Lessons Learned: The Basics of Bootstrapping

By Rosemary Barnes

For decades, the prevailing wisdom at business schools throughout the United States has been that in order to succeed, a new business requires a healthy dose of upfront venture capital. But this theory increasingly is being challenged by a growing phenomenon known as "bootstrapping," or the art of building an entrepreneurial startup with little or no money.

Instead of relying on a fat cushion of investment dollars to grow their businesses, bootstrappers opt to create successful companies with diligence, creativity, passion and determination. Build your company, and the profits will follow.

Doing without outside funding shouldn't be viewed as the end of the world for aspiring entrepreneurs. Almost 8 million entrepreneurs build their own businesses from scratch each year in this country. The reality is that less than one percent of these start-ups are launched with the help of venture capital.

Some of the world's business giants were bootstrapped, including Microsoft, Oracle, Intuit, Virgin, Dell and The Body Shop. Proponents of bootstrapping argue that the lack of startup funding acts as an incentive, forcing entrepreneurs to be innovative, outside-the-box thinkers who create successful companies.

Innovation drives success

Bijoy Goswami

Bootstrapping is an age old concept that's generally not taught in business schools but is being embraced anew by entrepreneurs around the globe, thanks in large part to Austinite Bijoy Goswami, bootstrapping guru, an entrepreneur, an author, public speaker and founder of Bootstrap Austin (www.bootstrapaustin.org), an online network of more than 500 business owners who share their opinions and experiences about building companies.

He recently facilitated the first "Bootstrap Bootcamp" for approximately 50 Austin area residents planning to start their own businesses. The sold-out, day-long event was sponsored by the City of Austin's Small Business Development Program (SBDP).

"Without a ton of investment cash, bootstrappers have to be inspired and resourceful in solving problems," Goswami said. "Out of pure necessity, they are forced to focus on their products, not on their profits. They're forced to be innovative. In the end, they wind up creating value."

Teaching entrepreneurs about the intrinsic and, ultimately, monetary value of their creative energies has become 32-year-old Goswami's career. It's hard to question the validity of bootstrapping once you've witnessed this charismatic young man's commitment and enthusiasm for growing a startup business on your own dime.

"This is the synthesis of a lifetime of work that I didn't know I was doing," Goswami said. "I've had a lifelong exposure to paradigms. I'm a confused mutt. What can I say?"

With a few hundred thousand dollars in venture capital in hand, the Stanford University graduate co-founded his own Austin-based software company, Aviri, in 2000. The ensuing dot-com bust all but decimated his company, halting most of his work and forcing him to lay off his staff. He had no choice but to bootstrap Aviri.

The experience of bootstrapping his troubled business inspired Goswami to refocus his company's mission to educating established corporations about the people-centered approaches that form the foundation of bootstrapping.

Discover your core energy
"Getting congruent with yourself," one of Goswami's favorite phrases, is the ongoing process of defining your passions, talents and limitations through self exploration.

"You have to step out of the box and get congruent with where you are," Goswami said. "What is that one thing you are working towards? Realize that, and the rest will happen. Follow your dreams, your passions. The side effect, profits, will come."

He categorizes people into one of three core energy groups – Mavens, Relaters or Evangelists. Mavens are driven by knowledge, Relaters by relationships and Evangelists by action.

"I think of these as energies. People, for some reason, are more connected to one, maybe two of these energies and this ripples out in many aspects of their personality - be it communication, relationships, learning, values, etc." Goswami said. "Discovering your core type is an ongoing process that never ends."

"Power of 2"
In discovering their core energies, entrepreneurs also learn about their business strengths and weaknesses. This discovery should prompt them to seek out a business co-founder, someone who complements their strong points and compensates for their limitations.

For instance, an Evangelist should seek out a Maven partner. A Maven would help the action-driven Evangelist think through ideas in a logical manner to arrive at the best decisions for the company. Thus, the "Power of 2."

Goswami calls co-founders "dance partners," or those who complete the "Power of 2." Some winning dance partners are Bill Gates and Paul Allen of Microsoft, Steve Jobs and Steve Wozniak of Apple and Bono and Edge of the rock group U2.

"You'll find that your dance partners are already in your world. There's a serendipitous quality to this process," Goswami said. "Making dance partnerships work is hard work, but on the other side is awesomeness."

His 2004 self-published book "The Human Fabric" details his theories on connecting people based on their talents and passions and how this innovative approach not only builds new enterprises but also revitalizes large, established companies.

"My work in life is to show how things that don't seem connected really are connected," Goswami said. "It makes so much sense that building an effective team or teams is key to the continued success and growth of any company."

Customers provide capital
One of the biggest myths about bootstrapping is that entrepreneurs must abstain from all outside funding as they grow their businesses. Not true, Goswami said.

"You need to raise money," he said. "But you don't raise it from the big money guys, as everyone thinks. You go straight to your customers for money. You start selling them your product as soon as you can, and you keep going back to them."

Infusing a lot of investment capital into a new business thwarts innovation because the entrepreneur doesn't have to struggle to survive the hard times. They'll most likely "burn" or waste the money on unnecessary items before they've built a viable business.

But bootstrappers don't have the luxury of throwing money at a problem. They must resolve their business dilemmas creatively, often unconventionally.

"You've got many more resources you can access than you think you do, and the lack of capital makes you to find and use them," he said. "Scarcity forces you to be innovative."

Demo, sell, build
Goswami compared nurturing a business to raising a child. Business owners should constantly be asking themselves: What does my business need right now? The right intervention at the right time is the definition of bootstrapping, he said.

So, when entrepreneurs need money, they sell their demonstration products to their customers. They ask the customer for input, make the revisions and sell it again. They repeat this process, which Goswami refers to as "demo, sell, build" until they've perfected their product and business.

According to the bootstrapping way, entrepreneurs don't have a business until they have paying customers. So, maintaining a customer focus is essential to building a successful business.

"You have to go directly to the customer for help, for input," Goswami said. "The customer's needs plus your innovative ideas result in the product or service you'll come up with." ■