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.
Bootstrapping in Practice (Not Theory)
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. 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 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 revolutionise 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.
Summary
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”.
