What is bootstrapping?
It simply means funding your startup with the finances that you have. It comes with its own set of pros and cons just as in the case of using venture capital or angel investors. As an owner, you have the power to make your own decisions based on your financial capacity, but at the same time, you can only use the limited amount of funds that you have and if it fails, it will take all of your personal capital with you.
Why should you consider it?
Although bootstrapping is a daunting choice for all entrepreneurs, it comes with an underrated upside that will prove advantageous in the long run – the freedom to make decisions. When you approach a VC for funding, the plan is always designed in a way that will benefit the investor. Although the path of getting funds from investors is the most sought after because of the comfort it provides in the short term, it is always wise to explore self funding as an option, because even if you lose, you will be the only person held accountable for it.
Another benefit is that when you fund your own start up, you are extra careful with every decision that you make. You pay close attention to the equipment costs, total capital, marketing, operation costs which results in greater control and understanding. There is greater autonomy to expend time and energy and control costs as required.
You learn better about your revenue stream, and it can help you become a better entrepreneur. When there is no backup around to save you if you fail, it gives you a desperate hunger for success. Understanding and experiencing that hunger is very important as an entrepreneur, because it gives you a very high sense of value for the funding that you will receive later.
When you start off as a small organization, with very less amount of money and lesser experience still, you are bound to make some mistakes. These mistakes are valuable lessons which you will remember once you are in the top game, being funded by big investors. When you make mistakes as a bootstrapped organization, it will be on a very small scale, affecting very little than what it might affect if you make the same mistake as a big organization.
How can you bootstrap your startup?
You need to spread word in your community about what your company aims to do or what product you have to offer. If you are making an application, make sure you host free seminars in schools, colleges and workspaces where you explain what everyone stands to gain. Stress a lot on social media when you consider community. Social media can amplify your chances of getting attention and profits from potential customers.
The most important factor to consider is who you are planning to do this for and their requirements and expectations with your service. It is quite pointless to work on developing a service or a product if there is no potential customer to buy it. Research is of essence when starting on your own capital to make sure that you do not waste any of it on unnecessary efforts.
Hire wisely and thoughtfully. It would be great to hire an experienced individual because of their invaluable input which would be instrumental for your growth, but it would also be wise to hire a non experienced individual due to their willingness to try things and get their hands dirty where required without any hesitation. The best solution is to hire someone who you know and take some time if needed and test their skills with small tasks or jobs. Hiring freelancers is a great way to get work done fast, especially for a founder who doesn’t have a technical background, but a team that has a majority of freelancers is risky and not scalable and has a very slim chance of growing exponentially.
Start evaluation once you begin to sell your product or service. The important factor to see is whether the sale is enough to let your company increase it’s scale. If that case is true then, then it is time to start scaling your business, and take on additional responsibilities.
Start investing the revenue that you make into your business as soon as you can so as to promote growth. This means hiring new people, buying new equipment, or investing in anything that will make sure you grow. Consider hiring interns because even though there is a lack of experience, a team of dedicated interns can make a huge difference in exchange for work experience and some freebies from the company.
Even though the main aim of your business plan was to use your own capital, it does not hurt to consider approaching VCs or other investors. The only thing to receive from such big organizations or people is not just money but the prospect of making new connections or coming across new ideas. The main idea is not to just get funding but also to make progress at a rate that is faster than using your own finances. Only 2% of the organizations which apply get funding by VCs, and that is because they are willing to give a lot more than financial support to the business. Hence, it is not a bad idea to approach VCs once you are sure that your business will grow statistically.
- Never stop being picky about your expenses and always make a thorough check before investing any amount of money in any kind of service or equipment while making a decision for your company.
- Believe in your business and your team, because your belief will many a times be the only driving force needed to save your business in difficult times.