Bootstrapping wasn’t our first choice, but it was the best choice ever” Ilma Nausedaite-Tiki, the Remote Company
They don’t make a lot of headlines, and they’re almost never the first choice for founders. They’re said to be for side projects or small businesses, but their results don’t lie: bootstrapped companies do succeed.
Yes, they take longer and they don’t tend to become unicorns, but their founders say they’d choose it over anything all over again. We interviewed entrepreneurs from five companies across the world and asked them to share their experiences bootstrapping their businesses. These are their insights.
But before we move on, give it up for the bootstrappers:
- Ilma Nausedaite-Tiki, COO at the Remote Company, unites several SaaS products such as MailerLite, MailerCheck, MailerSend, and Ycode. They’ve been in the market for the past 10 years.
- Ariel Camino, founder, and CEO at SalesQL, the free LinkedIn email finder. He’s been in the market for the past 3 years.
- Devashish Datt Mamgain, co-founder and CEO at Kommunicate, the hybrid, and bot customer support software. Together with his co-founder Adarsh Kumaar, they’ve been in the market for the last 2 years.
- Jean-carl Cohen, CEO, and co-founder at Octopush, the mobile marketing and SMS gateway for UK and Europe. Together with his co-founder Yoni Guimberteau, they’ve been in the market for the past 9 years.
Bootstrapping a company is learning to think small, going step by step, focusing on your customers’ needs first, and trying to improve 1% every day. Ariel Camino, SalesQL
If you’re thinking about launching a business, chances are that you’ll cover the costs with your own money or you’ll find investors.
The first one is known as bootstrapping, and according to Investopedia, it means “building a company from the ground up with nothing but personal savings, and the cash coming in from the first sales”. In exchange, the bootstrap entrepreneur retains total control of the business and gets to make all of the decisions.
If self-funding is not an option, you can look at getting someone to invest in your company. This money usually comes from private or institutional investors, like venture capital firms or funds (VCs). It’s normally raised in rounds (like a seed, series A, series B, series C, etc..) as the company matures and reaches certain milestones. But there’s a catch.
Since 90% of those companies will fail, the strategy is to look for potential unicorns (companies valued at over $1 billion) to compensate for that money loss. No need to say, this model works! But not everyone wants to become a unicorn, which leads us to the next point.
How’s like to bootstrap your business?
Being bootstrapped forces you to be very careful about where and how much to spend. It forms a habit to make better decisions and being capital efficient. Devashish Datt Mamgain, Kommunicate
There’s this thing with VC-backed start-ups: they’re sexier. They’re made overnight. They can also fall overnight. They have this adrenaline of racing cars, they’re the fast and the furious. The media loves them. The audience acclaims them.
But hiding beneath the headlines there’s a massive amount of bootstrapped businesses that are building up silently, sometimes slowly, always mindfully.
One of the main differences between these two models is the access to financial resources: in funded companies, it’s abundant, whereas in bootstrapped ones it’s quite limited. It may seem like one is better than the other, but the key is how it’s spent.
“Sure, it’s great to have cash, but when you have to spend it fast and show a fast result, it’s easy to go after short-term and vanity metrics. The truth is that money can’t buy happy users. Passion and time are the most important ingredients to build amazing products and grow a business”, says Ilma.
And because of that limitation, you become capital efficient. “It forces us to innovate and find new ways to achieve things at less cost with more outcome”, explains Devashish. As Ariel puts it, “learning how to work without resources is extremely valuable”.
That ability to problem-solve creatively is the kind of skill you want to be a master at when things get ugly, and it’s basically what bootstrappers learn first hand and from the beginning.
“I think bootstrapped companies have a lot more chances to survive over the years, even during bad years like 2020, and in very competitive markets. Because they’ve been growing right”, says Ariel.
Why to bootstrap your business?
As with everything, there’s the good and the bad, but let’s start with the good stuff.
Why do bootstrappers love doing business this way? What can you expect from choosing this path?
Here we give you 4 of the most important reasons directly from our experienced and successful entrepreneurs.
1) You don’t need anyone else believing in your business
When you bootstrap, you don’t need to convince anyone else but your customers. How often do we hear those stories from investors passing away from great opportunities? How many entrepreneurs that today are considered leaders and role models have been rejected until they finally made it?
