What is “bootstrapping”?

You’re probably familiar with the phrase “pull yourself up by the bootstraps”. It generally means that no help is coming from anyone else, so it’s down to you to help yourself.

To give a concise definition, “bootstrapping” means: To create and grow a business without any external investment or financial support.

The origin of the phase has the potential to leave a bit of a negative impression. But in reality, many businesses bootstrap because they want to, not because they have no other choice.

That is how it is with our business IAM Cloud. I can’t speak on behalf of other businesses, but bootstrapping for us is an essential part of our long-term business strategy.

But what does bootstrapping actually mean when it comes to running a startup or small business?

What bootstrapping isn’t

The startup world – particularly the tech startup world – is dominated by investors. I’ll talk more about that in other posts. But the obvious difference between funded-startups and bootstrapped-startups is that funded-startups have plenty of money, and bootstrapped-startups don’t. This is undeniable – at least for a while. But I think this tends to lead to some common misconceptions about bootstrapping. Misconceptions like: They do things on the cheap. They’re austere and penny pinching. They cut corners. They blag and they bodge.

No. This is not what a bootstrapped-startup does. This is not how most bootstrappers think.

Equally, compared to funded-startups, bootstrapped business are also most definitely not:

  • Small-fry and unambitious
  • Slow paced and unexciting
  • More restricted in the long-term
  • Less respectable
  • Less capable
  • Sub-standard or mediocre

Principles

To be a successful bootstrapper there is one quality you need above all else: you need to really appreciate and understand value.

Value is a greatly misunderstood concept in our society. I’ll steer clear of politics though. But suffice to say: value is not just financial. Value is the full systemic impact something will have.

Value is about the future.

Value is about transformation.

Let’s use a somewhat ironic analogy… In the stock market, value investing is long-term investing based on core fundamentals. This differs from trading, which is just looking at trends.

While bootstrapping is kind of the antithesis of investment in one obvious regard. In another way it’s not. Investment is actually right at the heart of bootstrapping. But it’s about your investment. Your time. Your energy. Your ideas. Your creativity. Yourself. And of course your team, your community, your society, your world.

In other words, to be a great bootstrapper you have to appreciate everything that has an influence on your business. Which is a lot of stuff. Appreciating the world around you is a good quality to have though, so there are nice added consequences of this way of thinking.

I personally believe that because funded startups have many of their resources “given” to them, they will never truly understand what they’re worth. They will never appreciate value in the same way as a bootstrapper.

Bootstrappers are the true value investors of the business world. VCs and startups are the traders.

Bootstrapping in the real world

That was a little bit philosophical there. Let’s talk a bit more about what bootstrapping means in the real world.

Why bootstrap?

Bootstrapping is not easy. Money definitely makes things easier. If you’re bootstrapping a business you’ll have a period of time where cash is almost inevitably your biggest focus and concern. You might even have your fair share of sleepless nights. This short-term pain in the early days of your business is ultimately worth it though. Because provided you do manage to steer your way through the challenging waters – you will be greatly rewarded.

What are the rewards of bootstrapping? I think if you were to boil all the benefits of bootstrapping down into a single word, that word would be: freedom. Independence to follow your dreams, do things the right way, take your time, do good work that really matters. It also gives you the freedom to fearlessly make mistakes. Important mistakes that will ultimately make your team better, your products better, your business better, and ultimately mistakes will help to improve your most valuable asset: You.

The process of bootstrapping both forces and encourages you to learn, evolve and improve. Being funded gives you the luxury of not needing to. But consequently, in the long-run, I believe very strongly that most bootstrapped businesses are fundamentally better than businesses that are funded.

How bootstrapped companies work

I mentioned earlier that bootstrapped companies aren’t penny pinching and don’t cut corners. But if they don’t have much money, what else do they do?

Example scenario:

Your business needs a certain widget system. As a bootstrapper, you know what your long-term goals are, and therefore you know what the widget system needs to do. Right now you don’t have enough money to invest in the widget system you want, but there is a cheaper intermediary widget system which has some, but not all, of the features you need. What do you do?

You think. You question. And you explore the different scenarios in your mind or on paper.

You consider: Can we suck up the temporary inconvenience of not having a dedicated widget system at all and get by with say e.g. Excel? If we did suck up the pain right now, how long would we need to wait until we’ve saved enough for the widget system of our long-term dreams? If we went down the route of the intermediary system, how long would it take to transition from e.g. Excel to it, and then in the future from it to the widget system of our dreams? Exactly how much benefit would we gain on the intermediary system vs e.g. Excel? And would those benefits be big enough to mean it would be quicker for us to acquire the widget system of our dreams by first going via the intermediary? You also consider the risks, the assumptions and the uncertainties.

You plan and you work out the right option for you. This is not cutting corners. This is not penny pinching. Both of those are mindless actions. This is carefully considered business growth planning and optimization.

Conclusion

That is just one basic example. But you’ll hopefully it will give you a brief taste into the world of what it means to be a bootstrapper. Above all, bootstrapping requires a lot of thought and planning. It requires you to have a clear long-term vision. And it requires the ability to continuously reconcile the actions and decisions of today with your goals for the future.

If you’d like to talk to me some more about bootstrapping, you can catch me on Twitter @iamleonmallett and @iambootstrapped.