Minimum Viable Funding
A couple of posts ago in “What Are you Waiting For? Launch Already!” I mentioned the Minimum Viable Product, which is a fancy term for describing a product that has just enough features to make it attractive for someone to buy, and no more. Now apply that same concept to startup funding. Some people, including me, would say that’s what a bootstrapped startup is. But is it?
According to the all-knowing Wikipedia, here’s the definition of bootstrapping for businesses:
Bootstrapping in business is to start a business without external help/capital. Startups that bootstrap their business fund development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture a small amount of money will be set aside for the bootstrap process.
So the issue is whether or not a startup with a small outside investment is in fact bootstrapped, such as Max Foundry (knowing that “small” is relative). My perspective with Max Foundry is that it sure *feels* bootstrapped, but the words “without external help/capital” in the first sentence of the Wikipedia quote lead you to believe that Max Foundry is not a bootstrapped company.
But take a look at this year’s The Crunchies nomination categories. Scroll down a bit and you’ll see the category for “Best Bootstrapped Startup”, with the following description:
To recognize a startup’s impact that has raised less than $150k (from individuals, angels or other sources).
I admit that basing logic on an award might be a tad flawed, but I think the dollar amount has merit. Just because a startup accepts outside funding, for say less than $150k, doesn’t mean the company is not bootstrapped.
Maybe there should be a different term to describe how startups like Max Foundry are financed, which is to say, with just enough to get by. And then it hit me:
Minimum Viable Funding
Like how a Minimum Viable Product has just enough features to ship, a startup with Minimum Viable Funding has just enough of an investment to move forward:
- The investment covers just enough to launch a product.
- The investment covers just enough to pay the founders a stripped down salary, most likely barely covering their bills, and nothing more.
- The spend rate is tightly monitored, usually daily.
- All money is re-invested back into the company, even well after your monthly revenue surpasses the original monthly invested amount.
The term Minimum Viable Funding feels like a good middle ground between the exact bootstrap definition and startups with large investment capital. And to shamelessly borrow the graphic for the Minimum Viable Product, here’s the intersection:
So what do you think? Does this more accurately describe startups in these situations? Leave a comment and let’s get a conversation going.
