong word of mouth references, they will help you sell), channel sales, OEM partnerships/private label (people who would embed what you have in their existing offerings), Internet, consulting.
Bootstrap marketing - PR, events/seminars/webinars, directories, analysts, affiliate marketing programs, AdWords (some people are getting fantastic payback using this). Normally there is a company out there doing market development, explaining what a new segment is. Piggyback on that messaging.
Recruiting - networks of friends and advisors, university, pilfer from competitors, contract recruiters, NOT Monster, nuture “tallent in waiting”.
Operations - do the core, outsource the rest. Leverage the skills in your ecosystem.
Questions to determine if your company should be bootstrapped.
is the model strappable
do you have the discipline
access to leveragable resources
if raising venture is just too painfull
When do you stop boot
VCs start to call
your product becomes hot
you can validate revenue projections
validated payback
you can operate indefinitely at break even
you are profitable
never!! If things line up right.
When you no longer need money, the desperation is out of your eyes, they’re more likely to give you money.