bootstrapping Archives

The Military Strategy “Bellum se ipsum alet” applied in Startups

“Bellum se ipsum alet” is the startup equivalent of Bootstrapping. The Latin phrase bellum se ipsum alet describe the military strategy of feeding and funding armies primarily with the resources of occupied territories. The phrase was coined by Roman statesman Cato the Elder, is associated with the Thirty Years’ War (1618–1648).
The strategy Includes :

Understanding the most resource rich and strategic locations.(The Beach Head ,Mountain top ,Vantage Points,Oil fields etc )
Choose the perfect Time to attack.
Attack and grab the territory with stealth and speed with zero or minimum damages.
Use the resources of occupied territories to fuel the war and expand into new areas.

“Bellum se ipsum alet”(Bootstrapping )in the context of entrepreneurship means starting a business without getting funded by investors or by means of capital in exchange of a liability,shares or board seats etc .Bootstrapped startups fund the development of their company through internal cash flow,and ,are deliberately slim with their expenses .(,Otherwords with the resources of occupied territories and resources. )

Following are some of the compelling reasons that make bootstrapping the ultimate Startup Warfare Tactic :

1) Bootstrapping promote conducive situation for prototyping and experimentation to find what really works and what not .This will help us to pivot adapt and change our ideas .Founders will not get external pressure to deliver ,so they can use the time to refine their products in real conditions .As Steve Blank said “Startup is a search for repeatable and scalable business models”.

“Rouse him, and learn the principle of his activity or inactivity. Force him to reveal himself, so as to find out his vulnerable spots” (And opportunities ,Blue oceans etc)Sun Tzu

2) Startups can grow by reinvesting profits in its own growth if bootstrapping costs are low and return on investment is high.

“Opportunities multiply as they are seized.” ‘
Sun Tzu

3) Bootstrapping approach allows owners to maintain control of their business and forces them to spend with discipline.

“One mark of a great soldier is that he fight on his own terms or fights not at all.”Sun Tzu

4) It allows startups to focus on customers rather than investors, thereby increasing the likelihood of creating a profitable business.

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. ”Sun Tzu

5) Bootstrapping help us avoid the trap of scaling up too fast, too early without making the foundations strong .Allocating resources beyond the essentials on growth before nailing the product/market fit or what Steve Blank calls “Repeatable and scalable business model”.

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win”Sun Tzu

6) Bootstrapping will keep us away from limelight and media attention .This helps maintain the secrecy and avoid attention from big players and strategic competitors .

“Let your plans be dark and impenetrable as night, and when you move, fall like a thunderbolt.”
Sun Tzu

7) Bootstrappers are experts in Guerrilla warfare. Bootstrapping will force us to improvise and innovate. When we know no help is coming for us ,we will improvise with Gorilla Tactics. Guerilla strategy aims to magnify the impact of a small, mobile force on a larger, more-cumbersome one.

“Make your way by unexpected routes, and attack unguarded spots.” Sun Tzu
“Great results, can be achieved with small forces.” Sun Tzu

8) In bootstrapping “SPEED of adaptation” is the ultimate weapon ,which the funded startup may not enjoy because of expectations and officially communicated goals,ideas etc .A bootstrapping startup can find an idea ,validate the product in the real world; adapt and change swiftly.

“If quick, I survive.If not quick, I am lost.This is “death.” Sun Tzu

9) Bootstrapping facilitates the Paul Graham strategy of “Doing things that does not scale ”. Its importance lies in the learning experience we get by exposing to the diversity, building of mental models and reference data points for adequate adaptive responses in the future.

“Do many calculations lead to victory, and few calculations to defeat” Sun Tzu
“The end and aim of spying in all its five varieties is knowledge of the enemy; and this knowledge can only be derived, in the first instance, from the converted spy. Hence it is essential that the converted spy be treated with the utmost liberality.” Sun Tzu

10) Only one thing matter in a startup.That is a Product Market Fit with a Repeatable And Scalable Business Model.Big pockets allow us the opportunities to enjoy the Peripheral Vanity like a fancy building ,media glare etc .All of which may ultimately dilute our focus on the customer and the product market fit .(These may comes under what Lean Startup guru Eric Ries calls vanity metrics.)

“No ruler should put troops into the field merely to gratify his own spleen; no general should fight a battle simply out of pique.If it is to your advantage, make a forward move; if not, stay where you are.” Sun Tzu

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Bootstrapping? Some Survival Tips (from another bootstrapper)

In my earlier column, I shared the pros and cons of bootstrapping. After all, it’s a decision that you stick by for a pretty good amount of time.

Bootstrapping isn’t about one’s inability to raise funds – it’s a choice you make. To play the game you want to, by not depending on investor money – but on customer money. That is, you can’t afford to have fancy metrics for customers. But, products your customer wants to buy from you.
Assuming you ar a happy bootstrapper, here are some survival and growth tips for you (fyi: I have been bootstrapping for the last 6 years. We said NO to several investors, primarily because we wanted to be in the control of our journey).

Wants vs Needs

When you are funded, you can afford to spend money on things you don’t need – fancy office, furnitures, stationary etc etc.
When you are bootstrapped, focus on things you need. Wants come later – you can always have fancy office, furnitures, stationary etc etc at a very posh location – but it’s time to focus on building products and solutions that matter to your customer.
So hold on to your wants and focus on needs. Having said that, don’t be stingy. Spend where it is important – but do ensure that you aren’t trying to be somebody else.

