I would like to offer some supporting thoughts as to the value of the bootstrap process, the wisdom of your choice to follow it, and the ultimate practicality of it today. First a couple of quotes:
Forbes this month (Jan 2009 ) "The venture capital industry is staring at the most vicious shakeout in its history . . . Returns are pathetic for most funds, [and] the public offering pipeline on which venture depends for its exit strategy is clamped shut."
Bloomberg.com, "IPOs historically dry up at the end of a bear market and don't begin to recover for months after a rally as issuers and investors wait for signs of stability."
During the last quarter, 38 companies withdrew or postponed their filings with the Securities and Exchange Commission (SEC). Bloomberg says "it may take until 2011 for the number of companies going public to return to their 2007 level, according to data compiled by the University of Florida. While the S&P 500 rose an average of 24 percent in the first year after a market plunge, the data show, it takes 34 months on average for underwriting to return to its rate at the start of a slowdown."
Companies pursuing the traditional VC or investor routes are running into brick walls or valuations that are ridiculous
Yet this is one of the best times to start a business.
We are in a world rich with new technologies, applications of those technologies, services that can be based on those technologies, and perceptions based on those technologies that open unimaginable doors.
Even better, established businesses whose inertia, that is inability to change and adapt, and whose debt or commitment (financial, political, or social) are now untenable are thus going on the rocks and leaving unsatisfied customers with unfulfilled appetites looking for solutions.
This is possibly one of the best times in recent history to apply the bootstrap techniques creating your fortune. I wish you well and in these stormy times expect to see good results for you on your journey down a good path, stick to it.
In late 2005, my motivations were many to quit a six figure, 25-year, high tech career and launch TRACEe, a venture dedicated to applying technology to tracing lives for good; the good of the individual, society and essentially for eternity. Among the most significant of these motives were to release pent up entrepreneurial energy, to engage in work that kept me closer to home in hopes of shoring up family relationships that had begun to unravel and to produce results with more meaning and direct benefit to society. Little did I know these motivations would draw me into the "underbelly of Austin" narrowly escaping bullets, knives and a family catastrophe.
In early 2006, I thought I was bootstrapping when I joined Bootstrap Austin. But, attending Bootstrap Austin networking meetings does not a bootstrapper make. Submitting a proposal for a Homeland Security SBIR grant doesn't either.
Which makes me wonder...what constitutes real bootstrapping? Does applying for 20 patent claims make you a bootstrapper? How about stumbling on a technology partner willing to lend software for demonstrating your proof of concept - ala "demo/sell/build?" Or leveraging UTA and St. Edwards University internship program resources to validate the business model and design elements of the offering? Or becoming a distribution partner for companies whose products are components within your intended offering? Or freelance consulting in areas aligned with your company direction? Or formulating an advisory board by promising a future equity stake? Or selling the company soul to the Austin Technology Incubator and affiliated VCs hoping to secure "free office space and business mentoring services?" Or volunteering your time to community events hoping to make the right contacts? It turns out that all of these fall short of what I discovered to be real bootstrapping.
Don't get me wrong, many of the aforementioned activities should and are commonly part of a bootstrapper's journey, however, real bootstrapping for me emerged only when faced with an imminent catastrophe in my life: the breakup of my family; my wife of 20 years, 16 year-old daughter and 11 year-old son.
It cut deep to learn that appreciation for the prior 20 years of providing a steady, high standard of living for my family was short-lived as evidenced by my wife's June 2007 ultimatum to "get a real job by year end or divorce will follow." Frankly, this was not unexpected as my wife and our financial situation had been under considerable strain since TRACEe began. What broadsided me, however, was when she relayed my daughter's perspective: "Mom, when are you going to divorce Dad?" POW - a heart punch! You never expect your own child to want you out of their life especially when you've spent the last 16 years loving and nurturing her to young adulthood.
So, what was I to do? Give up on TRACEe and go back to the corporate world fraught with meaningless churn, greed and travel so that my family could return to having all the comforts they had grown accustomed to but at the inevitable expense of a broken family anyway? Or, continue the TRACEe venture that felt like the right path to be on relative to my life, my family and society?
