I am a huge advocate for bootstrapping, but the truth about bootstrapping is that its tough and only the toughest can survive the process. Bootstrapping or booting refers to a group of metaphors that share a common meaning: a self-sustaining process that proceeds without external help. And that has its challenges. Startups that bootstrap fund the development of their company through internal cash flow and are cautious with their expenses. Microsoft, Dell, Cisco, Oracle, eBay — were all “bootstrapped”. But can you survive the process?
When you decide to bootstrap, you commit to fund primary development and growth through internal cash flow from real-life customers. You — the founder — and a limited number of early employees may forgo paychecks for quite some time to make this work. But to keep that strategy to a minimum, it’s common for bootstrapping companies to turn to consulting engagements, non-recurring engineering contracts, value-added reseller agreements and projected supplier contracts. In short, “moonlighting.” These funds go toward initial growth and expansion until the company can stand on its own two feet.-Javier Rojas
The bitter truth about bootstrapping is that you you will loose some friends and family. And most importantly when you have to re-architect your infrastructure to scale, you may not have the funds to do that. The ability to achieve scale and growth is greatly enhanced by having the funds in place to focus and execute on the plan in a timely manner. A bootstrapped company can take longer than usual to hit mainstream. A V.C. could give someone funding to compete with you when you refuse funding at the initial stage, which buys lot of market advantage for the funded competitor.
Bootstrapping forces you to become risk-averse to whatever doesn’t help you prove a core business hypothesis. That’s great at the pre-seed stages, but leaves you almost no room for error down the road and certainly won’t support abnormal growth. Guy Hirsch, chief executive of SayHired.
Bootstrapping requires founders and entrepreneurs to start selling immediately in order to survive. When the sales are not coming in, you are in trouble! But that makes you focus on making money off your business, which is what you should be focusing on.
The process of bootstrapping a startup is challenging, and bootstrapping is not for everyone. But for those who pursue it, it can lead to a great company and even greater financial rewards.