Startup 101: How entrepreneurs bootstrap their companies to success / Bootstrapping success stories

By
Sandra Dajic
March 16, 2022

To pull yourself up by your bootstraps means to succeed or elevate yourself without any outside help.

As the old saying goes, “Pull oneself over a fence by one's bootstraps.”

This applies to your startup as well. Bootstrapping your business means you grow your business without the backing from investors and having little or no starting capital. That means relying on your personal savings and income to work and expand. It's not easy, but it's incredibly rewarding.

Entrepreneurs who are self-made, the ones that bootstrapped their way to success - are a rare breed.

“Bootstrapping is the minimalistic business culture approach to starting a company, which is characterized by extreme sparseness and simplicity. It usually refers to the starting of a self-sustaining process that is supposed to proceed without external input.” (Wikipedia Definition)


Choose a good co-founder

When choosing a good co-founder make sure their skills complement yours. If you are a product expert, you may need a business development or sales leader to bring your vision to market. If one of the co-founders is in charge of the management and product development, for the perfect balance, the other co-founder needs to be in charge of sales and marketing.

Trust is an essential part of a successful co-founder relationship. In a 2015 study of Inc. CEOs, 68% said their founding partner team remains committed to their startup. Interestingly, 43% of respondents said they started their business with a close friend. You need to know that the other person is as committed to your business growth and success as you are. It takes great dedication, sound work ethics, and pure single-mindedness to achieve success this way.

If possible, it is best to work with people you have known for a while or have worked with before.

Having the right advisor

Even if you and your co-founder have different skill sets, you're unlikely to know everything you need to know about running a business. The ideal advisor complements your strengths and compensates for your weaknesses. Advisors can help your startup grow, but there are downsides. Most advisors will want equity in your business in exchange for their help and advice. Many startup founders value the connection their advisors have to introduce them to professional services (like good connections or lawyers), but they should provide long-term guidance and help make strategic decisions.

Consider Outsourcing

In the early stages of your business, you may be juggling multiple roles. From developing a company strategy to planning product development and building an MVP or prototype, it all starts with you and your co-founders.

You may reach a point where your startup needs more team members, but you don’t have the finances or stability to hire anyone full-time. During this growth stage it’s important to know when to start outsourcing. Hiring an entire team too early can lead to negative cash flow. Fortunately, there are countless ways to get help for your startup online.

Popular freelance sites like Upwork, Freelancer, Fiverr, and more allow you to connect with freelancers around the world.

Keep an eye on your cash daily

When you start, you need to stay lean. The term "Lean Startup" was created by Eric Ries. That means you're creating a fast-growing yet data-responsive startup.

It also means you should always spend on the aspect of the business where you know you have a return coming in due time and that translates directly to happy customers in the long term.

Instead of luxurious office space, choose something more functional. Saving money on simple things adds up over time. In the absence of external funding, this is crucial.

When you’re reinvesting most of your profit, you don’t have money to pay yourself. It will take you years to grow your business to the point where you can pay yourself a decent salary. If you're lucky, after a few years you'll continue to grow and reach a multi-million dollar valuation. 75% of startup founders earn less than $75,000 a year. Even entrepreneurs who have started 6 or more businesses still earn less than $80,000 a year.

Build your brand - Share your story

This is very important for growing your business, especially for building user trust from the very beginning.

In today's crowded market, a strong brand is worth its weight in gold. Your brand sets you apart. It attracts new users and draws attention from the competition. Your brand is a critical factor for B2B decision makers.

Use content marketing tactics to attract users

Content marketing is one of the most effective ways to reach new customers. 70% of consumers believe that brands that create original content want to build relationships.

You can either produce your own content or turn to bloggers and other content creators. One of the most effective content marketing tools a startup can use is to create an explainer video. This is a video that describes in 30-60 seconds how your product works and what the key benefits are. Of course, blogging is not going out of style either. Whatever tactics you choose for your content marketing strategy, make sure you focus on what your users want. Create content that answers their questions and objections.