Don’t read too much of funding news

You aren’t chasing the funding beast – so don’t read a lot of funding news. It might just make you a bit more insane.
Better – read up about your industry and be in the know of important trends, customer movements and activities.
Remember: you aren’t in the cool zone. You need to build and sell. You can’t afford to take your eyes off the revenue target.

Involve your team. Be transparent.

While you are comfortable with your bootstrapping status, your team will be impressed by the glitz that funding brings. Fancy office, furnitures and salaries too.
As a founder, it’s your responsibility to ensure that the team knows why the company has chosen to take the bootstrapping route and not raise funding.
The impressionable minds might just think that the company failed to raise funding – so be transparent about the internal goals, the roadmap and spend time with your team

Celebrate small wins

As a company, you will have your own share of hits and misses. More misses than hits (let’s be practical).
Celebrate wins with your team – no matter how small they are. Again, you don’t need to go to a pub for each and every small win. Learn to be frugal (have ice creams) but ensure that you celebrate each win – big or small (they all count).
This keeps the momentum going and keeps the team motivated.
Remember: bootstrappers need to take the entire team together and make them believe in the bigger cause. Unlike your funded counterparts, you have lesser ammunition – but it’s not the size of dog in the fight, but the size of fight in the dog that matters.
Make it count!

Bootstrapping Mistakes That Entrepreneurs Often Commit

Close to 50% of startups shut down within the first three months. Apart from scaling up the idea, managing finance /capital is really important for founders to know.

Here are some of the mistakes bootstrapping entrepreneurs often commit.

Not taking care of finance

This is an extremely important habit for any entrepreneur to build – i.e. taking care of one’s finance and always be in the know of runway one has.
No matter what your funding status is, you need to pay your bills, employee salaries, infrastructure costs (for e.g. website hosting) etc. You do know how much money you need to shell out every month – it’s really important to have a sense of working capital and the runway you have.
Finance management is a discipline – you let it go and there will be some really bad surprises on your way!

Not taking salary

In the first 4 years of my bootstrapping life, I wasn’t withdrawing any salary. While it looks good to the world outside, the reality is that I was in a very tight spot.
My logic was that I need to spend the profits/revenues back in the company, but when you woke up a day to realise that you just don’t have enough money to survive, you can’t think of running a healthy business.
The easiest corollary to this is when the air hostess tells you that when there is a low air pressure (i.e. tough condition), you need to wear the oxygen mask first and then take care of others (for example, kids). Because if you can’t take care of yourself, how can you take care of others (including your company)?
More than that, one needs to respect one’s time and efforts and while you don’t need to take market salary, you should withdraw enough to live a healthy lifestyle (assuming you/the business can afford it).
Make sure that you have a sustainable lifestyle and your family is comfortable with your entrepreneurial avatar.

Overspending Due to Peer Pressure

As a bootstrapper, you need to realise that you can’t take off your eyes from the target. While your funded competitors are spending on fancy office spaces, furniture, games and infrastructure, you need to be smarter with your money.
You may not be able to spend on fancy things, but ensure that you are spending smartly on employees and make your office a great place to work/spend time.
Be assured that sometimes your team/employees will ask you whether you are a miser when it comes to spending money (because your competitors are spending a lot), so always ensure that you align them the company vision.
Rethink Bootstrapping When the Timing is Right?
After a certain point in time, you might need more capital to scale the company. Don’t shy away from raising funds – just because you have been bootstrapping too long.
Happy scaling up!

Bootstrapping? Hot or Not? Some Perspective

Given that startups are often measued on how much funding have they raised, does it make sense to bootstrap?
By bootstrapping, I don’t mean one’s inability to raise funding – but a decision to not raise funding and instead run the business on *customer funding*.

As a bootstrapper myself (for the record, NextBigWhat.com never raised any external funding till this date), I am often asked on pros and cons of bootstrapping and whether it’s a good way to build a business.
Here is sharing a few perspective that I hope will help you decide.

Bootstrapping: Why It’s Cool [PROS]

You are your own boss.
There is nobody to report to. No boss. No investors. Nobody is asking for weekly updates. Importantly, you can decide on the companies’ direction / take risky bets.
Freedom.
You are free to take the path you’d like to. It’s your bullet (or car whichever you prefer), your petrol. Drive wherever you want to. Stop wherever you want to.
Helps Stay Focused
Unlike investor focused businesses, you clearly know that your only source of income is customer money, which basically translates to only 1 thing – build a great product/ service and do whatever it takes to sell.
That is, you have very less distractions to worry about. You aren’t buying into *creative* metrics (GMV et al), but the only goal is customer dollars.

Bootstrapping : Why It’s NOT Cool [CONS]

You are your own boss.
And that’s the hard thing about it. You don’t know when you are slipping / when you need a ‘kick in the butt’. Nobody pings you for any business update (unless you have advisory board).
You are a free bird. Fly or die! Nobody cares.
Credibility
Be it about hiring or sales, your credibility is defined by who is talking about you. Media won’t care because you are not a ‘sexy story’.
Having investors brings a lot of credibility. Everybody starts taking you more seriously, just because you have a few branded backers.
Growth Vs. Revenue Debate. Every Day!
From morning to evening, you will be struggling with growth vs. revenue (rather, profit) debate.
If you look at the current startup ecosystem in India, profit is considered a dirty word.
Everybody is talking growth (and an innovative term called GMV). But for those who are bootstrapping, growth mandates one to infuse more money – which simply mandates more revenue (and better profit margin).
That is, you do not have the liberty to lose sight of revenue and instead, focus on the growth (or play with funny metrics like GMV). This can potentially delay your plans – but that’s all what it is
In all probability, bootstrapping does mean that your runway is not just shorter, but also you have very little fuel left.
To some, it helps stay focused (there is no money to play around with – so better build a rocket that won’t explode). To some, it brings a lot of fear factor as well (especially when you know that your competitor has raised a massive round and is underpricing to win your customers).
Whatever it is, keep walking and keep selling.
Happy Bootstrapping!

