In my opinion, bootstrapping is one of those terms that get thrown around that mean different things to different people. My definition of bootstrapping has four components:

1. Starting a company with very little to no initial capital
2. Giving away no equity in your business
3. Staying lean
4. Being able to create your own company process/formula

1. Starting a company with very little to no initial capital

I was never really entrepreneurial growing up, it’s a trait I developed in University. I went through my undergrad as a serial entrepreneur, doing little side businesses, or “side hustles” to get by.

My business partner and I would meet up every single weekend, trying to think of a way to make a million bucks (isn’t that what all broke kids talk about?). During one of those weekend chats, we had our “A-HA” moment, and we got to work on our company, which we still operate today.

In my last year of University, I only had a few grand saved, which I dumped all into the company. I come from a hard-working, blue collar, immigrant household, and I knew my parents didn’t have much money, so I didn’t want to ask them for anything.

Being determined to start a company and knowing we didn’t have much money to begin with, we knew that wasn’t going to stop us, so we had no choice but to get creative.

The first resource we needed was a developer to build our software. Neither of us are coders or developers. We also didn’t have 100k in the bank to hire a local developer, so we were forced to think outside the box a little bit. We moved our search overseas, and were lucky to find a very skilled developer, who’s still with us today as our lead programmer.

18 months later, about $14k in initial investment, and not really knowing what we were doing, we finally had a product that was ready to hit the market. It was full of bugs and glitches, but it was just good enough to sell, which we did. We had started our company with very little initial capital, we just found a way to make it work.

Our approach and attitude from the beginning (and still is to be frank), was to “READY-FIRE-AIM”, rather than the traditional “READY-AIM-FIRE”. What I mean by that is, I see a lot of entrepreneurs that I advise and mentor, get too caught up in the business planning and pro-formas, when they should be getting out there and speaking with customers, and just getting shit done. 

Throughout high school and University, we’ve always been taught that if you want to start a business, first you need to have a business plan > then you have to ask your family and friends for startup money > then you have to build a product and get angel funding > then you gain some traction and try and get VC funding > then you sell.

I think that is a very old school way of thinking about business and is no longer relevant. There are an abundance of tools and resources at our disposal that make it extremely easy to start a business and reach an audience, very fast and very effectively, with very little initial capital.

2. Giving away no equity in your business

We started developing our company in 2008-09, during the middle of the whole tech craze, where a lot of big companies were popping up, such as: Groupon, Airbnb, Spotify, and Tumblr to name a few.

A lot of companies during this time, we’re putting a lot of their focus and efforts on creating apps for the sole purpose of acquiring investment or funding, rather than working on their businesses. It was as if getting an investment was the only way to get validation.

For us, it was never a goal or aspiration to go out and get funding. We were too confident in ourselves, the market and business we were creating, that we didn’t want to give away any of our sweat equity.

We continued to grind on, sale after sale, we grew to a point where we were able to cut ourselves our very first paycheck, a whopping $250. To this day that was the most rewarding pay check I have ever received. It was at that point that I knew we were on to something big, and there was absolutely no stopping us. And it would also be very difficult for us to give away any equity, because we knew we were on to something great.

As we grew, we naturally started to meet and connect with other entrepreneurs, some were bootstrapped, others had funding, either in form of VC’s or Angels. I then started to recognize a fundamental difference between companies that were self funded (like ourselves), and the VC funded companies – the bootstrapped companies were all doing better than the funded companies. The owners of the bootstrapped companies were also generating more wealth on a personal level and making more money than the VC funded companies’ founders.

This seemed very bizarre to me at the time, because you would naturally guess the total opposite. After doing some research, I found out the following:

• There are 100k startups per year. Only 51% of which will last 5 years
• 1850 of those companies look for funding
• 500 of those companies actually get funding
• 30 of those companies will exit, end up getting money back
• The average return for VC in Canada is negative

(Source: MaRs)

With these facts in hand, what do you think is going to likely happen if you get VC money? Your likely return will be negative!

And this all started to make complete sense to me, as I saw colleagues of mine who received VC funding that weren’t doing as well on a personal level, and didn’t end up getting that exit that they hoped for.