The Pros And Cons Of Bootstrapping Startups

Pros

  • Bootstrapping is cheap - which means there is normally a low cost of entry
  • The founders’ equity and control over the company are not diluted - you are your own boss, so you call the shots
  • You have the freedom and flexibility to develop your business

Cons

  • Cash flow issues
  • Risk of failure can be high
  • Personal stress

Companies That Succeeded With Bootstrapping

  • Software development platform company, GitHub, launched as a bootstrapped startup in 2008 and was bought by Microsoft for $7.5 billion in 2018.
  • MailChimp In 2000, Ben Chestnut and Dan Kurzius had a design consulting business. His clients were asking for e-newsletters, but at the time, creating them was a tedious process. More than 20 years later, the co-founders’ bootstrapped startup business is estimated at a value of more than $10 billion.
  • Shopify The Shopify founders were starting a snowboarding e-commerce site, but they needed a shopping cart solution. When they couldn’t find one that met their needs, they created one of their own. Today, Shopify has a valuation of over $166 billion.
  • TechCrunch, a technology website, was founded in 2005 by a successful serial entrepreneur, Mike Arrington, along with Keith Teare. TechCrunch was sold to AOL for a rumored $25 to 40 million.7 At the time, Arrington personally owned 85% of the company.
  • Mojang (Minecraft) Minecraft is a household name among gaming fans. Creator Markus Persson had a background in gaming, but he saw room for improvement. He turned nearly $1 billion in profits before selling to Microsoft in 2014 for $2.5 billion.
  • Zoho is a B2B software company that started life in 1996 as AdventNet.Today Zoho is a bootstrapped startup with over $600m in revenue (2021) and 10,000+ employees worldwide.
  • Plenty of Fish, one of the world's largest and most popular dating sites, became a full-time business in 2004. Until 2008, founder Markus Frind conducted his startup from his apartment. The site was acquired by Match Group in 2015.
  • Typeform is a web-based platform founded in 2012  for collecting and sharing information in a conversational and human way.  They have since went on to raise more than €42.9 million from VCs.
  • MessageBird - Founded in 2011, and based in Amsterdam, MessageBird is a cloud communications company that powers omnichannel communications between businesses and their customers. Up until 2017, MessageBird was bootstrapped. After that, and up until today, they have raised over €944 million in funding.
  • MySQL Founded in 1995 ('out of back pocket' and with no exit strategy) and bootstrapped for 6 years. Only at around version 3.X got their first VC investment, but were already established with a popular product. Eventually sold to Sun Microsystems for US$ 1Bn - now through that owned by Oracle.
  • SparkFun started out of the dorm room by selling electronics kits and oddball components to a coterie of engineers who wanted to explore exotic new sensors and systems. Now the e-commerce empire employs 154 and has revenues of $32 million per year.
  • Braintree Payments exchanging money online. Braintree built a better tech solution and survived on the proceeds of those transactions for four years before raising $69 million in two rounds of venture capital, which preceded an $800 million acquisition.
  • ShutterStock Jon Oringer was a professional software developer and an amateur photographer. He combined this set of skills and used 30,000 photos from his personal photo library to start a stock photo service that is currently worth $2 billion. His capital efficiency paid off and ultimately turned him into a truly self-made billionaire.

Bootstrapping companies must constantly look for ways to improve their processes, even without hindsight or millions of dollars at hand.

Conclusion

Bootstrappers may rely on sweat equity, customer funding, personal debt, or personal savings to provide initial capital. A bootstrapping startup is hard work. But you do not need a lot of money to bootstrap a startup. Some of the most successful companies in the world started with less than $10,000. Hewlett-Packard was founded with just $538 in a garage in Palo Alto, California!

You need to find a compatible co-founder with skills that complement your own. It's always a good idea to get advice from experienced professionals, but it's not cheap. You will have to give up some equity. You'll also need to learn when you can do tasks yourself and when it's time to outsource them. Bootstrappers may face cash flow issues and high levels of personal stress.

And while all this is happening, you'll need to maintain a strong brand presence and keep a close eye on expenses.

Bootstrappers, you rock!