Bootstrapping ? Some tips on surviving

Bootstrapping isn’t about one’s inability to raise funds – it’s a choice you make. To play the game you want to, by not depending on investor money – but on customer money.

That is, you can’t afford to have fancy metrics for customers. But, you just want to focus on building products your customer wants to buy from you.

Assuming you are a happy bootstrapper, here are some survival and growth tips for you (fyi : I have been bootstrapping for the last 6 years. We said NO to several investors, primarily because we wanted to be in the control of our journey).

Wants vs Needs

When you are funded, you can afford to spend money on things you don’t need – fancy office, furnitures, stationary etc etc.

When you are bootstrapped, focus on things you need. Wants come later – you can always have fancy office, furnitures, stationary etc etc at a very posh location – but it’s time to focus on building products and solutions that matter to your customer.

So hold on to your wants and focus on needs. Having said that, don’t be stingy. Spend where it is important – but do ensure that you aren’t trying to be somebody else.

Don’t read too much of funding news.

You aren’t chasing the funding beast – so don’t read a lot of funding news. It might just make you a bit more insane.

Better – read up about your industry and be in the know of important trends, customer movements and activities.

Remember : you aren’t in the cool zone. You need to build and sell. You can’t afford to take your eyes off the revenue target.

Involve your team. Be transparent.

While you are comfortable with your bootstrapping status, your team will be impressed by the glitz that funding brings. Fancy office, furnitures and salaries too.

As a founder, it’s your responsibility to ensure that the team knows why the company has chosen to take the bootstrapping route and not raise funding.

The impressionable minds might just think that the company failed to raise funding – so be transparent about the internal goals, the roadmap and spend time with your team

Celebrate small wins

As a company, you will have your own share of hits and misses. More misses than hits (let’s be practical).

Celebrate wins with your team – no matter how small they are. Again, you don’t need to go to a pub for each and every small win. Learn to be frugal (have ice creams) but ensure that you celebrate each win – big or small (they all count).

This keeps the momentum going and keeps the team motivated.

Remember : bootstrappers need to take the entire team together and make them believe in the bigger cause. Unlike your funded counterparts, you have lesser ammunition – but it’s not the size of dog in the fight, but the size of fight in the dog that matters.

Make it count!

Bootstrapping My Way Amongst Fund raising Unicorns !

I am an Entrepreneur & started Nurturing Green in 2010 when a friend of mine Gifted me a Zodiac Plant in Austria & I thought of how kool it will be to create a business model in India where Gifting is an inherent behaviour & flowers category is seeing de-growth across the world. Shifted back to India in 2009 where I saw myself juggling to start my journey without Parent’s money & no savings at all. Somehow, with the help of friends, family & fools, I was able to crawl the first few milestones of my startup journey. We raised a small Angel round in 2011 beyond which we bootstrapped & grew through customer money ever after.

Today, after 6 years we are a 100+ organisation bootstrapping to become India’s biggest Gifting Company along with helping our customers create Green Spaces Indoor through Live Plants & related products , bringing Fresh Air inside & even creating world class Landscaping for cities/govts . Along with Presence in 11 cities & being omnichannel , we are also showcased in Harvard Business Review twice & have won many national awards including ET-Power of Ideas .And yes we are healthy EBIDTA Positive & growing Y-O-Y at 3 digits . Such long eventful entrepreneurial journey has taught us few lessons which I would like to share :

GMV etc etc is crap, Unit Economics is the only nirvana : Post Flipkart era, i.e, 2011–12 it was all about GMV. You give out Investor’s money into exorbitant Salaries & crazy Discounts thinking customer behaviour will change which might reverse back after removing extra non sustainable incentives. While we went out to raise money too to expand in 2012–13, we have been tagged as ‘Lifestyle’ business & non sexy to be touched by prolific investors as they couldn’t have cash out easily (Well they didn’t in Ecom case too yet ! ).Today when I look back, I am thankful to all the rejections (more than 30+ BTW 🙁 ) as they made us learn the basic principles of business . How to make world class products & how to drive higher growth rates with minimal costs.
Topline is sexy to have, Bottomline is Sexier & Cash Flow Positive is Orgasm : I have learnt this after 5 years of my journey. I always thought of increasing topline by burning cash & thinking I will be able to bring the bottomline to required nos & cash flow + post burn. I was wrong !!!! & I learnt it early.We made this a basic pillar of every expansion we did in terms of hiring to geographic growth to increasing more retail presence. Today more than 80+% retail points make money & 20% will do in next 6 months max or we close it.
Understanding why you need Money : In 2013–15, it was fancy to say to people that we raised $ X million or become a me too brand & raise easy money w/o a correct business model. Things have taken a U-turn & again in 2016 , investors are talking about Unit Economics or why you need money for—Expansion or burning into discounts etc ?No real business can work w/o knowing these basic sustainable practices or a foreseeable sustainable business maths . One should know if he/she needs money to grow & is the unit maths making business sense before raising money.
Customer Money is the best Money : Ohh we have been so blessed to bootstrapped this whole time. Last 4 yrs have been really tough & we were always tempted to raise money through equity (Not that we were getting it in 2013–14 !!!! ) . But somehow we managed to gain more traction, get repeat customers , make real net money & BOOM ! Our cash flow today is positive.Even as base has increased, we are budgeting to reach 2–2.5X growth coming fiscal without external equity money . Thanks to the future inflows we can predict from our lovely customers !