After a few days of contemplation, prayer, counsel with friends & fellow bootstrappers and a coincidental read of The Dip by Seth Godin, the answer was clear: push on, go where most are unwilling to go; survive the dip! After all, how could my friends, family and a person with the moral stature of my wife fault me for doing otherwise? So, push on it was...but how? What could possibly position TRACEe as a viable growth (or at least sustenance) business within a six month window and hold my family together?
That's when the creative entrepreneurial mind coupled with personal spiritual influences kicked in. Without actually realizing it, my subconscious mind, heart and soul were formulating a survival plan. One which surfaced at a most unexpected time - while applying a fresh coat of white paint to our back door on a hot, sunny August day. On that day, at that moment, as that brush stroke spread its film of latex down, with bitter sweet emotion, I surrendered to the core concept of my survival plan - to become homeless via a six month immersion on the streets of Austin, my only companions being the poorest of the poor, my laptop and my cell phone both equipped with mobile, live streaming video, GPS and chat capability. The goals were (1) to explore social networking for the homeless via live interactive streaming of their stories to a global internet audience, (2) drive TRACEe technology development, assets and business partnerships, (3) garner TRACEe recognition and marketing lift, (4) generate modest cash flow and last but not least (5) keep the family in tact. Why not since I was likely to be homeless come December anyway? To quote a friend, "That idea is so crazy, it just might work!"
Somehow this plan incorporated elements of my entire life as if it weren't actually a plan but a destined road map. It leveraged many significant personal, family, educational, work and spiritual experiences whose purpose was now being revealed in tHis "Master Plan," one that had a clear lead up and a promising aftermath for family, company and society assuming I survived!
So, let the real bootstrapping begin!
Please stay tuned for future posts covering how it all played out. Alternatively, please feel free to explore and decipher aspects of it sooner by visiting archived immersion video at my latest alpha site, Homeless Coach. Note: the homeless immersion activity is concentrated within the date range of 3/16/08 to 4/25/08 which can be accessed by clicking the "archive" button that launches a date-based search dialog.
Brewster Kahle used to talk about the Internet as a huge book that everyone was collaboratively writing, and in that spirit, we adopted early on the metaphor of "bookmarking" to note online addresses we might return to for whatever reason. Bookmarking was crucial to evolving browser navigation, and soon enough we had web sites where we could store bookmarks. A site called del.icio.ous gave us a way to categorize bookmarks with simple tags. Any user of the system could create a personal set of tags - roll your own taxonomy. So why not share tags and bookmarks with others? That's the concept of social bookmarking, shared sites, navigation, and bottom-up taxonomies or "folksonomies." Social bookmarking became a popular way to share content, and to "vote" with your feet - using algorithms that rate content by the number of bookmarks and the number of links. This is all part of the evolution of a web-facilitated mediasphere where the line between content producer and content consumer is blurred, and crowds collaborate in making and extending stories and knowledge.
We can facilitate the social bookmarking of our own content by adding "blogware" that makes it easy to bookmark a site at one of the many social bookmarking and collaborative content sites that have appeared. We've done this at bootstrapaustin.org - we've added a drop-down menu to the footer of each post for bookmarking posts at del.icio.us, Digg, Furl, ma.gnolia, Yahoo, Google, Stumbleupon and Facebook.
Social bookmarking can be a powerful way for this community to share knowledge about bootstrapping with each other and the world. We strongly encourage everybody to read the Bootsap Austin blog (http://bootstrapaustin.org) and bookmark those things you find compelling at one or more of the social bookmarking sites listed.
Info about the social bookmarking sites (via Wikipedia):
Delicious (formerly del.icio.us, pronounced "delicious") is a social bookmarking web service for storing, sharing, and discovering web bookmarks.
Digg is a website made for people to discover and share content from anywhere on the Internet, by submitting links and stories, and voting and commenting on submitted links and stories.
Furl (from File Uniform Resource Locators) is a free social bookmarking website that allows members to store searchable copies of webpages and share them with others.
ma.gnolia is a social bookmarking site similar to Delicious.
StumbleUpon is an internet community that allows its users to discover and rate Web pages, photos, and videos. It is a personalized recommendation engine which uses peer and social-networking principles.
At Facebook, you can post bookmarks to you profile.
