03 July 2017
3 Benefits of Bootstrapping Your Startup (or Why Entrepreneurship Isn’t Always Like HBO’s Silicon Valley)
By: Dustin McKissen
If you watch HBO’s Silicon Valley, you may come to three conclusions:
- All coders and programmers are socially inept.
- People in California smoke a lot of marijuana.
- A startup must get funding from investors to succeed.
Numbers 1 and 2 likely have some truth to them, but the third item isn’t true. Yes, getting funded is a good thing, but many successful startups are passed over by investors and are wholly funded by founders—until they are funded by customers.
This approach, where a company’s founders use their resources to get the company started and then come up with a product or service people are willing to pay for, has a name:
A viable business model.
(It sounds obvious, but a few well - known tech companies—including Twitter and Snapchat—are still searching for one.)
At OPO Startups we have several entrepreneurs, including OPO Founder Randy Schilling, who’ve bootstrapped their way to success.
Here are a few things you’ll learn when you bootstrap your startup.
Bootstrapping teaches you discipline.
Remember when you were a kid and your grandparents gave you $20? And remember when you were a kid and earned $20 doing work for the neighbors at something close to the hourly wage paid making shoes in a sweatshop? How did you spend that money? Did it matter if it was earned, or given?
There’s a good chance the $20 you were given was wasted on a Pixie Stick and an arcade game binge, while the $20 you earned was spent on something you had wanted for a while. In other words, you were likely more disciplined about how you spent the money you earned through your own hard work. Startups that are funded with other people’s money can often be less disciplined than their bootstrapped counterparts.
That discipline will help you weather the setbacks you’re sure to experience as your startup grows.
Bootstrapping leaves you in control.
Another lesson from Silicon Valley is how easy it is for founders to lose control of their startup once they are funded. Funding always comes with strings attached, and one of the strings of significant funding is a seat on your startup’s board of directors. In Silicon Valley, the founder of fictional startup Pied Piper is demoted from CEO to CTO by an investor who controls 60% of the company’s board seats. After the demotion, the new CEO takes the company in an entirely different direction.
If you’re a founder, getting an investment requires giving up some control.
When you’re bootstrapped, you remain in control. You get to decide the future of your startup, and what opportunities you will(and will not) pursue.
Bootstrapping means you have to create a viable business model—something all companies need to do.
All companies have to develop a product or service people will pay for, and do so in a way that will make the company profitable. Funded startups can avoid this reality in the short run, but in the long run all companies must eventually make money. Even giants like Snapchat can’t afford to lose half a billion dollars in perpetuity.
At some point, they will have to turn a profit.
Bootstrapped companies need to turn a profit almost immediately, or risk folding. That forces founders to be lean, focused, and disciplined—qualities that will serve you well long after your startup phase is over.
Of course, just because you might have to bootstrap your startup doesn’t mean you have to go it alone. Having a supportive community around you that provides resources, encouragement, and opportunities to learn from and collaborate with other entrepreneurs can go a long way toward helping founders succeed.
That’s exactly what we offer at OPO Startups.
If you would like to learn more, schedule a tour, stop by our facility, or chat with our Community Manager today.
And if you’re a socially inept coder or programmer, that’s okay with us.
We have a desk—and a chocolate chip cookie—waiting for you.