Bootstrapping. Some call it the holy grail of building a startup, others don’t even know what it means. So before we tell you about all the insights from our Stammtisch #61, let’s take a look at how businessdictionary.com understands bootstrapping:
“Building a business out of very little or virtually nothing. Boot strappers rely usually on personal income and savings, sweat equity, lowest possible operating costs, fast inventory turnaround, and a cash-only approach to selling. Many of today’s largest corporations (such as Apple computer, Clorox Co., Coca Cola, Dell Computer, Hewlett-Packard, Microsoft) began as boot-strapped ventures.”
So basically, bootstrapping means taking no outside capital and funding your business solely with your personal finances and your company’s first incomes. Sounds hard? It definitely is. However, there is a lot to it, according to our awesome panelists, Claudia Eder (tubics), Klaus Furtmüller (jobrocker and jobiqo) and Peter Steinberger (PSPDFKit).
First things first – why should you consider bootstrapping? For many it’s a question of principle – not taking in any outside investment also means not giving away equity – the company stays truly yours. But Bootstrapping also means focusing on what should be at the core of every business – creating value for the customers. Since you need your customers to buy the product or service as soon as possible you’re extremely focused on making something people love and will pay for. Klaus Furthmüller put it like this: “You’ll learn how to make money”.
When to bootstrap?
As just discussed, one of the big advantages of bootstrapping is that you’re forced to focus on customer needs and development, building a great MVP, building something your customers will love and get value out of. There is no other way since you need to make money and making money depends on whether the customers like your product or not. Claudia calls this the “guiding star of bootstrapping”. In theory, we know that virtually every business should focus on this. But the reality often looks different. When Peter’s previous company scored an investment in the beginning, the team spent an entire year building a product before they started market testing.
When not to bootstrap?
As everything, bootstrapping has its downsides, too. One of them is that everything relies on you – and your co-founders, if you have some. Most likely, there is no money to hire a team in the beginning, so you have to do everything yourself, even the parts you are not good at or don’t enjoy that much. Additionally, you might not be able to grow as fast as you would like to. As Claudia says “Bootstrapped companies who have scaled without taking any investment have my biggest admiration”. So, after having bootstrapped successfully for a while and having built your first customer base, some might decide to look for an investment.
In the end…
As always, there is no right or wrong, when starting a startup. But focussing on your customers and getting them to show that they are willing to pay for your product will hardly be a mistake. What kind of learnings did you take away from Stammtisch 61? Do you have any questions? Let us know and we will forward them to our experts from the panel!
Thank you all for this great discussion and evening!
We can’t wait to see you at our next Stammtisch #62