Adversity makes you Innovate : Pre 2011 was a very tough phase in my life. I had to live for a year in my Girlfriends apartment to save living costs. I begged for even 10,000/- for many months from my siblings to give our only gardener salary. But that made me a stronger person & made me learn how to live & survive in bare minimum costs. In 2013–14 when we were not able to raise money & our growth couldn’t be survived with the cash flows coming in, hence we had some real BAD days.I cried, I failed, I gave up & re-started, Again next day failed & again started , Finally I survived !
But in this phase, I learnt to innovate in everything we did ! Right from saving costs (We worked from an Apartment with 8k rental only to getting 2nd furniture for office ) to making better Retail deals. Now innovation has got into our blood & as we expand is getting into our culture.

[About The Author: Annu Grover: #Entrepreneur #GreenEvangelist #Storyteller #Founder #StartupGuy #NurturingGreen.]

Why is NOW The Right Time To Stop Calling Your Bootstrapped Startup A #Startup !

Many entrepreneurs have been zoning in the startup landscape, but only in a literal sense. While they might have moved past that territory, it’s difficult even for the founder to assess if to be called a company or not yet.

According to the GEM global report, more than 100 million businesses launch annually. As we know it, more than 90% of those fail. And of those that stay, let’s accept that not all of them can be startups perpetually. The longer their lifespan, the higher their chance of survival in the market. So if I were to gratifyingly summarize this into a stanza, this is what it’d say-

Startup startup everywhere, most of them do sink,

Startup startup everywhere, but few do make it to the ring..

The following list might be helpful to assess how far you’ve traveled through the startup land and when is the time to dust its shavings off .

The reason? Because you need to come out of the startup zone; which at times becomes a comfort zone if you’ve done it for a long time. Because you can’t continue to solve the same set of problems if you desire to march your way into the growth factory. And because you need to emerge as a company with a credible brand in the market.

So here we go-

1. You’re thinking profit as opposed to product market fit– you are no more in survival mode. You’ve attested Charles’ theory of being fit enough to join the race. You keep a close eye on your profit numbers and not just your revenue. Running your growth engine at full speed is your utmost priority so you are even willing to feed in all the profit back onto the belt.

2. You’re on a constant mission to improve operations– Researching the right tools is your new-found interest. You’d go to any damn roundtable session just to see what tools other players, who are peeping from the heights, have used to scale. You’re on a constant mission to automate all those recurring tasks that take a lot of your team’s effort and time.

3. Hiring becomes a continuous process– There were times when a need to add another person to the team was felt just because there was too much on the table for yourself. Then you were hiring to complement skills. But now you hire because you need to maintain a constant pool of good candidates who could help your growing team in any which way.

But obvious, you have started following processes that come with it (read performance reviews, leave policies, office timings), which you might occasionally dislike.

4. You have separated out functions- There were times when you and your initial team wore multiple hats; you were the Devops guy as well as the office boy. But now you have separate departments with dedicated members. Marketing and sales are now different functions, practically enough to sell directly and indirectly.

This helps your team members keep focused and of late you’ve validated the productivity and efficiency in overall outputs.

5. You prepare budgets and roadmaps- You swear by quant-based marketing/sales/ops. You plan all your activities (by far) and track everything against the metrics positioned. The “n”x growth target tags along wherever you go and you have all the forecasting in place.

Guess what, now you also prepare budgets for marketing, sales and HR on the additional things to invest in, apart from the fixed costs.

6. You no longer know the names of your clients- Who doesn’t remember their initial customers? Some of us can say their names even in our sleeps. But as you start growing out of the startup phase, it gets practically impossible to remember their names.

As you grow further, you’ll find them only in numbers and targets, completely oblivious to their names. That’s when things start to get emotional, when the past presents itself in a colorful backdrop. But you hold on to the courage and sheepishly feel happy for the fact too.

7. You spend most of your time “on” your business- Mitchell Harper had written a great article on Pulse called Good CEO’s aren’t busy. He quotes Jack Dorsey on how good CEO’s are editors and not writers.

Once you’ve moved past the fluxes, most of your time goes in strategizing and overseeing operations vs doing things yourself. You’ve got most of the things covered and no task is solely dependent on you. Things are taken care of while you’re away for a vacation and you then know your startup has become quite independent of you.

How many of the above could you check off? At PromptCloud, we’ve successfully checked off all. I’ve seen people measure startup stages in terms of their annual recurring revenues (ARR) or/and the number of rounds of funding they’ve managed. This theory is frustrating as it’s inherently flawed. You might be making billions in ARR on paper and would have put up a team of 1000, but who knows how much of the world’s cash you’ve burnt already and what your losses are?

