The Must-Knows for Bootstrapping Tech Startups

Startups

An Insight Into The World of Bootstrapping

In the context of business – particularly in the startup world, the word “bootstrapping” refers to the act of starting a business with little to almost no money. What this phrase means is that, entrepreneurs who implement bootstrapping within their startup’s journey on towards growing their business without any assistance, either from venture capitalists or from angel investors. A few means of bootstrapping a business is via the savings and revenue from their own pockets. However, these are not the only means of funding a business.

The Stages Within Bootstrapping Startups

By no means is performing bootstrapping easy. Nevertheless, if executed correctly, it could prove to be the most rewarding means of starting a business. By relying on your own resources to support your business, you could own a 100-percent stake in your business. When your business flourishes, owing the entire stake of your business could be well worth the struggles and challenges that you face.

The general idea of bootstrapping startups originates from the concept of accomplishing something arduous via your own capabilities. The three usual steps that used to pursue bootstrapping include:

1. Obtaining seed capital – Obtaining seed capital usually starts with the owner investing her savings within her family. Often, he might also generate some funding from her friends or her family. Apart from this, the owner can also start her enterprise as a side business while simultaneously using her day job to sustain herself. As her business successfully flourishes, the owner can start shifting her time and her focus, completely to the business. In a nutshell, this step basically deals with the owner scraping up enough resources to get the business off the ground.

2. Obtaining funding from customers – This step essentially refers to the reinvestment of the revenue generated back into the business. As the revenue generated by the business maximizes, he can pump more cash flow within the business allowing her business to function without any impediments.

3. Obtaining some form of credit – In no way does bootstrapping mean that you have to lift the entire business simply by surviving on scraps. Bootstrapping simply means that owners do not wish to submit to the pressures posed while obtaining loans or investments from VC’s and angel investments. However, it is evident that you will require some form of credit along the way. There are numerous forms of short-term and small-scale that you can rely on. Credit cards serve a good epitome in such cases. However, you should bear in mind that such a form of credit is not meant to be implemented as the primary source of funding. These form of credits should only be employed as a secondary source of funding to be used for specific growth activities such as buying equipment and hiring more staff members.

 

The Rules Governing a Successful Bootstrapping Startup

In order for bootstrapping startups to flourish, it is important that they fixate on certain rules, to the point that these transmute into non-breakable diktats. These rules are:

1. Believe that you will accomplish it… even if it feels impossible – Working without the assistance of outside capital is sure to paint a scary picture in your mind. At some point in your business, you are sure to be overwhelmed by the stress that your business will bring unto you. The solution? Keep going. It is only by continuing on your path that you will be able to flourish your business. However, you should also keep in mind that there may come a time when you might need financial assistance from an outside source.

2. Avoid credit card debt – Now, we know that it has been mentioned that credit cards form a secondary source of finance for bootstrapping startups. Nevertheless, you should make it a point to keep a check on the expenses that you incur via these cards. It is only in extreme cases that you should use them and as soon as you can, pay them off.

One of the greatest advantages of bootstrapping your business is that you can easily remain debt-free and thus away from any constraints that might tie you down. However, by constantly incurring debts on your credit cards, you might take away this very advantage to point where you dive into a rabbit hole and never recover.

3. Choose a good co-founder – Jeff Bezos said that you require the right people for the job and not the best people for the job. If you’re starting your business with a co-founder, keep this fact in mind and make sure that the skill set that they possess are complementary to yours as well as relevant for the business. Distinctive skillsets will allow both of you to handle different aspects of the business, without unnecessarily outsourcing them.

For example, if you are good at managing the business, building the team and developing the product, handle those aspects but make sure that your co-founder is able to handle other aspects such as marketing or sales, etc.

4. Seek help – Let’s assume that you and your co-founder have two completely distinct skillsets that are relevant in the growth. Even so, it will be highly improbable that you will be able to attend to all the requirements of your business. In such a case, make sure that you take the help of advisors. Advisors can help your business to grow and flourish. However, advisors will also want a stake in return for their help. Therefore, you should keep an eye on how you structure your deals.

5. Keep your eye open for opportunities – As mentioned in the first point, you may feel overwhelmed by the stress that you face owing to all the money that you finance into your business. However, you should also keep in mind that you won’t have to bootstrap your business forever. At some point in your business, you will require some financial assistance from outside, be it from banks or from VC’s. Keep an eye for any relationships that may allow money to flow within your business.

 

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