Last week, I was asked to write up my "Top 10 bootstrapping actions"
for a book on bootstrapping that should be coming out later this
year. Bootstrapping must be in the air as Fred just wrote about how
he teaches about it in his course at NYU Stern and Jerry just wrote
about it for his Inc. Magazine column Forget VC Money, Fund Yourself.
I recognize the potential dissonance about VCs writing about
bootstrapping (or - "how to create a business without taking money
from VCs") - I know Fred, Jerry, and I all feel strongly that VCs are
only a small part of the entrepreneurial / company creation ecosystem
and the vast majority of companies that get created never take VC
money (my first business raised $10 - we had 10 shares of stock at $1
each - and - when we sold it - each share made a share of Google seem
like a penny stock - although we only had 10 of them.)
I spent some time with the author - Marcus Gibson - and felt his
questions and probing style were very good. Following is my Top 10
list and commentary I gave him to work with.
1. Figure out how much cash you really have: When someone says to me,
"I'm thinking about starting a company" I typically ask them "how
much cash do you have." They usually answer something like "none",
not realizing I am asking them about their personal resources, not
the business resources (or investor dollars). I clarify and explain
that they are likely going to have to go a period of time with no
salary, pay for expenses out of their own pocket, and invest in
various things for their new business. I'm not being nosy (and in
fact don't care what their answer is) - I'm trying to make the point
that they need to make sure they are cognizant of the potential
personal economic toll that starting a business entails. Obviously,
some of this is mitigated by an angel or venture investment, but
there's almost always a period of time prior to this investment (and
could be forever in the case where no money is ever raised) where the
entrepreneur is essentially funding the business, whether it's
through their own lost opportunity cost of not having a job or - more
likely - through writing checks or loading up on personal credit card
debt to get the business started. It's critical for a bootstrapper to
understand how much financial capacity they actually have.
2. Figure out how much time you really have: The cliche "time is
money" applies to starting a company. The amount of time one has to
get a business going is often directly linked to the answer of how
much cash one has to get a business going. Often, entrepreneurs
overestimate how much time they really have, either by only partly
dedicating themselves to their new business (e.g. working a full time
job and trying to start the business on the side) or setting
expectations that the business will be up, running, and generating
enough revenue and income to pay full salaries within an unrealistic
period of time. In almost all cases, an entrepreneur is going to have
to invest substantial time in a startup to get it off the ground.
Understanding how much time you have before you run out of cash,
energy, spousal patience, or market opportunity is important to think
about going into the startup phase.
3. Pick a domain and go deep: If your answer to "What kind of company
are you going to start?" is something like "Well, I have a few
different ideas..." stop immediately. You should pick one idea in one
domain and go extremely deep on this idea. Optimally, it'd be
something you already know a lot about so that you'll be leveraging
your personal experience and presumably one of your passions. Hedging
your bets by thinking about and playing around with a variety of
different ideas is a huge waste of energy - you need all of your
focus on the one thing you are going to do. Early in my life as a VC,
I was in a meeting where an experienced VC asserted that one of the
most important questions for a venture-backed company to answer is
"What do you want to be the best in the world at?" I think this
question broadly applies to all entrepreneurial endeavors.
4. Surround yourself with experienced people: This is often easier
said than done. When I started my first company, I had a very small
network which consisted mostly of my father and several of his
business friends. Fortunately, I had the advantage of age (or lack
thereof) on my side and several of my early clients took me under
their wing and acted as mentors for me and my partner. After I sold
my first company and shifted my role to be an angel investor in
startups, I helped start several companies with young, first time
entrepreneurs. I saw first hand how impactful having experienced
folks around the first time, inexperienced entrepreneur can be as my
new first time entrepreneur friends were perfectly willing to make
exactly the same mistakes I had made eight years earlier when I was
starting out (hopefully I was able to help them avoid most of them
while we made new and exciting mistakes together.)
5. Find angels: This is a corollary to surrounding yourself with
experienced people. While angels are typically associated with "angel
investors", they can also be part time advisors that will work for
equity to help you get your business off the ground. I've found that
finding people that are willing to help for equity (and no cash) are
surprisingly easy to find. The trick is finding "angels" (vs. devils)
- folks that can really help you and are on your team, rather than
people who have an agenda other than helping you succeed and are
willing to make a buck in the future if you are successful.
6. Figure out who you want to look like in 5 years: In 1990, I was
sitting in an Inc. Magazine / YEO Birthing of Giants retreat which,
at the time - was by far the best professional development experience
I'd ever had. I got to spend four days with 59 other entrepreneurs
who were running companies from my size (10 people, $1m in annual
revenue) to much larger ($250m in annual revenue). We sat together
all day, listening to lectures from MIT and Harvard business school
professors, other entrepreneurs, and each other. We partied at night
and got to know each other well. One of the recurring themes that
came up over the long weekend was to look out into the future. I took
away an idea that I continually use - I pretend that it's five years
later and I define what my world / business / life looks like. I then
look backward and write the story that got me to this point. When you
are starting your new company, use this tool. Figure out where you
want to get to. I can guarantee with almost 100% certainty that it
won't play out the way you initially envision, but at least you'll
have a vision for where you want to get to that you can start with
and adjust over time.
7. Get customers: Customers can help address almost all the issues
that a startup faces. Most importantly, customers generate revenue
and cash. But customers also help shape the product, business
parameters, validate the ideas, and provide "honest work" for you to
do. In the MouseDriver Chronicles, the authors state that business
consists of only two things - making and selling. Getting and having
customers helps you focus on this. Successful customers will also
typically help generate new customers as well as confidence that your
business is doing something useful.
8. Learn everything you can about what you are about to do: This is
the corollary to "pick a domain and go deep." Great startup
entrepreneurs are intellectually insatiable about the thing they are
trying to create. Learn everything you can about your product,
market, competitors, and customers. If you are starting your first
business, make sure you spend time learning about yourself and your
motivation; figure out what is important to you and why. Be
relentless about learning how other entrepreneurs do things,
especially those that have had both great success and great failures.
If you can figure out how to build continuous learning into what you
are doing - without it being a rationalization for not succeeding
(e.g. I can't stand the phrase "We had a lot of 'learning' from that
experience" - it's both poor English and shallow thinking - don't
"have a lot of learning" - dig down deep and get to the essence of
what is going on a talk about that) - you'll both have a better
chance of succeeding while having a lot more fun.
9. Figure out your fallback plan: You might fail. It happens. A lot.
Your initial idea might be stupid. Potential customers might not
care. Competition might be more significant than you thought. You
might do a lousy job of delivering your product or service. Failure
can be terminal to a business, or it can merely be a setback. If
you've thought about a fallback plan, especially if you have limited
financial resources, you'll have a different mode you can shift into
planned in advance. Time is always working against you when you start
a company - the more you've thought through the different scenarios -
the greater your chance of ultimately being successful.
10. Figure out what to do if you fail (face your fears before you
start):One of my favorite quotes is from Dune - "Fear is the mind
killer." I've always believed that fear is one of the most completely
useless emotions. "What if I fail" is one of the biggest fears of a
startup entrepreneur. Face it - play with it - figure out what
happens if you fail. In most cases, failure is not going to be death
(although it could be very uncomfortable). Understanding what your
fears are and trying to stare them down in advance of actually
encountering them will help you enormously in the process of trying
to create a new company.
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