“We spent more than a year looking for investors for MailerLite, but email marketing wasn’t a sexy topic. Our drag-n-drop editor didn’t change the world. Meetings with investors were quite demotivating, they saw email as a dead medium. So we had to bootstrap our business”, says Ilma.
Having to convince investors can be really daunting if you don’t have a billion-dollar idea, but you can take all that pressure off of yourself to put it into creating a great product your own way, in your own time.
“I came to understand the way VC’s work. That ‘go big or go home’ mentality where having a valuation of 10 million dollars is considered a failure… it’s weird and stressful world”, says Ariel. Sometimes, fame is not worth it. After all, the market will be the only one judging.
2) You don’t need a “successful” tracking record
“Before SalesQL I’ve tried to start other software companies looking for being accepted in an accelerator or an incubator, but it’s hard when you don’t have a successful tracking record or you are a solo founder…”, says Ariel.
Since only 10% of companies will succeed, VC’s must minimise the risk of their investments (can you blame them?). It’s understandable that they raise the bar and choose founders with proven records and experience.
However, being an experienced entrepreneur has its setbacks: when you already have your method on how to do things, you’re less likely to risk it innovating.
Once again…Their math is correct and certainly works for them, but it doesn’t need to stop you. Go ask Mark Zuckerberg, Bill Gates, or Steve Jobs for previous experience when they were just starting.
3) You get the freedom to do exactly what you want
When you have investors, it’s not just money you accept. You’re also allowing them to have a say in the direction you’re giving to your start-up and if you can’t handle managing their level of involvement, you can lose focus from your vision.
Bootstrapping means doing business your way caring about what matters to you, but most importantly, to your customers.
“No one tells what to do and how to grow your business. You can try everything you want, trust your intuition, invest in long-term projects or into projects that you are passionate about. You grow and create a company and culture according to your values”, explains Ilma.
4) You don’t need 2 million dollars to start your company
“The Octopush project started in June 2011 during a dinner with Yoni, my partner. He’d developed a solution to send bulk-sms, invested €300 in advertising with Google Ads and generated €3,000 in sales”, tells Jean-carl.
Many bootstrapped companies share a similar origin: they begin by solving a very specific problem and once they find product-market fit, they start scaling. The truth is that a small initial investment used wisely can get you very far, and contrary to the common belief, bootstrapping a company is not only for small or side businesses.
What are the cons of bootstrapping?
Building a business is always challenging whether you’re funded or bootstrapped. There will be thousands of roadblocks, but here we list the top three for our bootstrappers.
You are on your own…
“… and there’s no one to blame for poor results and bad choices. Moreover, you don’t have much experience and there’s no advisor board to help you make the decision or connect you with someone big in the market”, says Ilma.
Remember we mentioned that when you’re funded it’s not just money you accept? Well, it also comes with important connections, mentors, and advisors that you’ll have to get on your own if you’re bootstrapping.
However, one of the things all founders can count on is finding a community.
“It’s a lonely way and you need a lot of resilience. It’s hard to find a local community or resources for bootstrappers. Fortunately, this has been improving a lot in the last few years”, says Ariel.
Devashish, for example, found a turnaround to that lack of mentorship in regularly meeting with founders to share their problems and learn from each other. “Often the problems that one person is facing are already solved by some other founders in their own start-ups, and their input helps in solving problems fast”, he explains.
Not a lot of love from the media
“In my opinion, the main disadvantage is that the media isn’t interested in bootstrapped companies. They prefer fundraising because in the collective unconsciousness, raising money is a sign of success”, says Jean-carl. Somehow bootstrapped start-ups are not as mainstream as funded ones, and that lack of press might make it a bit more difficult to let word of mouth rolling.
But that doesn’t mean you can’t create it yourself. One of those examples is Guillaume Moubeche, founder of the sales automation software called lemlist, who a few months ago created a campaign pretending a fake round of investment that ended up with them turning down a real offer for 30 million dollars. All this to prove a point: you don’t need millions to succeed.
You’re always on a budget
While you don’t need millions, money can definitely make things easier. “Not having enough money for experimentation can sometimes restrict the growth, but a benefit we got from it is that we focused on getting organic traffic from the start”, says Devashish.
Also, having cash can also give you the freedom to hire a team to delegate tasks to, and held accountable by -especially if you’re on this journey solo. “It’s hard when you’re a solo founder, you don’t have resources and you have to do everything, from doing support calls to designing the UI. At the beginning it was very hard”, says Ariel.
