by Guest Author on December 31, 2013
What made bootstrapping your business more attractive than seeking venture funding?
First and foremost, I wanted to own my own company. I didn’t want to have to answer to a board of directors, and I didn’t want outside investors to have an ownership stake in my business. I wanted to have autonomy in business decisions, build my own team and create my own company culture. Bootstrapping has allowed me to do that, and to this day, we haven’t taken any outside funding. I’m very proud of that. Of course, bootstrapping isn’t for everyone, and it definitely has its challenges—but it fosters a deep and unique relationship between you and your company.
What challenges do you face during the bootstrapping process?
Part of what makes the bootstrapping model so great serves as a double-edged sword: you’re on your own. Sure, you’ll have full control and ownership of your business—but you’ll also have to figure everything out and find the right people all by yourself. There won’t be a board of directors to teach you how to market yourself, help you hire the right VP of sales, recommend a good CPA or put you in touch with an attorney.
You’ll also have a tendency to be overly cautious with your spending. While this can be a healthy impulse, you must be careful not to pinch pennies in the wrong areas. If you hire a cheap designer, for example, you’ll get a cheap-looking website. If you don’t offer a benefits package that is attractive, you won’t recruit or retain great talent.
In your opinion, what are the advantages of bootstrapping?
I think bootstrapping is a valuable experience for any entrepreneur. For one, bootstrapping fosters a focused, disciplined company. When you’re working with your own money, you don’t spend it lightly; you focus your efforts only on what’s realistic and what’s bringing you closer to revenue. It also forces you to focus more intently on the needs of the customer, instead of striving for a hypothetical “perfect product.” You don’t have the cash to spend on perfection for perfection’s sake; it all goes towards creating solutions to customers’ problems.
What advice do you have for aspiring bootstrappers?
Remember the “3x rule”: when you bootstrap your business, getting to profitability will often take three times as long as you expected, and getting there will cost you three times more than you anticipated. Given this, you’ll have to make a careful decision about how far you’re willing to pursue the bootstrapping model before you resort to seeking outside capital. Remember that even if you make it to profitability, you might hit a snag and need to put in more of your personal funds. Consider the needs of your spouse and family, and make sure that you only pursue bootstrapping as long as it’s sustainable.
About the Author
Don Fornes is CEO at Software Advice, a trusted resource for software buyers. Based in Austin, Texas, he founded Software Advice in 2005 after previously holding positions as a software analyst at an investment firm and as a corporate development executive at a pioneering CRM software company. He blogs at A Million Little Wins. You can follow him on Twitter @dfornes and on Google+.