Today’s guest post is by Brian Link who is a partner of mine in weBuild, thoughtLEADERS, and TiXiT among the many other things he does (yes, both of us have many entrepreneurial interests). This perspective on bootstrapping a new venture is so spot-on it almost hurts. This article is prompted by today’s launch of TiXiT where Brian is the CTO and I’m CEO. Enough context. Here’s Brian:
I’ve seen my share of Internet startups and each entrepreneur, if you asked them, would tell you that getting started is the hardest part. Many people think they have a great idea. Some have even have written it down and dreamed of turning it into something big. But taking those first few steps of talking to other people, committing your own money, finding a team to help build it and figuring out how to tell the world about it is where you need great strategy (and some luck).
One strategy, if you’re lucky enough, is to borrow a million bucks from your rich uncle. You might also find an angel investor or venture capitalist and beat the one in a million odds and get funded before you have a product or revenue. The much more likely scenario and the smartest strategy is much more difficult, if you can pull it off. It’s called bootstrapping.
The term comes from a saying that started in the 1800s: “to pull yourself up by your bootstraps” which implies an impossible task. As a metaphor, it means to better oneself by one’s own unaided efforts. And today it often refers to starting a business that is self-sustaining and created with little or no external help. While bootstrapping is incredibly hard, there are huge rewards.
Bootstrapping is hard. You need to stick your neck out; quit your job; have some money to spend; have a great network to lean on; and have a lot of confidence and guts. It’s certainly not for everyone. But for the brave who have a great idea, the reward can be huge. The best practices for bootstrapping can fill volumes of books, but here’s a quick summary of some ideas and strategies:
1. Equity. By bootstrapping, you can control your own stake and your partners’ equity percentages better. Equity is your most powerful tool to attract big talent. But be careful, there’s great need for balance here. Don’t dole out too much too soon and conversely don’t hesitate to share your equity for the right reasons. Many entrepreneurs fall into the stingy founder’s trap – they refuse to give up equity and because of that, they never get the help they need to launch the company. In that scenario, they have 100% of a company that’s worth nothing. Instead, offer equity to those who can dramatically move your business forward, but get advice about what percent makes sense at your current stage of growth. Equity, they say, is the most expensive compensation you can dole out (1% of your company when it becomes a $100MM company will be worth a million dollars!).
2. Partners. Choose your partners and co-founders wisely. They should complement your skills and pass both the beer and elevator tests. Is this person someone you’d want to hang out and have beers with? If you were stuck in an elevator with this person for 24 hours, would you murder them? You’ll be spending more time with your co-founders than you might with your family, so best to have a great relationship and high level of trust and respect.
3. Business Plans. Don’t dwell so much on the format and length of your plan, but rather on the concepts of the business, the product or service and your competitive advantage. You should know exactly what your customer looks like, what alternatives they have, what the value is of what you’re offering and where you’re going to find those customers. And if you don’t have all those answers, get yourself some partners or team members who can. An executive summary of 1-2 pages is best. It should explain the big picture as concisely as possible. Don’t drag anyone through the details of your product until you’ve completely nailed it at a high level. Also prepare a Kawasaki 10/20/30 presentation and the two sentence and three paragraph versions. You’ll need those for marketing and email conversations to get people interested in having conversations with you.
4. Investors. You’re going to need investors at some point. Hopefully later instead of sooner. But as CEO of your company, your role is chief fundraiser, so start building great relationships. Find a trusted few to be part of your inner circle to give you honest and direct feedback. It’s never too early to plant seeds and start conversations. But be sure your message is polished enough before you request the face to face meeting. It’s not as hard as you think to get meetings with investors. But it’s very hard to build a compelling enough story to make them part with their money. Practice your pitch a dozen times on friends and friendly investors before you start talking to your big target investors. Also, do not assume that the big VC is your only option. Angel investors and chunks of $10-20K are extremely viable. It’s a lot easier to find a dozen people or more with $20K than it is to ask for large fractions of a million dollars from any investor.
At weBuild (http://webuildstartups.com), the Internet company accelerator where I’m a Principal, we are seeing more ideas and hearing about great things getting started in Columbus. One such idea came to us from an entrepreneur named Dave Cherry, previously of Limited Brands. His idea was simple: help sports teams and events sell more tickets. How? By offering deep discounts for seats that would normally go unsold. We brainstormed with his idea and helped Dave narrow his focus into something commercializable. TiXiT is now one of our portfolio companies and is launching today at http://www.tixitbox.com. Go check it out, sign up, and take a spin – it’s a perfect example of what you can do when you bootstrap a company well.
I wish you the best of luck getting your own startup going. weBuild would like to hear about your best ideas. Submit them here at http://webuildstartups.com/apply.