Twelve years ago, I was fresh out of college and found myself at a now-defunct Mac conference in San Jose. The keynote speaker was Guy Kawasaki. As any Mac zealot will tell you, Guy was (and is) almost as much of an icon for Apple as Steve Jobs himself. As I stood at the door to the hall, first in line, reading Guy's latest book, How to Drive your Competition Crazy, I felt a presence next to me. I glanced up from my reading and there was Guy!! I was nearly speechless, but managed to ask for an autograph. He graciously obliged and I was in geek heaven. As I sat there on the front row of Guy's keynote, I took pages of notes. A few distinct pieces of advice have stuck with me all these years and they find their way to the forefront of my mind now and then.
1. Let A Thousand Flowers Bloom
You never know which idea will take hold. Push hard to promote your product, service, or idea into as many areas as possible. Social networking makes this aspect of marketing easier than ever. This is one principle behind why we created BudURL.com. The idea that you need to know which flowers are blooming before it's too late so you can nurse and cultivate these opportunities. Cast your seeds of knowledge far and wide. Encourage others to spread the word and share their experience. You never know which of these seeds will take root and become a major source of opportunity.
2. Focus On Your Customers
Many entrepreneurs will tell you that customer focus is key to success. They are 100% correct. This doesn't mean that the customer is always right. What it does mean is that you need to run your business from both sides of the counter. Put yourself in the customer's shoes. Look at your organization from the outside. What are the 5 criteria that you would use to evaluate a buying decision for a company selling your services? How would you honestly rate your company in each of these areas? How would your customers rate you in each of these areas? If you don't know, pick up the phone (don't email them) and ask them. They want you to know - I promise.
3. Make Mountains out of Molehills
Let's admit it. Not everyone has a mountain to claim their own. Most of us start out with molehills. That's ok, as long as you know how to turn those molehills into mountains. Entrepreneurs around the world will tell you that small is the new big, slow is the new fast, and cheap is chic. They are right, but only if you believe it too. Make your perceived weaknesses your strengths. What edge does your molehill give you? Find it, promote it, and flaunt it. Use it to your advantage and make it work.
4. A Safe First Step
It's human nature to be skeptical and want to "try before you buy." Give your customers a way to engage with you without a massive investment or commitment. Whether it be a limited trial, a money-back guarantee, or a free sample. Whether it's a new product or a slow-mover in inventory, offering the customer a taste of the experience will leave them wanting for more -- assuming they like the taste. If they don't, chances are they weren't going to like the whole package anyway and would have been a bad customer in the end. This gives you both a chance to have a dry-run before making a long-term commitment.
I learned a lot from Guy in that keynote, his books, and from many that he inspired and those who inspired him. A couple of years ago, Guy came to Austin for another speaking engagement. I got another autograph in his latest book, The Art of the Start. I got a kick out of a few pieces of his presentation when I heard much of the same material as I had ten years earlier. Mountains out of molehills, remember?
Andy Meadows is the founder of Live Oak 360, a web software company that focuses on content management, ecommerce, and social networking. Live Oak 360's latest product is BudURL.com. You can learn more about Andy at http://budurl.com/h7su.
On July 21 I addressed the Ideation Subgroup of Bootstrap Austin, a fine group of beginning Entrepreneurs. They, and I, follow Bijoy Goswami's Bootstrapping ideas about the flow from worker bee to business Entrepreneur, in this case you start with and idea, create a Demo, and then proceed with raising some money to get on with business.
As usual I found my self 1) running overtime about 45 minutes with the help of lots of questions from the listeners, and 2) yelling a lot, no one has ever tagged me as Mr. Congeniality. Many are appalled at my choices of adverbs and adjectives when talking about such things as VCs, bit-time CEOs, and corporate careers; but I get laughs and a few lights blink on (you can see it in their eyes) so it is not in done vain.
My son pointed out to me that my primary message is always the same; Francis Bacon was wrong, knowledge is not power, it is a mental holding pattern. Knowledge plus action is power, and in the end we do pretty much everything today for power. The difference between being an entremanure and an entrepreneur is action.
So again the theme is get off your ass and do something, customers will give the final idea so you can start with almost anything close. Only your personal insecurity retards the progress (it's called the "BOX", the one you are always trying to think out of). Just take it to the customer as soon as possible, they will straighten you out.
