The unending news of one tech startup or the other getting massive VC funding in the media is fast becoming the norm rather than the exception.
Not only is this very distracting to budding entrepreneurs, it’s gradually killing the age long startup strategy of bootstrapping to success.
Bootstrapping is a process whereby an entrepreneur starts a self-sustaining business, markets it, and grows the business by using limited resources or money – this is accomplished without the use of venture capital firms or even significant angel investment.
Many of the successful companies that we see today – Dell Computers, FaceBook, Apple, Coca Cola, Hewlett-Packard, Microsoft, Oracle, eBay, Cisco, SAP and Virgin, to name a few, had their humble beginnings of bootstrapping to success.
But these days, all you need is an idea and you’ve got yourself an excuse to raise money. How come we seem to always want the rain check instead of putting our brains to work first?
Call me old school or even cynical, but here’s one fact that can’t be denied; not every startup or entrepreneur is going to get funding.
Yea, that’s reality for you, so suck it up and deal with it!
On this entrepreneurial journey, there’s no guarantee. And nothing can be more dangerous to your morale as an entrepreneur than succumbing to the fantasy of funding.
Trust me, I know the drift.
Lying awake all night wondering where the next income is going to come from to cover your expenses is no joke. Or wondering whether you will make it to the end of the month before running out of cash can be damn scary.
So yea, the fantasy of funding can be very appealing, especially in such situations. If only you could just get a major investor’s financial backing, all these nightmares and worries will just disappear, right?
Your Problem is MORE THAN Money
Funding is a palliative solution to a more fundamental business problem that most startup, especially these days don’t like to brutally confront.
It’s a fundamental business problem if your startup can’t generate some initial revenue to sustain itself till your business idea is fully validated and ready to scale.
It’s a fundamental business problem if your startup can’t find a way to successfully launch a minimum viable product to test the market with without seeking for major external funding.
It’s a fundamental business problem if your startup needs major external funding to create her first customer.
It’s a fundamental business problem if your startup can’t raise her initial funding internally from your family and friends.
It’s a fundamental business problem if your startup needs money to figure out how to make money.
It’s a fundamental business problem if your startup can’t find a way to start small.
It’s a fundamental business problem if your startup needs money to solve a problem no one is willing to pay for.
My point is pretty simple; there are so many fundamentals that are often left out once you allow yourself to succumb to the fantasy of funding.
There are just too many business basics that more money won’t necessarily help you solve. And getting caught up in the fantasy of funding will only becloud your thinking.
Until you identify these business basics and brutally address them, access to more funding will only amplify your fundamental business problems.
The Mindset for Bootstrapping to Success
To succeed as an entrepreneur, you have to understand one fundamental truth about starting, building and growing a business; there’s no guaranteed straight path to success.
What does this mean?
It means that your business will not manifest itself in the same exact way you dreamt of it or conceived the idea. It is absolutely going to take a very different form than when you first started and you must accept this reality if you will succeed.
This is the mindset you need to have for bootstrapping to success. You have to be prepared to think about your business in several different ways and continually work on the most minimal action you can take per time to get you closer to your goal.
Because all the resources you need to make your business a success won’t come to you at once. They will come in bits and pieces, and your ability to make the most of what you’ve got per time is what bootstrapping to success is all about.
If you would rather focus on having all the money and resources you need to start the way the business was conceived, then you are not going to ever start. But once you accept the reality that venture capital funding is not the only way to grow your business, then it’s easier to open up to other bootstrapping to success strategies available.
Strategies for Growing Your Business Without VC Funding
Here are some bootstrapping to success strategies that you don’t need more money for; applying them will enable you avoid the fantasy of funding.
I wish I could skip this fundamental business principle; think big, start small. All great things start small; I know you knew that already. But why aren’t most startups doing so?
Why do new businesses without any form of validations for their ideas just want to raise money without any substantial track record of success or traction?
I know you do need money to start, but do you really need that much money that you can’t raise internally through your family and friends?
If your startup idea is too big that you can’t start small, then perhaps you need an interim startup idea that will allow you make enough money to startup your big idea.
My point here is simple; don’t let the lack of money hold you down from starting. See your startup in bits and pieces rather than a completed whole. Then start with the smallest bit and piece bearing in mind that where you are starting from is not your destination.
The more traction you gain as you grow the idea from its smallest bits and pieces, the more tangible bootstrapping to success gets.
Don’t go into any business you haven’t first figured out how to make money from. Not knowing how the business is going to generate revenue is a warning sign you have a fundamental business problem.
Your business model is how you structure your business to enable it make money through the products/services it offers.
When starting small, your task is to find a way to start with the very first bit and piece that can win you a paying customer.
Your greatest startup success story is a paying customer. If you can get the first one, strive for the second and the third and so on until you have fully understood how your new business makes money.
Your primary drive should be to see your startup idea being embraced by paying customers. They are the best sources of finance any business can have. Always start with them first, they are great bootstrapping to success enablers.
Because you need the money to keep ploughing back into the business to sustain your bootstrapping to success strategy.
“Get a customer before you start your business, if you can. So many people say to me, “I have an idea. Can you introduce me to VCs?” There is a HUGE gap between “idea” and “professional venture capital”. In the middle of that gap is “customer”.”
– James Altucher, Investor and serial entrepreneur
Most of the things you may need more money for are being done by others and it wouldn’t hurt to just collaborate with them.
I realize that strategic partnerships mean giving up some sizable piece of the pie, but that’s permissible as long as it’s a high impact partner. Remember that you are just starting out and money is not a luxury you have to get the things you need, so you’ve got to focus on gaining some traction and less about money.
Bootstrapping to success through strategic partnerships is about giving up some piece of the pie today in order to secure a bigger pie tomorrow. The involvement of high impact partners intrinsically increases the size of the pie than what you alone initially had.
One form of strategic partnership you should explore for bootstrapping to success is joint venture. Rather than create a product/service all by yourself, partner with others through a joint venture relationship.
Providing a Service
I’m sure you are aware of this, most service businesses are usually less capital intensive than the manufacturing businesses.
This is another bootstrapping to success strategy you can adopt to avoid the fantasy of funding. This is equally applicable to manufacturing businesses; you just need to widen your scope a little bit.
If you are manufacturer and need money for production, find a way to provide a service with your professional expertise. That you want to manufacture a product means you have some deep level knowledge and expertise can be sold.
While this might not seem encouraging at first, remember my point about starting small, this is only temporary until you can raise the money you need to start initial production.
Knowledge is one thing bootstrapping to success cannot do without. Not having money to toss around means you will have to gain mastery of some critical aspects of your startups survival.
And this will require you to invest the only resource you have – time, to acquire the knowledge and skills you need to navigate the business during her infancy.
Bootstrapping to success by becoming resourceful is how most startup entrepreneurs grow personally and professionally. Through this, they are much equipped to execute strategically better than just the entrepreneur who has more money to throw around.
As a result of being resourceful, the same results people spend money to get, they achieve through strategic execution at much lower costs.
You don’t have the money to waste, so you dare not be trying stupid things. Bootstrapping to success is about focusing on the things you do best and letting go of all other things that may distract the startup.
You can’t serve the whole market obviously; you lack the capacity and resources. So your best bet is to focus on a profitable niche and being the king of that niche.
As you capture your niche market, you can extend your focus into another niche market. The strategy is to fight one battle per time and only fight the ones you are most equipped to win.
How are you Bootstrapping your Business to Success?
These are not all the bootstrapping to success strategies available to startups, so join in the conversation and share your own story below in the comment section.