A friend from the startup fraternity once said that as long as the problems you have while on your entrepreneurial journey keep changing, you are on the right track. So if your problems have changed enough, time to be called a company. Alright, you can still call yourself “a startup at heart” okay?

[Guest article by Arpan Jha from Promptcloud team.]

[NextBigWhat invites insights from our audience. Do connect : editorial@nextbigwhat.com.]

Of Bootstrap Mentality & Red Pills : Key Ingredient for Startup Success

Bootstrap was term coined from the computer lingo ‘booting’ which means starting a computer or starting a chain of processes which eventually starts up the operating system. In the startup world, bootstrapping essentially means funding your own venture and not being too dependent on external sources.

Let’s face it, to have a bootstrapped startup you need grit and total faith and conviction in your product, something a lot of new startup’s find it difficult to conjure. While most startups believe that only funding guarantees success, we beg to differ. Bootstrap mentality is critical for a startup to succeed, irrespective of whether it has raised funds or not. Bootstrap mentality keeps the organization focused on being frugal, innovative and agile. Here are some suggestions on how to maintain a bootstrap mentality while running your organization:

Hiring: Hiring is the key element in any startup and every success story is as good as its team. They say that to make an effective presentation, ask the question ‘Why?’ / ‘So What’ to each slide and if you get a convincing answer, then you are doing good. Ask the same question while hiring someone and if the answer is in lieu with your vision and larger good of the company in a prudent manner, then that’s a good hire.

Going on a hiring spree on receiving funding will ensure that you burn before you earn. Last but not the least, if you come across a ‘proven team’, then that’s just a rabbit out of a hat and you can believe us blindly. Proven teams are highly overrated and irrespective of who says what, they may not be right fit for a bootstrapped company. A young team which proves itself is where you should bet your money.

Spend Wisely: Put need first, want later.

Most startups on receiving funding go berserk with huge spends on office infrastructure, hiring, system upgrades, software’s and all kinds of fancy things. Some even spend on creating apps and elaborate marketing campaigns. This is the sure shot way of burn out before you start making any money. So, question all expenses and never incur it unless you have found out a way to balance it with the money you make. Remember that it is better to be a successful business than to be a popular sink-ship.

Another pro-tip – Keep everything short – small up-front capital requirement, short sales cycles, short payment terms and recurring revenue cycles.

Barters and Associations: Barters from age-old days have been pivotal to successful business deals and if you could compensate a cost with barter, then nothing beats it. It is a win-win situation where there is no physical money spent and a mutually benefitting association is formed. These could actually extend your customer base if you use it wisely. Use it abundantly and wherever possible.

Experiment: To be a bootstrapped company, put on your lab clothes, lab goggles, burn gloves and experiment. Don’t be afraid to think out of the box, try different things, get out of the herd mentality. You would burn your fingers, but a few tests and trials and you would shine.

Similarly, to the way, we at Vista Rooms went ahead and created our mobile app on Instagram, no need to worry about downloads, or upgrades or coding. We could do it because we experimented, so keep experimenting to see what works for you.

Stretch Your Team: They say that God invented e-commerce to sell directly and reap greater margins, use it well. Stretch your team to don different hats be it marketing, operations or sales. The marketing guy can always look at operations when required, or the sales team could help in marketing initiatives. The lesser the number of people between you and the customer the better. This would ensure your team size is optimal.

Product first, sales later: Most startups do the reverse of this.

The focus on sales and upscaling is so high that the product never gets a chance for betterment, till the time it becomes an absolute necessity. By then a competitor would have gained ground and whatever product enhancements you do may not save you. Focus on bettering the product and delighting the customer and rest assured your marketing budgets could reduce down. Genuine customers would always go for better products, no matter the cost. More marketing will not always bring you customers, there has to be a constant focus on understanding customer needs and action on feedback.

Funding is never guaranteed: Successful startup ventures follow this as a quote from the Bible. They would focus on being able to sustain without any funding and manage their overheads in a manner that they are able to manage with little or no funding. They have made up their minds that they will not need funding and work towards that goal. Most bootstrapped companies would worry on expanding business or bettering their product, instead of running behind wooing investors.

Red Pill or Blue Pill: Taking a leaflet from Apple’s ex-chief evangelist Guy Kawasaki’s blog, the Red pill or the Blue Pill dilemma sources from Neo’s quandary in the movie The Matrix, where he is given a choice to either accept reality or be in deep dream space. Bootstrappers take the red pill every day with pride and go deep into the rabbit hole to see how deep it goes.

We encourage you to have a bootstrap mentality, irrespective of whether you have raised a large amount of funding or not. Make your team focused on being frugal and innovative and take the red pill daily.

[About the author: Amit Damani, Co –Founder, Vista Rooms, when not having quintessential talks on anything entrepreneurial, runs one of the fastest growing online aggregator for budget hotels in India.]

Pi of Life : Bootstrapper’s Guide to Buying Used Products [Getting Comfortable and Getting Hooked]

Go lean. Extend your runway as much as possible.
Spend frugally, and more importantly, wisely.

These have been as much part of recent startup folklore as business plans, customer acquisition and the debate about needing a co-founder has been. Living the bootstrapper’s life often involves watching your personal finances as much as you watch the startup’s numbers. Perseverance pays, and is often a function of how much of a financial crunch you’re under. It just makes sense to give yourself the most time to experiment with your ideas.

Of course, then there’s the real world!

And its attendant needs, gadgets, homes to run, places to go to, and every once in a while, you won’t feel like totally giving up on all the little pleasures.

