What a time to launch a startup. The market is hot; investors’ money is flowing. It’s hard not to get excited. The only thing left to do is to start crushing it. There are two popular ways to take on this feat. One route, used by Uber and Airbnb, is to accept a large sum of venture capitalist money upfront. The second, which I took is the bootstrap approach: leaning on revenue from clients rather than soliciting more money initially.
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In 2003, we launched using the bootstrap method with less than $ 10,000 in initial funding and we’ve been profitable ever since. There are a handful of other notable companies in the bootstrap club including Square Space, WuFoo, Imgur, Github, Mailchimp, Braintree, and many more.
But why should an entrepreneur go about bootstrapping their funds rather than taking the big money for their startup? Let’s check out five ways how bootstrapping gets you started off on the right foot.
Keeps the customers hungry
By bootstrapping the funding of your business, you are letting any potential customer positioned as a co-pilot on the drive. It forces you to connect with your customers on a more consistent basis, taking their ideas into consideration, as it is their money predominantly fueling the machine. This isn’t to say the customers will be the decision makers — they won’t, but it demands that you make changes tailored to your array of mini-investors.
Requires all hands on deck
When working with a tighter budget there is less room for error. The spending needs to be firm. As our team was finding its footing, we did not have “room for error” so keeping customers as accountable as employees was a must.
Lets the creative juices flow
The bootstrap method demands forward thinking in how to distinguish your company from the crowd that should answer the ‘Why us?’ question for the clients. My experience drove me to work with small market businesses – power in numbers is what I thought – coupled with the need to grow in the mobile market. After much discussion, my team developed a web platform that allows designers to create mobile apps easily for a competitive price. We didn’t create a new market; we constructed a desire.
Doesn’t ever stop moving
Bootstrapping requires forward-thinking, always staying on your feet, ahead of the curve. We began our process with the mindset to help those that help small businesses. Bootstrapping helped us tackle a market with exponential growth. As our customer base grew, so did the team, and now we have more than 100,000 live apps in the app store with more than 3,000 resellers worldwide (and counting).
Retains repeat business
One of the main perks I enjoy with the bootstrap approach is constantly working with new people. The customers are more attached to the product because their feedback is the incentive for growth and improvements. It allows their voices to be heard because when you have consistent engagement with the customers you’ll learn quickly whether or not a process is working – trust me.
If you’re launching a startup, be aware of what you are signing up for. Whether you raise millions of dollars from institutional investors or take money bit by bit, know your surroundings, your competition, and the type of relationship you wish to have with your clients.