Bootstrap evangelists: self-funding your startup

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    Ray Newman

    Ray Newman UKBF Newcomer Staff Member

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    A conversation about the benefits of bootstrapping over crowdfunding recently broke out on the Forums prompting one user to ask: “WTF is bootstrapping?”

    That’s a good question. It’s certainly not a phrase in everyday use outside of entrepreneurial circles, and is a relatively recent addition to the language, at least in the form of a noun that's been verbed.

    In brief, it means establishing and growing a business with no outside investment, through a ruthless focus on cashflow, and a dedication to reinvesting in the business until it is established.

    The origins of the name are somewhat obvious – we’ve all heard people boast about pulling themselves up by their bootstraps, achieving great things through their own efforts.

    Don’t be too literal about the physics behind the idiom, though – the implication is clearly that Newton’s third law of gravity can be overcome through sheer willpower. In fact, some people trace the phrase’s origins back to Rudolf Erich Raspe’s tales of the heroic fantasist Baron Munchausen, who pulled himself out of a swamp by his own hair.

    The modern usage – shorn of any irony – gained momentum in the early 1980s, cropping up in business magazines and the works of get-rich gurus.

    Cynics might suggest that it’s really just a fancy name for the way most businesses start, out of the pockets of their founders: “I have been bootstrapping for 30 years and never even knew it”, says forum user Jeremy Hawke in the thread linked above. 

    And statistically, yes, this is correct – according to research undertaken by funding broker the Company Warehouse in 2016, 56% of startups were entirely self-funded in the first instance.

    But, regardless of how you might feel about buzzwords and management jargon (oh, boy – just wait until you hear about ‘growth-hacking’) bootstrapping has come to mean something distinct to its most passionate proponents. For them, it has evolved into a kind of philosophy, or discipline – almost a religion.

    The self-identified bootstrapper sees themselves as a kind of entrepreneurial athlete – leaner, more focused and with greater stamina than the average schmo.

    Bootstrappers pride themselves on starting with very little, perhaps a couple of thousand pounds from savings, bolstered with spending on credit cards. The real investment, they argue, is not financial, but in brainpower, personal effort, and self-sacrifice.

    In his 2007 book My Start-Up Life, young entrepreneur Ben Casnocha describes the indignities he has endured while bootstrapping over the years, from extra security checks to take advantage of bargain one-way plane tickets, to staying in hotel rooms with “brown stains on the faded blue carpet”. Every cent, he argues, makes a difference in this stage of a company’s life.

    He also suggests that half the trick is knowing which corners to cut, and another cornerstone of the bootstrap lifestyle is just this kind of rigorous, self-challenging pragmatism. Not everything has to be perfect, as long as it’s good enough; and if it isn't immediately going to contribute to generating income, park it.

    The embrace of bootstrapping is to some degree a pointed rejection of a particular tech startup culture which saw entrepreneurs draw in huge amounts of venture capital (VC) funding back in the 1990s often before they’d done anything more than designing a logo. Being courted by VCs, flown about in helicopters and plied with Champagne, has a certain glamour which working a second job to support your startup lacks, but to some the latter feels more honest.

    In more recent years, bootstrapping has also been positioned as the polar opposite of crowdfunding, which often resorts to 3D renders of non-existent products or breathless video prospectuses to draw in funding for products or services, many of which never even materialise.

    The dedicated bootstrapper prides themselves on building a business, and a customer base, and proving its value, before even thinking about outside investment. There’s something almost puritanical about this approach – nobody is being deceived, no snake oil is being sold, what you see is what you get.

    Some benefits of this approach, are apart from the virtuous glow, are that:

    • You maintain complete control.
    • Have almost complete freedom (funding permitting) to make bold moves in response to the market.
    • And, by testing your business in the harshest of circumstances, create something strong, without a scrap of fat.

    Of course, there are downsides, not least the personal risk the bootstrap founder carries. There’s certainly something anxiety-inducing about the talk of credit card juggling that accompanies some bootstrap origin stories, paying off the balance on one card with another, hoping to outrun the interest.

    Casnocha flags another problem – the tensions that come with penny-pinching, and the potential for arguments about lunch expenses when you should be focusing on more important things.

    Some dedicated bootstrappers also report a tendency to let pride in self-sufficiency tip over into zealotry, until that eventually stands in the way of sensible decision making when investors do come knocking.

    Even if you think all this is self-aggrandising nonsense – and reading the room, UKBF forum users do lean that way – there might still be some lessons to be learned from the bootstrapping believers. 

    If one of these bright-eyed evangelists came into your firm, where might they spot money being wasted? And where might they see you squandering time and effort in the pursuit of perfect?
     

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  2. FlaviusFX

    FlaviusFX UKBF Newcomer Free Member

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    good article, am self funded, now looking for partners or funding.
     
    Posted: Mar 22, 2019 By: FlaviusFX Member since: Dec 18, 2018
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    Uttam Kumar Das likes this.
  3. The Byre

    The Byre UKBF Ace Free Member

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    Posted: Mar 25, 2019 By: The Byre Member since: Aug 13, 2013
    #3
  4. JEREMY HAWKE

    JEREMY HAWKE UKBF Legend Full Member

    3,876 1,232
    After a lifetime doing this I am a big supporter of bootstrapping I only discovered the word on here in the last few weeks ( I learn a lot on here :)) !
    I have vans on long term rental that can be returned at anytime without commitment but my favourites are my old payed for vans that just make profit !
     
    Posted: Apr 26, 2019 By: JEREMY HAWKE Member since: Mar 4, 2008
    #4