A session called Bootstrap Your Startup at South by Southwest 2009 provided valuable insight for the many web workers who are either embarking on their own online business venture or considering doing so.
Led by Bijoy Goswami, CEO of Aviri, and Marcy Hoen, founder of Austin Art Start, the focus was on bootstrapping, or a period of self-funding that many businesses choose to follow in their early stages – and, at times, later stages for established companies, which is referred to as “rebootstrapping.” The dynamic of bootstrapping was presented as sitting between the worlds of “cookie cutter” and “funding-driven” business models (see Slide 8 of the online slide show). Cookie-cutter businesses are those that require little creativity or innovation, such as purchasing a fast food franchise, whereas funding-driven businesses take money from investors with the idea of quickly reaching profitability.
The bootstrapped model, on the other hand, allows start-up founders to have maximum flexibility and creativity while seeking out the business model that will best suit the growing company. In fact, Goswani went so far as to present an opinion that some would likely disagree with: that founders who take venture funding are not true entrepreneurs because it is not their money being used to fund the company. The implication, then, is that creativity and innovation are curtailed from the moment of taking funding forward, because the primary concern is returning the investment to financial backers as soon as possible. Goswani cracked up the room by saying in a mock lecturing tone: “At a funded company, it’s not about your journey, guy.”
Alternatively, bootstrapping your company allows the business model to “show up as you go along,” and may become the true extension of the expression and passions of the founder. Of course, this is why many web workers seek to start their own online businesses in the first place, so the bootstrapped model is therefore seen as an ideal way to bring the best ideas to life and then into full-fledged and profitable businesses online. Money, critical of course for every business, is needed to keep bootstrapped businesses afloat, but the advantage of the bootstrapped model is that overhead is often lower and there’s not a “ticking clock” to meet the demands of anxious investors. If a bootrapping founder has a spouse or significant other with a good job with a high salary, it was asserted that, in theory, a bootstrapped business could have an “unlimited runway” to find its way to profitability.
The “bootstrapper journey” takes on a number of different phases, such as discovery, ideation, and the “valley of death.” The journey starts with the old maxim to “know thyself.” In terms of obtaining true expertise in any field, it’s noted that most people need to have 10,000 hours of practice under their belts. “Skipping ahead” on the broadly themed bootstrapper roadmap can often lead to having to circle back to go through each step once again in order to find success. Taking on each stage to its natural conclusion, however, allows for organic creation of successful businesses, which means a formal business plan does not have to be a major concern.
Many of the bootstrappers in the room were, it turns out, somewhere in the midst of the “ideation” phase, where it’s important to create a working demo of the product or service that the business will be based around. Finding the right co-founder(s) is key during this phase as well.
Overall, however, it was emphasized that while the bootstrapper journey is partitioned out into broad phases for the purposes of explanation and conversation, each bootstrapper finds his or her own way in the process of creating and sustaining a new online business.
A final note of encouragement was that “failure is feedback.” Each part of the journey will create opportunities to learn great lessons that will aid each bootstrapper along his or her route.
Where are you on the bootstrapper’s journey?