Bootstrapping is when an entrepreneur attempts to build a company using their own money and the operating revenue of the business while not seeking out external investments (at least, not during the early stages).
What is an example of bootstrapping?
MailChimp is one example of a startup that made its way by bootstrapping. Some consider it the most successful bootstrap success story of all time. Launched in 2001, MailChimp’s founders set out to provide an alternative to the clunky, expensive email platforms of the mid-2000s. After two decades of never accepting venture capital, MailChimp generates $800 million in revenue annually and has more than 1,200. And the icing on top? They were just purchased by Intuit for $12 billion, representing the largest-ever exit by a bootstrapped company.
Is bootstrapping a good idea?
Assessing whether bootstrapping is a good or bad idea comes down to weighing the pros and cons. Once you know how you want to grow your company and what you're getting into, you'll have a sense of whether it's the right choice for you. Here are some of the most notable advantages and disadvantages.
- You maintain equity
- You control major business decisions without investor interference
- If you seek external investment from venture capital (VC) later on, getting a clean capitalization structure would be easier without having previous investors
- You don’t have to worry about repaying a loan with potentially high-interest rates
- Less outside stress
- Your business may grow slower (at least at first)
- It requires the entrepreneur to take more financial risk
- It can be difficult to find the capital you need and manage it well enough to ensure your steady cash flow
- What are bootstrapping strategies?
Ultimately, any and all bootstrapping strategies come down to “keep costs low and increase revenue.” As such, focusing on getting your startup’s sales up and running as quickly as possible is an important piece of the puzzle. Not to mention keeping an eye on business activities like marketing and talent acquisition, which are areas where costs can skyrocket.
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