Thinking about bootstrapping? Consider these takeaways
Maybe now that we’ve gone through all these pros and cons you might be thinking about bootstrapping your business instead of start pitching investors. Good for you! To get you started, we gathered 6 takeaways you might want to consider as you start your bootstrapping journey.
1) Find a partner
You can grow a business solo, but it’s always advisable having a partner to rely on. A partner holds you accountable, motivates you when you’re feeling low, covers for you if you need to take a day off, and shares responsibilities with you. Being on your own can be overwhelming if you don’t have a proper support system in place.
“Having started this project together with my partner Jean-carl was an undeniable advantage. Having both your head in the handlebars to move fast and keep your head above water seems like an impossible challenge when you’re alone”, says Yoni.
2) Focus on the real metrics
Don’t get distracted by vanity metrics. Truth is that tracking 5 of your most important Key Performance Indicators is enough to understand your progress. For most businesses, these are profit, revenue, retention, MRR, acquisition, and usage.
Define those 5 KPIs from the beginning and follow them close but don’t get obsessed with every small change. Like Ariellikes to put it, “If they’re slowly growing, then you are good. If the process and the direction are right, eventually you will get wherever you want to be”.
3) Take a revenue-first approach
Being funded gives you a significant amount of time to start making revenue in order to sustain your burn rate. Most founders wait until they have everything in place before they start thinking about revenue, but if you’re bootstrapping, chances are that you won’t have this luxury.
“I started my career by not paying attention to revenue-first and experienced many failures. Today, when they contact me to invest I educate on this essential approach that I’ve developed towards another more general rule of ‘cash flow first’, says Jean-carl, who’s also a seed investor.
Having a revenue-first approach will allow you to not only find product-market fit early on, but to have a fluent income to reinvest on improving your product or service tailored to your customers’ feedback.
“We were two entrepreneurs with a limited initial investment that didn’t want to raise funds, so it was important to produce quickly enough to reinvest and accelerate our growth. Each step of our path had to meet a customer’s need to generate income. Getting there is a good indicator that you are on the right track”, explains Yoni.
4) Start on validated markets
If you’re a newbie founder, you might want to consider this one.
“I think it’s a great idea to start on validated markets and focus on what really generates value for your first customers. Talk with them regularly, look at how they use your product”, advises Ariel.
Starting on validated markets will save you significant time (and stress) because you’ll already know there’s a need for what you’re offering. You don’t have to revolutionize an industry to be successful, and what’s wrong with reinventing the wheel as long as it works?
5) Be patient
Building a business takes time. Even more, if you’re bootstrapping. Like Ilma from The Remote, Company says, “with limited or no budget you have to be very careful what you choose to invest your time in, and then it takes time to see the results”.
Data shows that it takes 2 to 3 years to be profitable on average, so buckle up, take a breath and give yourself time to experiment and collect the data you need to make informed decisions until you reach stability.
6) Take care of yourself
“I think when you’re bootstrapping, the most dangerous enemy is yourself. You will have good days and bad days. Days when you’ll feel good about your progress, and days when you won’t see any improvement at all. You have to learn that the process is long and slow and that the direction is more important than the speed”, says Ariel.
Like we said before, having a support system like a partner or a community is essential, but to complement that, consider hiring a mindset coach or a mentor that will keep you aligned and motivated. Don’t overlook your mental health, remember that taking care of your team is extremely important for your business to work properly. And that includes you.
To bootstrap or not to bootstrap? It depends on what your business needs
Starting from nothing is a choice, but it shouldn’t become a mantra. Yoni Guimberteau, Octopush
There are many ways to start a business, and being self-funded can definitely be one of them, even if you’re thinking big. It’s not the longest or the hardest way, just a different one.
And also, it doesn’t have to be black or white: you can start up on your own and raise money or take credit later. Choose according to what your business needs because, in the end, that’s the only thing that matters.
Like Yoni likes to put it: “they say that bootstrappers are always reinventing the wheel. It’s not totally wrong, but it’s not right either. Starting from nothing is a choice, but it shouldn’t become a mantra. Sometimes you have to build your tools yourself and sometimes you have to know how to use the best third party in order to focus even more on what you can do”.