But hey, buy used.

Phone, car, mattress, microwave, earrings, books, utensils, laptop, DSLR, curtains, furniture, CDs, tools, pianos, paintings, whatever.

They’re all available around you. In pretty good shape. Usable, useful, much cheaper!

[Of course, avoid toothbrushes and the like!]

So here’s the “All You Wanted To Know About Buying Used And Were Afraid To Ask” guide:

Automobiles

A friend of mine who’s a serious dieselhead swears by used automobiles. “Its a huge waste of money to buy new – you lose a big wad of cash the moment the car’s driven out of the showroom. Most cars last forever these days, and you can get a detailed service history for most modern cars.”

You’ll save a cool 20-50% at least. If you don’t mind buying really old stuff, 7+ old premium sedans are available at a pittance, and if driven under 75,000 kms or so, and maintained well, will do the job just fine!

Narrow down to a budget, a couple of makes/models you’re interested in, keep scanning the classifieds at multiple options – the TBhp Classifieds, Olx, Carwale, etc. Even better sources are company bulletin boards – especially for intra-company car lease transfers (they can bring in many benefits). Befriend a mechanic at a reliable, recommended service station, pay the man something for his efforts and get him to check the vehicle out for you.

The service history, seller’s candidness and condition of the engine bay, underbody and tyres will give you a fair idea. Remember, batteries need a change every 3-4 years or so, tyres are best changed all together, and scratched windscreens cost a fair bit.

(Some makes and models have known issues after a certain number of kilometres. Watch out for those, and budget for some renovation and repairs.)

Books

If you love books, and read lots of them, then the why’s apparent. Except a narrow niche, books are still pretty expensive especially if you buy many. And personally, love the feel of pages that have already been turned, read and yellowed a little. The lowered prices also encourage you to discover new authors and genres more easily.

Buying pre-read saves you around 35-70%. People who like books and are clearing out the piles at home are usually generous. You can also get free books, once in a while.

Well stocked (and stacked) used bookstores are now part of most of the bigger towns. The folks who run them know their books, and will soon learn your preferences if you’re a regular. Then there’s online communities like Second To None where books are put up for sale at very nominal prices every now and then.

Electronics, Gadgets and Appliances

Not all of us always need the newest, the most advanced when we buy a phone, or a microwave, or a laptop. The brands that keep peddling the dazzling array of features, or capabilities have a need to push them more than you real for the same. This is especially true for appliances – and there are good ones available as a lot of people move town, or upgrade because they can!

Do remember the older stuff was designed to last more than more recent products have been – again truer for appliances. For laptops and DSLRs, older high end stuff oftentimes scores over newer entry level ones in build quality – and might be more than enough for what you need. Do look up the average life expectancy of what you’re trying to buy, though (Why aren’t classifieds building this as a feature? People don’t just buy on price – its always price vs value!).

Solidly built corporate laptops do last 6-8 years very well, and for many a good dual-core or early core2duo powered machine will do just fine – I recently saw a 5 year old one with nice configuration for 10k! For a DSLR, the shutter count is the number to look for. And for phones – well – a solidly built phone that continues to work well and looks solid after 2 years will last that much more easily, not counting a battery change.

But for these, especially for the electronics, trust in the seller is a lot more important than for books, furniture or even automobiles. So a closer group works better – apartment or office mailing lists and communities like Second to None are a better bet than classifieds sites.

Furniture, Toys, And Assorted Other Stuff

You’ll be amazed at what you can find online. Furniture’s easy – but finding good value is a matter of good fortune. Good cycles and musical instruments also usually do not lose too much value. Small household stuff, rare to find stuff, stuff others might think is waste but that use for you, and even stuff you normally think is unaffordable but hey, surprise! ( the piano I saw was just 30,000/-) – you could find it all in there.

Its an art though – buying used. It saves you a good amount of cash, but before you master the art, you must learn the basics …

Don’t be in a rush. The cosmic dance happens at its own pace, and you and that perfect object will be united at the appropriate time
When you see it, grab the opportunity! Analysis paralysis could mean you then may have to wait really long again.
Avoid impulse buying, especially just because its cheap. Defeats the whole purpose.
Be honest in your dealings, and expect the same in return.
It seems tough to start with. But please, lets drop pretences.
It actually reuses/recycles stuff, so pat yourself on the back!
If you get hooked and find yourself looking around your home to see what else you need to buy, get off the groups and classifieds for a bit 🙂

Make a list of a couple of things you’ve been thinking of getting. And go get them, tiger!

[Bonus Tip: Weekend Activity : If you’re in Bangalore, and if the used-bargain-hunting bug totally bites you – pay a visit to BVK Iyegar Road early morning on a Sunday when the streetside used goods market spreads out. There’s every conceivable thing on sale there – and with regular sellers, their standardized pricing, and even interesting warranties on some stuff!! Its a lot of fun to just see the place. And I’m sure every city has its own equivalent of this.]

Reommended Read : Buy/Sell Used Products : Any startup solving this?

Bootstrapping a startup via Consulting gigs ? The Big Question

[Guest article by Indus Khaitan, Partner at theMorpheus. Indus takes a shot at one of the most important question every bootstrapped startup faces, i.e. of finding the right balance between consulting gigs and product development].

