Bootstrapping your way to Success

Bootstrapping your way to SuccessMatt Dedrick & Ben CapellMarch 28, 2011

1Successful Bootstrappers

2

What it is?funding primary development and growth through internal cash flow from real-life customers.

7Why you do?Someone once told me that the probability of an entrepreneur getting venture capital is the same as getting struck by lightning while standing at the bottom of a swimming pool on a sunny day. This may be too optimistic.

Read more: http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#ixzz1HvCltVL4

8Why you do?Let's say that you can't raise money for whatever reason: You're not a proven team with proven technology in a proven market. Or, your company may simply not be a VC deal--that is, something that will go public or be acquired for a zillion dollars. Finally, your organization may be a not-for-product with a cause like the ministry or the environment. Does this mean you should give up? Not at all.

Read more: http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#ixzz1HvCltVL4

9Why you do?I could build a case that too much money is worse than too little for most organizationsnot that I wouldn't like to run a Super Bowl commercial someday. Until that day comes, the key to success is bootstrapping. The term comes from the German legend of Baron Mnchhausen pulling himself out of the sea by pulling on his own bootstraps. Here is the art of bootstrapping.

Read more: http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#ixzz1HvCltVL4

10Why you do?Cause your wicked smart and you know that Furr says too much funding can kill a business cause youre tempted to scale too soon and stay within your four walls

(C) Betthew Caprick Inc.

11Da BestKeep Expenses Low

Supplemental Income

Carefully Manage Cash Flow

Use Equity Effectively

12Far Out Keep Expenses LowUse open source software

Use VOIP phone systems and/or just cell phones

13Rad Keep Expenses LowWork from home or find office space you can use for free or minimal fee

Buy used equipment, particularly office furniture

Outsource where possible and/or needed to keep expenses variable

14Totally Tubular Supplemental IncomeConsulting Enagements

15Do It!Supplemental IncomeNon-recurring Engineering Contracts

16Awesome Supplemental IncomeValue-Added Reseller Agreements

17Wicked Good Supplemental IncomeProjected Supplier Contracts

18FORD

EASTMAN

Solid Carefully Manage Cash FlowKeep track of all income and expenses

Track your own hours and factor them in as an expense even if youre not currently paying yourself

21Z Best Carefully Manage Cash FlowEngage customers early in the process and get them to commit to help pay for product development

Offer incentives to get customers to pay as quick as possibleConsider requiring customers to pay up front

22Bestester Carefully Manage Cash FlowPostpone payment to suppliers but be careful of doing anything to jeopardize supplier relationships

If receivables grow enough, consider using receivables as financing

23Rock and Roll Use Equity EffectivelyUse equity to build out a board of advisors with a broad range of skill sets and expertise.1-1% equity in exchange for 4 hours/month

24Party On! Use Equity EffectivelyOffer equity for in-kind services such as accountants, attorneys, and developersOptimally, these services would all be paid for up front or negotiated for delayed payment but equity is an alternative to consider

25Right On Apply NISI PrinciplesGet out of the building and talk to prospective customers to nail the pain

Simultaneously develop the solution while building out a set of potential customers

26Nailed It! Apply NISI PrinciplesTest the solution with potential customers often and iterate rapidly

Nailing the pain and the solution will either put you on the path to cash flow break or better position you for external financing

27Top Ten Benefits!10 Youll learn to keep expenses low9 Youll manage cash better once you have it8 Youll develop your minimum viable product7 Youll know youve got a real business before wasting other peoples money (OPM)6 Youll employ missionaries instead of mercenaries

28Top Ten Benefits!5 Youll stay focused on your core business4 Youll retain the equity in your business3 Youll retain control of your business2 Youll learn to sell1 Youll listen to your customers

Source: 10 Lessons in Bootstrapping a Business, Clate Mask, Co-founder and CEO of Infusionsoft, submitted to VentureBeat.http://venturebeat.com/2009/10/28/10-lessons-in-bootstrapping-a-business/#disqus_thread

29What was that again? Turn me up in my headphones!1 Youll listen to your customers!!!!!!!Opting to be self-sufficient (either voluntarily or not) and rely on real revenue means one thing: The customer is suddenly king. This focus becomes baked into the companys DNA. Its very survival depends on developing products that its target market actually wants and likes. Customers are often involved in beta testing and are encouraged to become involved in the process. And early on is the time when you want to solidify a customer base for future sustainability.

