September 06, 2010

Why Write About Bootstrapping?

So, I've decided to add my voice to the chorus of online resources on entrepreneurship. Why does the world need one more blog on early-stage companies, and why do I promote bootstrapping over venture-backed startups? I've elected to focus on bootstrapping, because (a) it's the best approach to entrepreneurship I've found, (b) it seldom receives the attention it deserves in the business press and academic literature, and (c) many resources on bootstrapping do not venture much beyond discussions of sole proprietorships.

The harsh reality is that very few entrepreneurs in a startup will ever manage to raise equity outside friends and family. Most don't have the right experience or connections (and are not pursuing the kinds of opportunities that would attract funding). Despite this fact, most serious resources on entrepreneurship devote an inordinate amount of time to the minutiae of writing business plans and the tactics of raising seed funding from professional investors. Entrepreneurship programs and books often have little to say about the day-to-day realities of getting a new venture to profitability, but this is precisely the point where most new business owners get into trouble.

By thinking creatively, bootstrap entrepreneurs find ways to reduce their initial capital needs. They scavenge, borrow, or rent assets instead of buying them. Bootstrappers keep their fixed costs to a bare minimum while their startups are burning cash. They design business models to reach breakeven quickly and finance growth through internally-generated funds. In short, an outstanding opportunity doesn't need a lot of cash to get off the ground if you approach it in the right way.

You may have been conditioned to think that bootstrapping is a waste of time for entrepreneurs who intend to grow their ventures into substantial enterprises. (At least, that's the answer you'll hear from most MBAs.) Let me remind you that industry heavyweights such as Apple, Microsoft, and Dell all started life as bootstrapped ventures. The point I am trying to make is this: Being capital constrained at launch does not limit you to pursuing marginal opportunities. The size of company you can build is hindered only by your creativity and ability to execute.

Greg Gianforte (who successfully bootstrapped two software companies on a shoestring) says it better than I ever could. I strongly encourage you to read his classic primer on bootstrapping.