Every startup requires cash. It’s not built on thin air as early stage investors think. Money for paying the lawyer, government fees, hiring developers and more importantly paying your rent, food, fuel, etc. An entrepreneur starts with a calculated risk of investing (or burning through) his savings for that 6 months period with an assumption that either a customer would start paying or an investor would bet on it.

In reality, a startup takes longer than the original time frame in most cases. If you planned for 6 months, you’ll take 12 before anything comes out of it. A PPT or a paper napkin plans writes you cheque when you already have money in the bank or sold two startups in the past.

So what do you do? You start doing consulting gigs! Smart entrepreneurs do it all the time. Some short gigs here and there. A lot of entrepreneurs I have known do it to get started after quitting their job. Paul, Bill & Co. did the same in their formative years. The most famous of the consulting stories is how Evan Williams consulted for a year at HP while building Pyra Labs which eventually got acquired by Google. Muziboo is a good example in India where the founders did consulting to bootstrap it.

As an entrepreneur, how do you manage it; where do you draw the line as to not getting distracted completely. There is a chance that consulting gig’s sweet money just takes over your primary passion.

I have compiled a list. Also, including some interesting nuggets from a thread on Hacker News (yeah, I love reading it. More gyaan than a single post anywhere!).

Do a high impact consulting where a gig of 3 months can cover you for 9 months. The math is 3x.
Try to do a gig at a stretch instead of a 2 days in a week stint. It kills the output of your startup but then when you are done, it is easy to just do a complete switchover rather than continuous context switches
If you are doing consulting, treat your own startup like a client, as there may be other people working on this
Throttle your rates, depending on the project and desperation for moolah
Know your deliverable. Pick up hourly rates or visits per month Remember, you have your venture, you do not want to get caught in fixing a bug for days and goes beyond your original estimate.
If you know something and you want to learn more which may help your startup, maybe charge a little less. A counter thesis is that pick up a gig which you are a rockstar at and you can do in your sleep and get paid as well.
If you are doing couple of days in a week, then restrict it to only certain days
Make sure you show up at client’s desk for the work and not really do the consulting gig from your home or wherever your startup is located. This helps you keep it clean and juggle them well
Keep the IP clean. Good idea to let the recruiting manager know that you have other gigs. Of course, sign an NDA as required
Do combined gigs with other friends with complimentary skills
Keep your other team members informed or at least they know that you are not available certain days in a week
It’s easier to do technology consulting than “strategy consulting”

India is a tough place to raise money for your venture — though it gets better by the day; the number of ‘pre-series A’ venture deals are still in double digits every year. Consulting is one way to bootstrap it.

Have you done consulting gig while bootstrapping your startup? What are the things you did to keep it clean? What else?

[Reproduced from authors blog]

Related Question: Consulting while product development ?

[img credit: picman1108, via flickr]

Advice From Founders Who Bootstrapped Their Way to Success

[Guest article by Prof Vivek Wadhwa. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University.]

In my last post, I discussed why the odds of a rookie entrepreneur getting seed financing from a VC are very slim. The reality is that less than 5% of venture money goes to seed-stage startups; VCs typically invest when a company has a working product, a tested business model, and a strong management team. It’s the entrepreneurs who take the risk; not the VCs. They beg and borrow money from friends and family, max out their credit cards, and sometimes make do by living at home with their parents. Yet, very often, it’s the VCs who get the glory. I don’t think that’s fair. So in this post, I’m going to highlight three bootstrapped companies, and share the advice of their founders. In my books, entrepreneurs are the real heroes—those who make the innovation happen. They are the ones you should be following on Twitter and learning from, notboastful VCs.

Take Chicago-based Threadless. Its founder, Jake Nickell, built a very profitable $40 million business by bringing crowdsourcing to the mundane world of t-shirt design. Threadless sells millions of tees every year and has been growing annually at double-digit percentage rates. It was founded in 2000, after Nickell, then a 20-year-old web developer, won a t-shirt-design contest. With an investment of $1000, he built a website to which people submitted t-shirt designs, and the favorites were printed in limited-edition runs. In 2006, the company had gained traction, was generating nearly $10 million in revenue, and took a small investment from Insight Venture Partners.

My Q&A with Jake:

Would you have taken a VC investment if you could have, when you started?

Definitely not, as I was starting a hobby and not a business. It’s kind of like asking if I would consider a VC investment to help me start learning to skateboard. Sure, I’d spend a couple hundred bucks on a board, some pads and maybe some materials to build a ramp, but I’m not looking for millions or even hundreds or tens of thousands to just create something for fun. Even if I was starting a business, I don’t think I was raised that way or have that type of personality. I didn’t even have my first credit card until I was maybe 23, so I really just don’t do well with spending money I don’t have.

Why did you take investment and how has that experience been? What changed after taking VC?

We were having major operations trouble and weren’t incredibly excited about fixing it ourselves. I never finished college and my background is more in art/programming. In ’05 if you ordered a tee during our holiday sale, you’d probably get it three weeks after Christmas. We had a few choices… outsource all that stuff (but still have to manage it), work with consultants to help us figure out what to do, or to get someone who knew what they were doing to invest in the company and help us. We felt that last option was best.

The experience has been great. There was no shortage of interest from VC firms in investing in us, so we got to be pretty choosy about whom we worked with. We got really comfortable with Insight as they had some programs in place for helping us, and we got along really well with them. A lot has changed after taking the VC—we are now operationally sound and actually ship orders out in a decent timeframe!

What advice would you give fellow entrepreneurs?