Source: 10 Lessons in Bootstrapping a Business, Clate Mask, Co-founder and CEO of Infusionsoft, submitted to VentureBeat.http://venturebeat.com/2009/10/28/10-lessons-in-bootstrapping-a-business/#disqus_thread ANDhttp://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

30Its time to move onHow much bootstrapping is enough?Raising the right money at the right time can make or break a companys growth, so its important to know when your company has outgrown its boots. Here are some indicators:- Market growth rate is accelerating: If the market is growing faster than your internal funding, you risk losing market share (and equity) by not catching up.http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

31its time to get going- Customers are buying products and sales are predictable: You can scale your sales team, and more effectively channel the VC money you raise. As a rule of thumb, you should feel confident that you can predictably bring in at least $2 in gross profit for every $1 you spend on sales and marketing. I recommend a $3 to $1 ration as an even safer barometer.- Complementary products or businesses have become available: It may be time to expand your offerings through an acquisition. Can you economically acquire new customers through a merger? If you are considering M & A activity and need help financing your growth, its time to raise capital.http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

32 under my feet, baby, grass is growing- The current economic cycle favors growth: This isnt what were experiencing now, of course, but hopefully it wont be too far off. If the market seems to favor technology investment, or you see new growth areas on the horizon, it could be wise to switch.- Your balance sheets are weak, or you want to diversify risk: Co-mingled balance sheets can be a major challenge for bootstrapping businesses. A prudent decision for a company may be imprudent for its founder (scaling sales at the expense of cash-flow, for example). As a consolation, selling off some shares can let founders offload some risk as well.http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

33Where do we go from here?If youve bootstrapped long enough to face these issues, youve probably done a pretty good job establishing growth and maintaining an equitable personal stake. Now the question becomes, What do I look for in an investor?

http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

Fly me to the moon!My advice: Dont just look for the money look for a partner with vested equity interest to help you expand. After this point, many parts of your business and how you manage them will need to change. Your investment partner should offer substantial contributions in this direction, not just capital.

http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

Stacy Lawson and 3-D Parts CatalogsEngineer

IBM

MBA

Exhausted credit cards while searching for investorshttps://www.lib.byu.edu/cgi-bin/remoteauth.pl?url=http://search.ebscohost.com/login.aspx?direct

Just one way it was done, maybe not the best way be a better ninjaSeed Capital

Customers

More investors

Sell your biz for $45Mhttps://www.lib.byu.edu/cgi-bin/remoteauth.pl?url=http://search.ebscohost.com/login.aspx?direct

See You Alsohttp://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/

https://www.lib.byu.edu/cgi-bin/remoteauth.pl?url=http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=1427456&site=ehost-live&scope=site

http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#axzz1HRJNZHoo

http://bx.businessweek.com/bootstrapping-a-startup/view?url=http%3A%2F%2Fwww.inc.com%2Fmagazine%2F20020201%2F23855.html

http://sfx.lib.byu.edu/sfxlcl3?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2011-03-23T10%3A15%3A39IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primoArticle-elsevier&rft_val_fmt=info:ofi/fmt:kev:mtx:&rft.genre=article&rft.atitle=Bootstrapping%20in%20small%20firms:%20An%20empirical%20analysis%20of%20change%20over%20time&rft.jtitle=Journal%20of%20Business%20Venturing&rft.btitle=&rft.aulast=Ebben&rft.auinit=&rft.auinit1=&rft.auinitm=&rft.ausuffix=&rft.au=Ebben,%20J.&rft.aucorp=&rft.date=200611&rft.volume=21&rft.issue=6&rft.part=&rft.quarter=&rft.ssn=&rft.spage=851&rft.epage=865&rft.pages=851-865&rft.artnum=&rft.issn=08839026&rft.eissn=&rft.isbn=&rft.sici=&rft.coden=&rft_id=info:doi/10.1016/j.jbusvent.2005.06.007&rft.object_id=&rft_dat=%3Celsevier%3EOM06028E_08839026_00210006_05000662%3C/elsevier%3E

http://www.emeraldinsight.com/journals.htm?articleid=1864398&show=abstract

http://www.emeraldinsight.com/journals.htm?issn=1355-2554&volume=16&issue=4&articleid=1864398&show=html&PHPSESSID=7ljq00rnv0d6k5atcqstval9v0

http://bx.businessweek.com/bootstrapping-a-startup/view?url=http%3A%2F%2Fwww.inc.com%2Farticles%2F201102%2Fthe-start-up-paradox.html