How To Bootstrap Your Business To €100k!
Zero To €100k Revenue In 12 Months — Month 9
Funding — The Hard Lessons
“Unfortunately in this round you haven’t been successful,” the disinterested voice on the phone informed me. But he added, “you’ll get it next time, its just 3 months away”. I informed him that by that time we would be out of business.
We were number 16 on a list of 15 companies that received €50k funding. Tiny margins, big impact.
24 hours later, my co-founder and I sat in her garden and after 2 hours of debate, terminated the company on the spot. It was over.
The story above is from one of my earlier startups and it is the reason why I promised myself that my next business would be 100% bootstrapped.
I made a deal with myself. It will work from day 1 or it won’t. I would never put my success and future in the hands of an arbitrary external decision.
Success is not funding. Sales is the only true marker of success.
Beware False Gods
Initially our startup idea attracted interest and we secured €20k within a few months of starting the journey.
This was probably the worst thing that could have happened to us at this early stage. It made us think that funding was the only way to scale the business and we proceeded to pour at least 30–40% of all manpower time to exploring funding options, doing paperwork, preparing presentations and all the networking that goes with it. There were 3 of us working in the team, so that meant one person’s time was exclusively tied up in this. Madness.
When we closed down, I was angry at the funding process, angry at the investors for not seeing the brilliance of our idea and angry at myself for letting us get this far into the hole. In truth, we were completely delusional. I wouldn’t have invested €50k in us either.
I started my current business for less than €500. My only initial costs were a domain name, hosting and my time. People tend to overcomplicate the startup process but in truth, that can often be a procrastination excuse for not starting.
“If you really want to do something, you’ll find a way. If you don’t, you’ll find an excuse.” — Jim Rohn
Why Bootstrap?
There are plenty of reasons for self-funding your own company but they differ for everyone. The main reason is usually lack of access to external funds such as bank loans, investors or Government grants. For me it was the following:
Control — Live and die by your sword. As a 100% owner of a business, you chart your course to success or failure.
False Gods — Companies love firing out press releases celebrating another funding round. Better to be known for a fantastic product and service than owing a VC fund €10 million.
Distraction — Time spent applying for grants and funding is time that should be spent selling or developing your product.
Flexibility — The minute you sense the market moving in a certain direction, you can take immediate and often critical action. When you have a monthly board meeting, you are often more focused on preparing your slides and reports rather than moving forward with critical immediate issues.
What do you want/need it for?
Some companies will need funding to start. Elon Musk didn’t build Tesla by going to his local hardware store. However, you need to ask yourself what exactly you need funding for? Are you really just seeking funding as external validation of your idea?
Could you strip your idea back to the simplest parts and launch that? Do you really need all those features to get your first customers? In all cases, this is a definite no, you don’t.
To stay with the Elon Musk example, he built the first Tesla Roadster using a Lotus Elise and simply stripped it back, removing the engine and installing electric motor. It barely worked, it overheated and broke down but it proved that electric cars could be done!
Mo’ Money, Mo Problems
The most famous cautionary tale of seeking too much funding is the recent case of Nigel and Lesley Eccles, Tom Griffiths, Rob Jones, and Chris Stafford. The original founders of FanDuel, once valued at $1 billion, sold recently to Paddy Power for $465 million. The founders stand to receive absolutely nothing from the sale. ZERO dollars.
They had diluted their original shares so much by raising over $400m that by the time they sold up, their shares were effectively worthless.
Is it the only way?
It’s really important to bear in mind, that all my articles are based on my personal experience and my opinion. Maybe its the right path for you but equally it could be completely wrong. Listen to everyone’s thoughts and opinions, they have learned through often costly and painful experiences. But when it comes to starting your own business trust your gut and don’t be swayed by external pressures.
“Most people are other people. Their thoughts are someone else’s opinions, their lives a mimicry, their passions a quotation.”
― Oscar Wilde
Bootstrapping To-Do List
Strict Customer Credit Terms — 14 days net and keep a really sharp eye on costs. This means your customers should/must pay your invoices within 14 days.
Pay As You Go— Use monthly services, that you don’t need to pay large yearly fee’s to use. Surf Accounts, Gmail, Squarespace, all offer monthly options.
Track Marketing Spend — You must know that every marketing euro/dollar is bringing you in customers. Ask every single potential customer where and how they heard about you. So simple, but so few companies do.
Pay Your Suppliers — In full and on time. Not only is this good business practice but it ensures you know exactly what is due and when it is due. Set yourself extremely strict rules for payment.
Bootstrapping Not-To-Do List
Ignore Cashflow — In the early days, there will be zero room for error so you’ll need to ensure you have enough cashflow to meet monthly outgoings such as hosting, supplier bills etc.
Treat Yourself — Only buy things that help you make sales or help you attract new clients. Don’t buy yourself a new laptop, phone, etc. unless it’s critical.
Hire Excessively — This is a fine line to walk. Staff will help scale your business but hiring too early is a serious burden on cashflow. Keep it lean until you have a cash surplus in the bank.