As short story before I close this testimony. I went to a presentation review for entrepreneurs a couple of months ago. I was a mentor along with a couple of other guys and we listened to a presentation by a couple of folks with an idea that they had poured $70k and a year into for software. They were looking for half a million and wanted us to comment on the presentation. They launched off on the idea, the pitch was all laid up on PowerPoint (which is only slightly better than morphine for numbing your mind). Five minutes into it I stopped it and asked - The Question..."What did the customers say?" The CEO told me that they had not presented this to any customers yet, only friends, family, and experts (someone who used to be call "Pert").
Well, I alienated everyone in the room with my usual question (delivered in my drill Sergeant's voice) . . . "What the F*** are you doing? Without customer feedback this is all a work of fiction! You made this all up, there is no reality in this presentation, only you dreams."
How can I comment on fiction in a real world? The other two mentors went on to talk about the cute slide show and how to make it cuter, they were corporate guys used to living in a cartoon. I got up and left. I don’t live in a fictional world (I may be delusional at times but not that day). They were too polite to deal with the truth, what a waste of everyone's time.
The truthache you have to have is the customer's reaction – will he give you a check for your idea when you can get it to work and what does "work" mean???
Nothing else counts!
Barry W Thornton is technologist, who organizes, manages and explains knowledge. Copyright Barry W Thornton 2008 all rights reserved
Our speakers' experiences spanned the gamut in why, how, and the lessons learned in getting investors to pony-up for the growth of their venture. Three wise principles stand out:
Proceed with the end in mind
Go for the money before you need it
Choose your investors wisely
Before you go for the money, know where you eventually want to be with respect to the venture. What becomes of the founder in the future? Of course, whatever you want is ok. It's your business – for now. Remember that once you bring in investors you will be accountable to them, and depending on the terms of your funding and how much you raise, you may eventually lose control of your company, and if you don't perform you may lose your job!
It takes a very long time to get investment money. The tasks involve: getting the connections; establishing relationships; negotiating the terms; and, working full focused to move things through. Not only do these steps occur over time, during this time you still have your duties in your business and could be looking at some very long days. Start this process way before you're ready for the money. The day you wake up and decide you need funding, you will be thankful that you started conversations in the right circles - long before.
Your investors become your left-hand, your shadow, and your conscience. You want to know well about their motives, their expectations, and their interests in your company because when you take their money, you become accountable to them.
When considering investment funding for your business, keep in mind right action right time. The implications of this funding will vary markedly, depending on the stage of your business. For example, if your venture is in Ideation, your investors are likely to become your bosses and you become an employee who can then be fired. When your venture is beyond the VoD and in Growth, you are likely to have more influence in creating the terms of that funding and control in the business afterward. Nancy Schill, founder, Executive Intelligent Coaching and co-lead, Growth Subgroup
Everyone has a different idea about what Entrepreneurship is and everyone has different motivations for their desire to be an entrepreneur. As an entrepreneur I get a lot of people who approach me to talk about their ideas and the business they want to start. Each one of them, from what I can tell, seems to have different reasons driving them. Some people just seem to be looking for more fulfillment. Unfortunately, I don't think everyone can find the answers they're looking for in starting a business.
What do people seek in entrepreneurship? Why do they want to do their own thing? Many will tell you it's because people want to be their own boss, be in control. But what does that mean? What if you have a great boss? How many people that are being managed well in a position suited to their strengths want to start their own thing? Will they find ways to believe they could do it better? Are some people just never satisfied. Or because they've never experienced a satisfying job with a good team do they think that entrepreneurship must be the way to make them happy? On many levels, wanting to be your own boss and be in control is a really bad reason to start a company.
Starting your own company, especially bootstrapping one, is on a fundamental level creating your own future. Manifesting your own destiny. And yet it's not always the best way to create the future you actually want. It's just a different future and can be just as dissatisfying as a corporate job. If you're not happy where you are there are a thousand ways to change where you are without starting your own company. So how do you know starting your own thing is the way to go?
