Posted on 26 March 2020
Commencing a professional career as an entrepreneur is often marked by seeking support from Startup Accelerators, Investors and Venture Capital Funding Rounds. However, this hasn’t always been the case. In fact, the beginnings of some of the world’s most successful companies have had nothing to do with this “rite of passage”.
Coca-Cola, Apple, Inditex, Microsoft and Hewlett Packard (HP) all started doing bootstrapping, which means launching an initiative with only the resources that one has at hand at a certain point in time. This implies drawing only capital from one’s own savings and the company’s operating revenue when starting a business.
The term began to catch formal use (within the innovation ecosystem) after the Global Financial Crisis, but the expression actually has an origin that is far more ancient. It dates back to the legend of Baron Münchausen, who supposedly managed to get out of water by pulling on his own bootstraps. If the Baron managed success without anyone’s help, then why couldn’t a Startup do the same?
But… attention entrepreneurs! If you decide to embark on this path, then you must be clear on this vital notion: Initial goals & expectations for your project must not be ambitious, and they should be achievable in the short-term. The most important thing is that the business idea flourishes, and the entrepreneur should be the one responsible for making this happen. Lastly, be sure to be endowed with sufficient funds - “Cash flow is king”.
Bootstrapping’s main advantage follows this simple logic: The entrepreneur who obtains success without initial investment, maintains total control of its affairs and thus becomes the primary owner & CEO of the company. But that’s not the only benefit.
That person would have creative freedom to define the company’s identity. This proposed new identity could seem crazy at the beginning, but if the entrepreneur works towards it and is passionate about it, then it might still captivate others. It is often said that when resources are limited, creativity surges.
Regarding money, bootstrapping should force one to be more conscientious with it as it will prompt “smarter” spending habits. Since investments will be personal (as the entrepreneur would be spending his or her own personal capital), any venture should target a type of return.
The coined phrase "the customer is always right", is even more fitting with bootstrapping. The entrepreneur will learn to value & cherish clients being that they will be the company’s primary source of revenue. One should aspire to satisfy their needs by focusing on what they truly want.
Even so, there are still some cons to bootstrapping, since all financial risk gets assumed by the founder and growth can get stumped if demand exceeds the company’s capabilities.
But don’t get disheartened. HP was created in a garage by two university students, William Reddington Hewllet and David Packard, who invested a mere 538 dollars to give birth to their enterprise. Now, it sits as one of the biggest companies in the world.Bootstrapping doesn’t sound all too bad, does it?