With the constant spotlight and frenzy surrounding startups that raise funding, it sometimes feels like that’s the only way to finance your path to success. However, bootstrapping a business by self-funding your idea is a completely viable (often underrepresented) option. Companies like WeTransfer, GitHub and Nasty Gal intentionally bootstrapped for years before taking external investment to further expand.
While going down this route undoubtedly requires hard work and personal investment, bootstrapping ultimately means you have greater control over your company, while finding suitable partners to help you scale. It can also be an invaluable lesson in staying focused, resourceful and creative when finding solutions. Having said that, there’s no one-size-fits-all answer when it comes to bootstrapping. Depending on your goals, the market as well as the amount of personal time and funds that can be invested into the venture, the bootstrapping approach can look very different.
For those considering this option or are looking for tips in this realm, we spoke to two startups about their bootstrapping journey and the biggest lessons they’ve learned so far.
Think about your goals and how you plan to get there
Before embarking on the bootstrapping journey, it’s a good idea to define your business goals, envision the kind of life you’d like to live while leading your business and understand the financial requirements needed to get the business going.
“Different ventures require different capital investments,” says Mohamed Sayed, co-founder of Heuro Labs, a Berlin-based startup utilizing artificial intelligence to build a platform that enables technologies to work in more meaningful ways. After working at various companies—such as Nokia, Yahoo and Symantec—and with large amounts of data in distributed data systems, Sayed was inspired to create a tool that would allow machines to interact with people more effectively.
“Because the technology risk for the project was quite big, I didn’t feel comfortable going out and asking for money,” he recalls. Instead, Sayed decided to pour some of his savings into the venture and hired some people to start working on it. A short time later, his co-founder Martin Popilka joined and also contributed some finances to Heuro Labs.
“One of the first questions to ask yourself if you want to start bootstrapping is what are my capital requirements? And what will I be using the money for?” advises Sayed. Depending on how much personal time, resources and money you can allocate to a project, it’s important to start outlining the type of company you want to build and creating a plan by working backwards. “The biggest challenge is thinking about how you can do it without becoming so stressed that you’re unable to effectively get the business off the ground,” he says.
After several years of bootstrapping the project, the Heuro Labs decided to take a small round of angel investment in January 2016.
Select a tip-top team
“If you have a team that consists of people with complementary skills and knowledge, you’ll be able survive,” said Philippe Brulé, co-founder and CEO of Sponsokit, an influencer marketing platform helping companies build relationships with video creators. While Brulé and his two co-founders—Gaëlle Walrave and Armend Avdijaj—were working at online eyewear retailer Mister Spex, the trio often faced problems trying to reach their target customers while working with video creators on YouTube, Instagram and Snapchat. That’s when they saw an opportunity to solve a problem and decided to start building a software tool that would help brands find influencers to collaborate with when creating video content.
In the early stages of bootstrapping, it’s critical to find core team members that have a diverse set of expertise so most tasks can be completed from within to keep expenses low. “In our case, I was coding, Armend was in charge of sales, revenue and customer relationships and Gaëlle was responsible for blogger relations and marketing,” says Brulé, “The three of us working together meant we could already do a lot for the company and didn’t need external people or contractors – which cost money.” After all, when you’re bootstrapping, every penny counts.
Set priorities and milestones
While bootstrapping Heuro Labs, Sayed said one of the key lessons he learned was to be very vigilant with the startup’s financial resources. One way to do this is to set milestones. He suggests developing a timeline that determines startup goals that should be accomplished when X amount of money has been used up or Y amount of time has passed. Ask yourself questions like: When should the business be making revenues? Or when will the startup be ready to get an influx of external investment?
“If you’re bootstrapping, then you’re inevitably on some kind of clock,” he explains, “And as the clock ticks, you have to ensure you’re achieving the metrics that contribute to the goals you’ve set.”
Stay lean and focused
Bootstrapping often means making some lifestyle sacrifices to accommodate your business plans. Meticulously monitoring expenses, staying scrappy and being flexible are all parts of the journey.
So try to do as many jobs as you can yourself and carefully consider every purchase. “We used technologies that were already there – so open-source stuff or software that enabled us to validate most ideas,” recalls Brulé, “We had to build a resourceful startup in a very lean way and I’m very happy we did it because when we finally went full-time to work on the project, we were able to focus on the important things – because we didn’t have a lot of money.”
Walrave stresses further that a lean approach was crucial during the startup’s bootstrapping phase. “You need to test things and iterate really fast when bootstrapping because you don’t have time—and especially not money—to lose,” she says, “We tried to test ideas in a week or less, and then measured them to see whether the made sense or not. If the idea made sense, we found a way to scale, test and validate it. If it failed, we moved onto the next one.”
Surround yourself with a community
Another big lesson for the Sponsokit team was learning the importance of being surrounded by a supportive community during their rollercoaster ride of bootstrapping. “Working in an office alone is not as good as being part of a community where you can mingle and learn from other people,” says Brulé.
“Surround yourself with other entrepreneurs in the same stage as you, whether that be bootstrapped or seed-funded. The life of an entrepreneur is full of ups and downs and it’s reassuring to talk to other people who might be in a different industry but share the same struggles,” he adds, “It’s nice to know you’re not alone in feeling a certain way.”
The Sponsokit team first started working on the project in January 2015, validated it March, had its first client in July and then became a full-fledged company (GmbH) in October of that year. After bootstrapping for more than a year, the startup took part in the Virgin Media Accelerator, powered by Techstars, in London in April 2016 and received a $120,000 investment. Since completing the program, Sponsokit is back in Germany and now have an office based in Factory.