You first need to take a deep look at what would make you happy. For me, it's about doing something that you love in a company that is aligned with your core values. Money should not matter. The desire for material things in me seems to be more a result of our inundation with marketing messages convincing us we want more stuff than a desire for happiness. The desire for money is a hard one to overcome and is a constant battle. I believe it necessary to remove this from the picture, though, if you are to truly evaluate this objectively and find the most fulfilling path.
I believe the best reason to start your own company is because of all the opportunities in front of you it is the best available option to combine your core values, strengths, and resources into an activity that helps you manifest the first two. This is very ambiguous, intentionally, because it's such fundamental topic. I believe one should put a lot of thought into what makes them happy before considering starting a business. I would highly recommend figuring out your core values and strengths and taking roll of your resources. With these critical tools, all you need to do is look for intersections of your values and strengths with your resources and you've got your best option for a happy, fulfilling career. This may or may not involve starting a company and it may require some creativity. Let's look at an example...me:
Many of my core values are now very evident in what I'm doing. My company, Greenling, is trying to help people and the environment. There is a list of our core values plastered on just about every wall in our facility and many of those are my personal values as well. My strengths are in spurring people and things to action, in developing ideas, in pondering the future and what it may hold for me and my company, in working hard to achieve goals, and in helping people focus on what's important (I discovered these through a tool listed below). I think these are fairly well-suited to entrepreneurship.
Many of my core values are rooted in helping the planet. I care very much about Sustainability and improving our environment. My other core values include hard work and dedication, integrity, loyalty, building and respecting lasting relationships. I developed my core values several years ago and when I got married, my wife and I developed our core values as a team and Greenling developed its core values a couple of years ago. It seems cliché or something that is so simple you don't need to pay it attention, but I believe it's incredibly important to vocalize and write these things down. They can make every other decision in your life a little easier by check your options against your values.
My resources were slim when we started, but I had some good friends with additional resources, connections and experience in the local Sustainability scene. You don't need a lot of resources to start a company. You just need to know how to leverage them. If you need resources you don't have, partner with people who do have them. And I think it's just plain easier to start a company in an area where you DO have some resources than to strike out on your own into the blue. And with how hard it is to start a successful business anyway, every advantage helps.
There are many tools for helping you develop your core values. One great one for developing them within a team is Mastering the Rockefeller Habits by Verne Harnish.
For finding your strengths there are a couple of really good tools. Strengths Finder & the MRE framework.
Finding your resources just requires, well, resourcefulness. Who do you know? Who do they know? Make a list of family and friends and what they do for work (or personally). Talk to them. Do they like what they do? Are they well-connected in their industry? What do they have influence over? Are they the purchaser for things in their industry? Who do they use to help them do what they do?
With all of these things, you have some great tools for evaluating a new venture. Whether you're starting from scratch or you have this great idea and just need to evaluate if you really want to do it or not, these are the building blocks.
It's no coincidence that when you think about this process, it leads much more easily to a bootstrap model of business than the other two (cookie-cutter business and VC-funded business). If you're starting with something that makes you happy it is most likely not going to be just copying someone else exactly. We all have our own ideas of how to run a business. If you're just reading a manual and following instructions, how likely are you to be following your happiest path? The VC path can seem glamorous and sexy, but remember my point about being motivated by money. As has been demonstrated by Dell, Microsoft, Southwest, there is not a business on the planet that absolutely cannot be bootstrapped. So why would you take VC money? Because it seems to make everything easier. But all money does is put a magnifying glass on everything. If you don't start out of the gates with every detail of your business figured out, you could end up with some huge problems.
Innovation comes from constraints, they say. And not the constraint of someone telling you what to do. So many things were really important, but I couldn't do them all. So I had to pick the most important ones to do first. How do you discern which are most important? Constraints help, however painful they are.
I believe the only way for you to freely manifest your values and strengths in a start-up is through a bootstrap model. Figure out what you love and demo, sell, build. Bootstrapping forced me to look deeper at my business and make sure I was doing the right thing at the right time.
Greenling is an Organic food delivery business with about 1500 customers that get weekly baskets of Local and Organic food delivered to their doorstep. I started Greenling 3 years ago with Jonathan McCoy and Jonathan Duffy, who have both since moved on to other ventures. Greenling is my 4th official start-up (I consider it official when I start depositing revenue), though I have investigated dozens of business models and truly enjoy the entrepreneurship process.
