How to bootstrap your startup without losing your sanity (part 2)
October 12, 2012 by Guest Contributor
Making revenue in a free world can be daunting when you have to pay rent and salaries. But if you decide to bootstrap your business, you are not alone. 85% of startups worldwide fund their startup idea by consulting and contracting their labour. 20% of Futurebooks clients bootstrap their companies.
To make the process hopefully a little easier, here’s a two-part guide on how your startup can do well without funding from investors (read part one). We explore the feelings you will have to grapple with when bootstrapping.
Bootstrapping feels like 25,000 feet
When you are spending your own money to back your idea, you are bound to experience feelings of uncertainty.
Bootstrapping a company in the first year is like being pushed out of a plane at 25,000 feet with no parachute.
You expect to hit the ground at any moment and splatter, but you don’t. Instead of hitting the ground in a few seconds, you fall for days, weeks, months.
If you have ever done a course in investing in stocks, instructors will teach you how to emotionally control yourself when the value of your stock portfolio is falling. This is an important lesson in the psychology of dealing with uncertainty.
The cure is simple: Try to make a sale. A sale can be a paid or unpaid. The key is get someone using your product. A sale is confirmation you are heading the right way, and that your crazy, insane idea is valued by others.
Bootstrapping feels like you’re being punched
Everyday your startup baby blatantly reminds you about how ill-prepared you are for the task ahead.
It is also like an aggressive coach that relentlessly hurls abuse from the sidelines each time you make a mistake. By the end of the match, you are psychologically bruised.
The attacks can be relentless. Your startup gives you feedback about everything you’re doing wrong. Activities you’re not good at include sales, making appointments, keeping appointments, email marketing, SEO, writing presentations, writing web content, cutting html code, public relations, investor relations, bookkeeping, and reading financial statements.
You adapt by becoming a generalist, hire generalists, and along the way, figure out what you can eventually delegate.
50% of startups will not survive to see a second year of trading. The combination of uncertainty and self-criticism causes 50 percent of startups in the first year not to fail, but to quit. The founder(s) simply cannot live at 25,000 feet, or take the daily punches.
So they don’t so much fail, but quit.
The good news is that founders become more successful with each new venture. So entrepreneurship is not a one-time event, but a lifelong pursuit.
It is not one big grant, one big product and one big buy-out. It is a career. Except instead of changing jobs, you change businesses.
At the beginning of your career, start small, work hard and get results. Promotion will come in the form of more investment and better advisors.
If you can build your first business with little or no investment, ie bootstrap to Series A, imagine what you can achieve in your second business with a little investment.
Not all founders are suited for bootstrapping
There is a caveat to bootstrapping a business.
All the founders of bootstrapped startups mentioned in part one contributed directly to the value creation in the business. They are developers, designers, marketers.
Look at your two hands and ask yourself: ’Can I make something?’.
Unless you can make a paper mache, a piece of clay pottery, or draw a picture of your pet, be cautious about bootstrapping a company. You won’t get to a minimum viable product, because you won’t know what it looks like. In the process you will lose all your capital.
Just like many of us were not all meant to be doctors, some of us not destined to bootstrap.
In such circumstances, use your intellect to raise early stage investment and work on becoming a very good manager of people. Instead of contributing value directly, become good at managing those that do directly contribute value.
There is another reason why bootstrapping a company can put you at a disadvantage. Starting a business is unpredictable.
There is a radical difference between what entrepreneurs think it will be like, and what happens on race day.
This diagram is taken from Demetri Martin’s book This Is A Book. The diagram suggests that when we write a business plan, we plan for a linear journey. What happens is the opposite. Instead we go in circles — reiterating and pivoting — trying to crack the value proposition.
The story of a startup is not linear. It is more like a choose-your-own-adventure where every decision you make influences the conclusion of the story.
One of the advantages of securing early-stage investment is having more money to solve this big grey mess. Investment affords you wiggle room — room to make mistakes, and still have enough cash to stay in the game.
View more presentations from Futurebooks Pte Ltd
About the author
Anthony Coundouris is the founder of accounting and analytics firm Futurebooks. Anthony is obsessed with helping start-up companies incorporate, conduct industry analysis and develop positioning. He has ten years experience in media and marketing, and was founder of Firestarter, a digital marketing agency. Firestarter was acquired by Novus Media in 2010.
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