š¤ What does the term "bootstrapping" mean to you?
Tomorrow, @jonbuda and I are doing an episode on our podcast about bootstrapping.
Curious: What does the term mean to you?
Here are some of my thoughts (off the top of my head):
Bootstrapping means self-funding your business from revenues. It means not taking Venture Capital not taking Angel funding.
Different people have different definitions of who is a "real" bootstrapper. Some people say if you take money from friends and family, then you've taken investment and you're no longer a part of the bootstrappers club.
For many, it means starting something small and spending a lot of money and validating that there's really a business there.
As you increase cash flows you put that money back into the business. You keep doing that over and over and over again until you get to a sustainable level and then you start paying yourself.
I think technically, yes, bootstrapping means to not take any outside funding. But I think that extends to a sort of philosophy of doing business.
A bootstrapped mindset:
Slow, steady growth vs fast, volatile growth
Wait as long as possible hire vs scale up the team ASAP
Revenue first, scale later vs users at scale first, revenue later
Profit is the ultimate North Star metric vs valuation is the ultimate North Star metric
Build a business that creates the lifestyle you want vs build a business that dictates the lifestyle you live
Keep CAC as low as possible vs keep CAC under what we project we can afford for our marketing budget to hit numbers
Okay with perpetually being in business vs sell in 5 years
Sell at a lower valuation with 100% equity vs sell at a higher valuation with 10% equity
Focus on retention and reducing churn vs focus on acquisition and upselling
There's a huge difference between hiring for the sake of having a metric to show versus hiring for the sake of getting work done, with a positive return on investment.
Point being, you're listing opposites, and it doesn't have to be that way. Bootstrapping means that you're responsible only to yourself and so you must be honest to yourself. You can't engage in the skewed behaviors that go on in the funded world. No reason why you can't have medium growth, or hire some people upfront, or build a business with the intent of selling it in 5 to 10 years. It's all up to you and you decide how to approach maximizing profit, maximizing your life, maximizing the help you can offer your customers and the world, etc.
Of course, I'm listing generalities. But I'm highlighting the key differences that you usually see with bootstrapped vs funded.
The main thing I wanted to highlight is that when you're funded, you're basically forced into behaving in the stereotypical ways I listed above --> fast growth, user acquisition at scale, focus on valuation (for funding rounds), crazy hours, high pressure, need for an exit (sell or IPO).
If you're bootstrapped, you have many options. If you're funded, you have less options.
@mijustin himself also wrote a blog post called the Bootstrapper's Paradox [1] where, yes, one can bootstrap forever, but then one loses time as well, as an opportunity cost. Great read.
[1] https://justinjackson.ca/bootstrap-reality/
Agree @corey Haines
For me bootstrapping is entirely about self funding your business so any outside investment would disqualify. Though I'm not really of the opinion that one or the other is better so for me bootstrapped is not a goal so much as just a label.
I think it's super counterproductive for people to keep pushing the 'you can only spend money that you've earned through the business' part of bootstrapping.
Just because I've spent fourteen bucks of my own money on a domain name and hosting, I'm not allowed to call it bootstrapping?
Let's not be fundamentalist about this stuff.
There's a big difference between on the one hand spending small amounts of your own money here and there (and using resources you may already have from other projects, like the server you already operate), and on the other hand putting $50k of your savings into the business as if it were a VC cash infusion.
Doing it on no money at all and only investing any cash after you've earned your first dollar is possible of course. I guess if this were a computer game I'd call that challenge mode or something?
Good moment to recommend a great book on this topic: "The Customer-funded Business" by John Mullins!
There is also a Coursera course accompanying the book. The book is better, but the course is very informative, too.
Hey Justin! It's sounds cheesy but I would add that bootsrtaper is a someone who is constantly learning and testing ideas other bootstrapers are talking about. For example I just love to re-listen/re-watch Rob's Walling/Jason Cohen/Patric McKenzie talks from MicroConf cause every-time there so much new suggestions to validate and reflect on. And sometimes you just need to be at the right state of your product (pre/post problem-solution fit, pre/prod product-market fit) to apply them all to your business. Waiting for the episode!
For me bootstrapping is focus in sell your products and forget about find money from angels investors or family.
Outgunned, Outmanned but processes well planned !!
I see bootstrapping and self-funded as synonymous but others donāt (including this site: both ābootstrappedā and āself-funded are mutually exclusive when completing the Product profile).
I wrote a blog on how to build and launch an AI startup for $100. Must write and share more on this.
Leaving it here because nobody has mention it: The Bootstrapper's Bible[1]
It's been 10+ years that I've stumbled upon it, and it has changed my perception about what a business could and can be. All my life I've been working with limited resources and I think that's part of what a bootstrapper does.
1: http://sethgodin.typepad.com/files/8.01.bootstrappersbible-1.pdf
For me bootstrapping is not taking money from investors or family and making a business idea work and make it profitable.
To me bootstrapping is the act of investing and reinvesting in your own business for your gain. The goal is to put in enough time, sweat equity and financial equity to get to profitability to carry the business forward, having the business serve you and your needs.
I donāt believe you negate the ābootstrappingā monicker if you put your own money and time into it. Iād even say the lines are blurred with friends & family who may back you. But as soon as you take that first dollar from a sophisticated investor (angel/seed round) you are no longer bootstrapping. Why? Because your motivation at that point is to deliver value to the shareholders, not the customer, the business or you.
YMMV. But as soon as you answer to someone else who gave you money and expects a return, you are no longer bootstrapping.
Not accepting money from investors.
Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.
Bootstrapping means focusing strictly on ROI and spending only the money that you've made. It also means being extremely careful with every new hire and expenses in your business.
In my opinion it is all about being resourceful which is a key skill of business, and by being resourceful it forces you to think more creatively on how to solve problems (vs. throwing money at it)
Being scrappy. Like extremely scrappy.
I think the impression we get when a startup is funded is that the pressure to come up with creative ways to succeed is lost somehow. But I think definitely there are situations where even funded companies can behave in a "bootstrapped" kind of way.
Technical definition - yes, a company that funds itself.
Bootstrapping means doing it yourself, as low budget as you can. For instance, my company is moving into a new space and weāre doing all renovations ourselves - including networking, office build out, electrical, etc. We even retrieved 900 ceiling tiles out of a dumpster to replace the smoke stain ones in the space. Thatās bootstrap AF! IMHO
That just sounds like ignoring opportunity costs.
I think it's common misunderstanding that bootstrapping equals self funding your business. However, the two are not exactly the same. If you're funding your business by investing your own money into it, technically you're no longer bootstrapping.
Bootstrapping means using nothing but revenue generated by your business to grow it.
So in your definition buying a domain name pre-revenue disqualifies a company from being considered bootstrapped? That seems terribly extreme.
Bootstrapping as a term goes back further than startups and has basically always just meant self-starting, starting using own resources, etc.
Lol, yeah that would be rather extreme :)
Obviously some initial cash to start up wouldn't disqualify as being bootstrapped. Not really sure where the cut-off lies; but if you were to invest say $10,000 of your own money, are you still bootstrapped?
Our opinions differ but to me yes. If you sell a company for $1m today and turn around tomorrow and drop the full amount in a new bank account for Company B then I would still very much consider Company B to be bootstrapped.
But again I don't put much weight on the label myself so my definition is extremely basic. I think there is an over focus on trying to make it more than it is in the community.