What It Means To Be Bootstrapped

In the startup world, there’s really two kinds of startups. There are those you hear about in the news and on TechCrunch, essentially companies that have raised a lot of angel and/or venture capital money. And then there are those startups without the big financial backing. These companies started on the founder’s savings account, or the founder took out a second mortgage, or maybe they have an investor who put up only a few thousand dollars instead of a few million dollars. These are the bootstrappers.

I’ve launched two bootstrapped startups so far, League Galaxy and Max Foundry. League Galaxy was funded mostly on our savings account, with some serious stretching of the dollar. For Max Foundry we have an angel investor (Bob), but his investment isn’t of the million dollar variety. Make no mistake, this was intentional and our preferred way of getting Max Foundry launched.

So what does it mean to actually be bootstrapped? Well, it all comes down to money. Take a look at some of the differences in spending between million dollar funded startups and bootstrapped startups:

• Million dollar funded startups can hire and pay employees “normal” salaries. Bootstrapped startups are lucky if they are in a position to hire someone, and if they are, they need someone who will work for much less than they could make as a consultant or in a corporate job.
• Million dollar funded startups have monthly advertising budgets of several thousand dollars or more. Bootstrapped startups might have a $10 per day AdWords budget.
• Million dollar funded startups might send a few people to that really cool Web 3.0 conference in San Diego. Bootstrapped startups would love to do that, but then think “That’s 4 days of travel expenses and 4 days not working on our product. Maybe next year.”
• Million dollar companies can hire designers or contract with an expensive design firm to make their product oh-so-shiny. Bootstrapped companies need to do the design themselves or enlist the help of a designer friend who can make it look good enough and do it for maybe a couple hundred bucks.

Bootstrapped startups only have just enough cash to get by, which forces them to be really focused and really creative with how and where they spend every dollar. They can’t afford to be loose with their money because if they are, they most likely can’t recover.

Cash is king for startups, especially for bootstrapped startups simply because they don’t have much of it to begin with.

Similar Posts:

• Minimum Viable Funding
• Determine How To Sell, Then Build
• Introducing League Galaxy