Why Bootstrappers Make the Best Entrepreneurs
by Brian Flynn
I always bet on the bootstrappers to win simply because they can’t afford to lose. When the chips are down and the business is on the line, I want the guy who knows that if he doesn’t figure out how to fit that square peg into the round hole, his whole life will implode. He has no choice but to roll up his sleeves and JFDI.
Bootstrapping is a mindset, a way of life. It’s about having such a profound conviction in your vision that the chance to realize it is worth putting everything you’ve ever worked for at stake. The bootstrapper is like a marathon runner - he has to have crystal clarity of purpose and laser-sharp focus in order to be able to complete his course. He must be able to spot obstacles from a distance and assess whether they are avoidable, or if not figure out a way to efficiently overcome them, all while continuing to barrel forward towards the finish line. Or, to use a different sports analogy, he’s like the guy walking on a tightrope between two skyscrapers without a safety net. He’s willing to do it because he’s just that fucking good at what he does.
When you talk about bootstrapping a startup, the vision that comes most readily to mind is one of an unwashed twentysomething hacker living in his car and eating ramen noodles, and he doesn’t even care about any of that because he’s too busy birthing the next Facebook.
And to a certain extent, depending on your financial circumstances to begin with, some of that type of deprivation is indeed what’s required.
But in the end, it isn’t about who can boast the most severe case of ramen-fueled malnutrition. It’s about working smarter, better, and faster than the rest. It’s not about how much capital you have to start with, it’s about being capital-efficient with what you do have, figuring out how to make do with whatever resources are available to you, and how to do without those that aren’t. This is what gets you to cash flow positive, and therefore success, faster.
The best bootstrappers are the ones who’ve gotten their startup to actually fund itself via paying customers, so that they don’t have to let their kids get scurvy in order to pursue their dreams. Those that generate their own revenue can control their own destiny.
No one is saying it isn’t nice to have a little money to work with. The problems come up when the money you have is someone else’s. It might seem like it would great to get a big pile of money just handed to you at the outset. But sometimes there’s a bit of unexpected steam coming off that pile, and what seemed like free money can turn out to have some really serious consequences. What if your interests and those of your investors fall out of alignment? Then you may find yourself forced into a quick exit if your investors get nervous about the state of the market, which might yield them a decent ROI but could leave you with nothing. VCs will always protect their own interests above all others, so there may be some draconian liquidation preference language lurking in the fine print of your agreement.
Or you could be branded a unicorn, which may give you bragging rights in the hot tub, but, if it’s an inflated valuation, may ultimately lead to a slow, agonizing descent into profitless irrelevance for you and your business (e.g. Theranos, Evernote, Jawbone, Pets.com, Solyndra and so many others).
If you’ve got too much investor money when you start out, you’ll find yourself immediately distracted by things that aren’t core to the building of your business. Money makes the pedal come off the metal. It either lulls you into a state of complacency, where there’s no ticking clock of bankruptcy hanging over you galvanizing you to action, or else forces you to work according to an externally imposed schedule and plan that is focused on what’s best for someone else’s bottom line.
The reality is that the best time to seek financing is when you don’t actually need it. Or, to qualify, when you don’t need it to survive, but are already in a position of strength with an established product, and have a plan to use investor money to help your thriving business reach new heights.
So let’s say you’ve got that drive, and have decided you don’t want to be lining up at the VC trough along with the rest of the herd. Where do you start?
The answer is, you just...start. Nothing is more important than the product itself. You can have all the business plans and market research and data in the world, but if you haven’t got anything to sell, you haven’t got anything at all. Identifying a gap in a market, particularly one in which you have domain expertise, is a great launching point, but it’s not enough. It’s just an idea. You have to create a solution in the space, and actually start building the product so you can start to test whether your solution works.
At this point, you don’t need to quit your day job. You can be coding at nights or on weekends, until you’ve got a MVP you can bring to market and start generating some traction. In the meantime, you can be implementing a strict savings plan for you and your family, in anticipation of you having to quit your job and focus full time on the business that will eventually support you. Maybe this means skipping the family vacation this year, or borrowing money from your parents, or just cutting down on those champagne breakfasts. If you’ve truly got the eye of the tiger in you, you’ll find a way to make it work.
The founders we work with have shown us that they have the bootstrap mentality through and through, which means that they do whatever it takes, no matter what. We want to see you be capital-efficient, not spending money on PR and lavish parties that don’t drive the business forward and only serve to tell the competition what you’re working on.
The notion of the instant, splashy fame and fortune that up-front VC money can bring is tantalizing, but wouldn’t you rather be master of your own destiny? Create something that you own, the economics of which you can control, and from which you can’t be fired? As the saying goes, necessity is the mother of invention, and, at the end of the day, your odds for long term success are much, much better if you take the harder road up front.
Brian Flynn (email@example.com)