When you’re starting a company today, I believe your primary focus should be on building a sustainable and profitable business rather than focusing your time on pitch decks and meeting investors, and business plans. All of that is very time consuming, which takes away your attention on the things that are actually important, and that’s building a real business and making money. 

3. Staying LEAN (“Growth Hacking”)

Mastering art of “growth hacking” is very important when bootstrapping a startup. In essence, growth hacking is the ability to use tools and resources from different disciplines that can benefit your business and make you more efficient, and profitable for little to no cost.

When we started our company, I naturally went into the role of CFO and managing the finances and operations, with my background in accounting and finance in University.

One of the main reasons why we’ve been so successful and become profitable very early on, was our ability to stay lean and utilize resources to their maximum potential, and continuing to have that mentality, even today.

Utilizing resources to their maximum potential could mean several different things, including motivating your employees to use every hour in the day as efficiently as possible, or utilizing paid software tools to their maximum ability in order to generate the most return.

I also have a reverse mentality then what most are used to – I’d prefer to save a dollar, instead of making a dollar. I could argue that this is the most effective way to manage your business because as your revenue grows, your overhead grows too. So when you have that “save a dollar” mentality, you’re constantly focused on increasing your margins and ensuring your cash flow is positive, which is very important for a self-funded startup.

One of the best ways to stay lean in my opinion, is hiring the right resources. We’re in a globally connected economy, and there are a lot of talented people from all over the world that can do amazing work for a very low cost (in our standards). If you can learn to leverage individuals from other parts of the world, and integrate them to your team and culture, it could be extremely lucrative in the long-run.

There are a tonne of free or inexpensive software and resources available to efficiently manage your business. From CRM’s, phone lines, emails, accounting software, and marketing systems – which are all necessary applications that every business needs, that you can find for little to no cost. Every single dollar counts at the beginning. I can’t stress that enough.

Managing your books closely is also very important when it comes to staying lean. Every single dollar counts – literally. If you learn how to stretch every single dollar as far as you possibly can, you’ll see profitability a lot sooner than most people. That’s a very tough thing to do in my opinion and a lot easier said than done. As entrepreneurs, we always want to grow and invest, and take chances. It takes a certain type of entrepreneur to scale back and tread with caution.

Remember, when you’re bootstrapped, you don’t have cash in the bank to burn like funded companies. You have to be conservative and scale cautiously and a lot more calculated compared to a funded company.

4. Being able to create your own company processes

One of the most valuable experiences I gained from bootstrapping my startup was being able to establish and create company processes and functions from scratch.

Being able to create your own internal processes, company departments, and company culture, is one of the most rewarding and unique experiences you can get in business. When you’re working at a corporation and just being put into an existing process, you literally just become a disposable resource, whereas when you’re building a startup, you’re creating and building these processes as you go.

When we started up, we were two young, hungry entrepreneurs with nothing to lose. All we knew was that we wanted to create something for ourselves. And we had no idea how to create a real company.

Our first hire was a sales rep. This person was responsible for making calls and selling our product – and that was what helped us gain the traction we needed to move forward at the beginning.

Next – we realized we had a need for a designer, not only for our users, but for our internal branding, so our second hire was a web designer.

Shortly after that, we realized we needed to establish a more sophisticated company structure, and required an actual Marketing Department, with a head of marketing, because this was going to help us generate more sales. So our first hire, the sales rep, moved on to be in charge of all sales and marketing, and we ended up hiring another sales rep to take his place. This was our first actual “department” that was naturally formed from the growth and evolution of our business.

After that, other internal departments were naturally formed in a similar flow, based on demand and growth, such as a support department, development team, and onboarding and retention team. This is something that is very hard to plan for in my opinion, especially when you’re starting a business you’ve never started before, and in a new industry. So it was definitely a huge learning curve, but extremely rewarding at the same time.

I compare the growth of a company like watching a little baby grow up into a toddler > then into a teenager > and then to an adult. You never stop working on efficiencies and processes, even when your company is at that adult stage. There’s always room for improvement and you should always continue improving your efficiencies as a company. This is especially important as you begin to scale.

The only way to get that unique and totally invaluable rewarding experience is by doing it yourself through bootstrapping your company.

PS. In no way am I against VC’s or getting funded. I am merely sharing from my own personal experience and insights. If any investors would like to chat, my door is always open 🙂