Is Bootstrapping a Go-to Solution for Startups?

Bootstrapping is a sought-after option for many market players, whether it is a newcomer to the industry or a business that is trying to keep the lights on. Most startups aim to receive funding from VC firms, but about 90% of these companies fail in the next two years.

Nevertheless, many startups, both globally recognized and those making their first steps on the road to success, had their humble beginnings. Making a company grow and achieve set goals is a roller- coaster ride. This requires considerable effort and work to make its owner’s ideas and dreams turn into tangible results. 

However, compared to the startups that receive funding, those that have their own funds at stake are more likely to hit a home run. Many believe that in this case, the startup founders are ready to put in the hustle and get their funds back, enjoying even more rewards. 

Most bootstrapped startups focus extensively on their business plans which helps them generate revenue within the shortest possible period. For them, money is air, and they have no other choice but to make money and channel their creativity to come up with industry-breaking solutions.

But how do you know if bootstrapping is for you and whether spending money in this way will pay off? That’s what I’ll cover in this article, so let’s get down to it.  

What Is Startup Bootstrapping?

Bootstrapping a startup implies starting a business without the help of outside capital, using your own savings and investments to make it grow. The founders are the ones who control expenditures. They can manage spending to a certain point until they find the right investors or to the end.   

With a bootstrap mentality, the startup becomes more flexible, innovative, and frugal. It also helps the business owners be more pertinacious and get the most out of the talents they already have, and attract the right people. 

As mentioned by Harvard Business Review, “sometimes it’s not until things get really tough that we find the gears that allow us to shift into overdrive — that is what bootstrapping does for you.” 

Bootstrapping forces startups to make the best use of their skills and knowledge to come up with the strategies and solutions they would never have thought of otherwise. They learn to improvise and find like-minded people who can turn down an $80,000 salary to work for $10,000 with someone passionate about the idea. 

The Advantages of Bootstrapping

If you have enough finances to invest in your dream, bootstrapping will become a perfect option. It eliminates the outside influences, and you are responsible for all the choices.

Reap the benefits of being a sole proprietor. As opposed to the fundraising startup, you won't have to dilute your ownership continuously. Even if you have a couple of co-founders, your share of the equity will be several times higher. Other stakeholders won't influence your decisions because you're your own boss.  

Create a unique model that really works. Many startups, even the fastest-growing ones, are losing money. To prevent this, you'll be forced to develop a strategy that'll consider all the peculiarities of your business and can produce profits right away. This will help you to earn income and understand your customers' needs. When you give customers what they want, they help you expand your business.

Take risks and control direction. When receiving money from investors, you need to make decisions that will satisfy their interests and are constantly under external pressure. However, when bootstrapping, you can evaluate your company's situation and decide on the path you want to follow. The ball is in your court, and you can rely on your vision to hit the big time.     

The list of bootstrapping advantages goes on and on, but the main thing to remember is that "with great power comes great responsibility." This means you'll have to face both the success and the aftermath of wrong choices. 

Bootstrapping Tips to Get the Most out of It

Here are some suggestions you can consider to leverage the bootstrapping mentality:

Don’t Spend Beyond Your Means

Don’t rush when it comes to spending money because you’re risking being left without a penny in the pocket if you put wants over needs.

When you consider purchasing something, ask yourself, “Is this the thing that’ll positively impact my business? Do I really need to spend on this right now?” It will help you evaluate the pros and cons of each option and avoid unnecessary expenditures. 

Spend on the aspect of business you know you’ll have a return coming from within a certain period. Consider investing in areas related to your customers because they are the main drivers of your startup’s growth. 

Find the Talent Not Only Locally but Also Globally 

Being a startup founder, you’re likely to wear a lot of hats. However, this becomes unnecessary and resource-intensive in the long run. So, as soon as there is progress, you can delegate all the tasks. However, hiring a full team puts significant pressure on your startup’s financial position. 

That’s why, when looking for partners to help the startup scale, the founders often check out the development rates by country. Outsourcing allows them to save money and get high-quality services without spending a fortune. The gig economy is booming, so why not take advantage of it?

Hire Slow Fire Fast

Employees are the backbone of your company, so make sure you treat them well. 

When looking for a person to join your team, create a detailed job description and use different sources to find the right candidate. It’s better to have a big pool of candidates to choose from rather than select the first available. 

Although narrowing down the list of applicants and conducting multiple interviews is time-consuming, it will make an immense contribution in the long run.

Also, say goodbye ASAP once you understand that a specific person doesn’t match your company culture and doesn’t fit the team. Don’t spend money on someone who doesn’t meet your expectations. Move on and be relentless. 

Don’t Burn Yourself Out

Trying to overachieve and burning the midnight oil to get the best possible results on an urgent basis is praisable. But is it worth it? Rarely.

When you treat bootstrapping as a sprint but not a marathon, you're more likely to burn yourself out before you even achieve the desired results. Time is in your favor; you don't have to rush to take your company to a higher level before the next fundraising level. 

In this case, second thoughts are best. So, find a perfect balance for your startup to grow and get outstanding results. 

Focus on the Things That Matter

Squandering money on fancy offices isn’t the right approach to bootstrapping. Be smart about your money and emphasize the things that matter to you the most. Don’t waste time nor money on tinkering around with something that won’t help your startup achieve targets. 

Focus on your core and strengths. Leverage the strategies that bring a measurable outcome. 

What Are the Examples of Successful Startup Bootstrapping?

Many prosperous startups bootstrapped their way to triumph, including:

GitHub

The founders of this software development platform spent only a few thousand dollars to launch their company. According to Preston-Werner, “it started bringing revenue the day we opened and we started charging for subscriptions.”

Mailchimp

Initially being an email marketing platform, Mailchimp soon turned into a feature-heavy marketing platform. The creators treated it as their “side business,” but decided to focus on it as their full-time company a few years later. They haven’t accepted any venture capital funding since Mailchimp’s launch and keep a freemium model as their growth strategy.  

Shutterstock

The owner, Jon Oringer, bootstrapped his stock image service, which is now worth around 2.5 billion dollars. He was selling the photos he took himself, offering users a $49 monthly subscription for unlimited use. 

So, Is Bootstrapping the Right Choice for Startups? 

Although bootstrapping isn’t a one-box solution for every entrepreneur, it’s still an attractive option for many startup founders. It brings many benefits but has associated risks as well. Nevertheless, if you’re ready to tackle all the emerging issues, bootstrapping is an effective way to get a foothold in the market.