If you want your life to be fun as an entrepreneur, I suggest going into it with realistic expectations and to measure your success in different ways than financially. I’ve done well financially with Threadless, but if I had to give up one thing, the money would be the first thing to go. The happiness, relationships, enrichment in others’ lives, the community that now exists; the opportunities brought to artists—that’s the success that really matters for Threadless. Build your business in a way that lets you say that, and mean it too.

Pointabout is a Washington D.C. based startup that markets a mobile-application builder, AppMakr.com. Founded in 2008, by Scott Suhy, Daniel R. Odio, Sean Shadmad, and Isaac Mosquera, the company started building custom apps for companies like Disney, The Washington Post, Newsweek, and Politico. They used this revenue to fund the development of their flagship product. Two years later, the Pointabout is profitable, with revenues approaching $2 million annually. It’s not that the founders didn’t try raising VC; things are even tougher in D.C. than in Silicon Valley, so they decided to bootstrap.

My Q&A with the team:

Would you have been better off if you could have raised VC when you started?

We’re really glad we didn’t. It’s easy to burn through a lot of cash trying to figure your business out. Bootstrapping (especially in a recession) has forced us to focus on what works, and on gaining traction. The right time to take money is when you have something that works and you want to blow it out of the water with explosive growth. Taking money too early often hurts more than it helps, and looking back on our growth, we believe that would have likely been the case with us.

Did you have to make major tradeoffs by going down the custom development/consulting route?

Sure, we made plenty of trade-offs. Many tough round-table meetings. We funded our growth by developing our AppMakr.com product based on custom app consulting revenue. This month we’ve been successful enough to break out our P&Ls so we can draw a line in the sand between the consulting and product divisions. We’ll continue to separate these two as we grow. The product drives consulting revenue when clients want features that it can’t provide. And since the consulting side is close to the customer, it helps drive our product roadmap.

What advice would you give entrepreneurs?

Focus hard and focus on your core. Almost anyone can make any one thing great if they focus on it and dedicate their life to it. If all you did was think about how to make one specific thing awesome every day, you would succeed.

Entrepreneurism is glamorized and romanticized, but at the end of the day, it’s really, really hard work, and it requires a lot of sacrifice—not just from you, but from the people around you. Make sure your friends and family are ready to support you, and then jump in. Don’t let the fear keep you from doing it. You only live once, so if this is what you’re passionate about, don’t have any regrets looking back on your life. Just do it.

I’ve written about the dearth of women and minorities in tech entrepreneurship. Timothy Bernard Jones, an African-American entrepreneur, is one of the rare success stories. He founded Buzzient in 2007, to market a SaaS application that enables users to integrate social media into business applications. It allows Oracle CRM to integrate data from Twitter, Facebook, and YouTube, for example. Having been an associate at a VC firm in his past, Jones decided to forsake VC and to bootstrap instead. He wants to build considerable value before seriously considering venture capital. With revenues in the “low millions of dollars” and having achieved profitability, Buzzient certainly seems on track.

I asked Tim how much of a factor his skin color was in his decision not to raise VC.

I wouldn’t say being black put either me or Buzzient at a disadvantage, but bootstrapping has been a big advantage. I have had absolutely no illusion about being able to walk into a VC pitch wearing a t-shirt and flip-flops and walk out with a term sheet. I know that if I had dropped out of college, there is no way I would be considered “entrepreneurial” or “visionary”; I’d just be “a college dropout”. So, in my case, and for the company I lead, we’ve created a culture of self-sufficiency that is very different from the mentality I see with so many venture-funded companies. Look, we’ve already outlasted tons of venture-funded companies, and I think that’s a direct result of the survival mentality we created early on.

What were the keys to your success?

The first rule is to relentlessly focus on your customers. We have Global 5000 clients, such as Xerox, Credit Suisse, and Perkin Elmer, who rely on Buzzient for social-media insights on their existing and prospective customers. VC-backed companies often go off on tangents based on business-school strategy sessions and the like; as a bootstrapped company you live and die by how happy and successful your customers are, and in keeping them so. Everything revolves around customer focus; what people you bring into the company and when, what technology you build and what features you add to the specification; everything. If we’d not focused as much on customers, Buzzient would not have made it through the recession.

What advice would you give entrepreneurs?

Don’t believe the hype and noise about how “easy” it is to do a startup and how money is literally falling from heaven into startups. Every time I drive by Sand Hill Road, I see clumps of “fresh fish”, shuffling from pitch to pitch, who equate raising VC with having a successful company. Look, this is hard; if you’re really building something of value, it’s going to be hard, and you have to be prepared to endure a lot. The finish line is liquidity for your shareholders, investors, and employees, not a VC raise.

I’d also advise entrepreneurs to not follow VC insights on what sectors to build companies in. VCs for the most part are following trends, not looking ahead of the curve. So, as an entrepreneur you fundamentally have to do something outside the scope of what VCs are currently investing in; if not you’ll end up doing yet another me-too company that doesn’t stand out. That means you have to consciously ignore a lot of the noise about trends, who got funded, the “blah blah blah” of the tech world. That’s the only way you’ll be able to focus on creating your own unique value proposition.

All these entrepreneurs have great advice to offer, don’t they? There are thousands like these who have paved the entrepreneurial trails—thousands whom you should listen to and learn from.

What’s your opinion?

[Reproduced from Vivek Wadhwa’s blog. Follow him on twitter.]