Build your success from the ground up!
If you’re new to the founder/startup lifestyle, you might’ve heard the term ‘Bootstrapped’ tossed around at networking events or on LinkedIn.
But what does it mean, and why’s it important? Read on to learn everything you’ll need to know about bootstrapping your startup.
What does ‘Bootstrapped Startup’ mean?
Bootstrapping is the practice of building and growing your company without taking external funding – such as Venture Capital (VCs) and/or Angel Investors. This difficult, YET POSSIBLE, approach is marked by:
- Reliance on personal savings.
- Reliance on revenue generated by the company.
- A relentless commitment to frugality.
External funding can come in many forms, but the two general categories are:
- Equity Financing – Trading a % of your company for money.
- Non-dilutive financing – Receiving money without giving up any shares of your company.
- Ex: Grants, Loans, Prizes. Etc.
Many people believe bootstrapping to mean using ONLY what is available to you by means of your bank account. This isn’t the case! Bootstrapped startups often receive funding in the form of grants or loans. The main difference is that non-dilutive financing isn’t as “strings attached” as equity financing.
If you can avoid the traditional route of seeking venture capital or angel investment (equity financing) you will maintain full control over your company’s vision and operations.
So what does a founder, like you, need to know about creating, running, and growing a Bootstrapped startup?
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Strategic decision-making is key
Money will be tight, so you need to make sure that every decision you make is aligned with a positive impact on your business. Strategic, cost-effective choices are going to be your bread and butter. This is because a bootstrapped startup will not be able to afford to invest in uncertainties (or throw money at problems), the way larger VC-backed organizations can.
Each decision, whether in time or money, should be a calculated step toward a viable outcome.
Resist the allure of market trends and hyper growth
The founder community in your startup ecosystem will likely be abuzz with all sorts of talk on market trends and hyper-growth opportunities. It’s only natural that you might be tempted to “follow the money” as it were… but the more important questions are:
Have we identified a niche, and are we servicing it well?
If the answer is yes, then it’s important to resist the temptation to follow market trends and hyper growth opportunities. Always be cognizant of them, but don’t shift your business focus on a whim.
Unlike your VC-backed counterparts, you will thrive by prioritizing sustainable growth over rapid expansion. The focus should be on building a resilient business model that stands the test of time, rather than succumbing to the pressures of quick – but often unsustainable – success.
No VCs doesn’t equal no funding
Bootstrapping doesn’t need to mean limiting funding options to your personal savings alone. We really encourage you to explore non-dilutive or creative funding avenues to infuse capital without compromising the ownership of your business.
Here are some options that worked for us:
- Crowdfunding platforms
- Small business loans
- Government grants
Embrace creative solutions.
Value accurate forecasts over impressive forecasts
Startups that rely on equity financing to survive may present rosy projections to attract even more funding opportunities. But you aren’t a traditional startup. You’re a bootstrapped startup.
Your greatest asset is your transparency.
Continuous monitoring and analysis of your financial and operations metrics is paramount. If you forecast accurately you will build a resilient financial model. This, and you won’t need to focus on impressing anyone for their support.
This is the number one way to achieve sustainable growth, free from the pressures of meeting unrealistic expectations.
Monitor your metrics constantly, and ask the hard questions
At the end of the day, Bootstrapping is not a one-size-fits-all solution. There are so many things that could contribute to a Bootstrapped startup’s success. Such as its network, its existing support system, and the quality/quantity of talent.
If you’re following the tips above: you’re already monitoring your financial metrics. This is going to open the door for a hard question: is bootstrapping the right decision for your company?
Consider whether the organic, self-funded approach aligns with your business goals and growth aspirations. Regular reflection ensures that bootstrapping remains the right fit for your unique journey, allowing for adjustments if needed.
Knowing the ins-and-outs of funding in the startup ecosystem is a must if you’re a founder with a vision you want to execute on.
Though it’s only one step of the path to profitability.
Our extended planning and analysis software: Pluvo™ will help you on your way regardless of your source of funding, size of your company, and financial literacy.
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