TL;DR - Explanation of bootstrapping (definition, pros, cons, etc) and examples of successful bootstrapped companies
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Tags - bootstrapping, pros and cons of bootstrapping, self financing, initial capital, successful bootstrapped startups, GoPro, TechCrunch, Plenty of Fish, Basecamp, GitHub
- What does bootstrapping mean?
- What sources of capital are available to bootstrapped companies?
- What funding stages do bootstrapped companies usually grow through?
- What do entrepreneurs need to do to achieve success by bootstrapping?
- What types of companies are suitable for bootstrapping?
- What are the advantages and disadvantages of bootstrapping?
- What are some examples of successful bootstrapped companies?
- Bootstrapping is a process whereby an entrepreneur starts a business with no outside capital and grows it using limited resources/money.
- Entrepreneurs who bootstrap their businesses might rely on sweat equity, customer funding, owner financing, or personal debt for initial capital.
- Bootstrapped companies usually grow through three funding stages:
- 1) Beginning stage: the company relies on personal income, savings, debt, or borrowed money from friends/family.
- 2) Customer-funded stage: the company relies on customer payments
- 3) Credit stage: funding specific business activities (e.g. improving equipment and hiring staff) is required - the company takes out loans or may even find outside investment for expansion.
- To achieve success by bootstrapping, entrepreneurs must execute a big idea, focus on profits, develop skills, and become a better business person.
- Early-stage companies and serial entrepreneur companies are suitable for bootstrapping
- Advantages of bootstrapping are: low cost of entry, ownership and control over the company, and ability to focus on developing the company.
- Disadvantages of bootstrapping are: cash flow issues, equity issues among multiple founders, higher risk of failure, and personal stress.
- Examples of successful bootstrapped companies include: GoPro, Inc., Basecamp, GitHub, TechCrunch, and Plenty of Fish.
- Go Pro, Inc:
- Manufactures small, body-worn, high-definition personal cameras.
- The founder, Nick Woodman (who had previously built two businesses that failed), raised his initial capital of $10,00 dollars by selling bead and shell belts out of his van.
- Consistently grew revenue and went public in 2014 with an IPO valued at $2.96 billion.
- A web application company that produces simple, focused software
- Started as a cash-strapped startup.
- Developed many software products (both free and paid versions).
- In 2005, produced its flagship product: Basecamp, a powerful tool for companies looking for a project management app.
- A web-based hosting service for software development projects.
- Started as a weekend project.
- Reached the 4 million user mark by 2013.
- 40 million registered users worldwide as of Aug. 2019.
- Founded by a successful serial entrepreneur, Mike Arrington (along with Keith Teare).
- Became the the epitome of technology blogs online.
- Sold to AOL for a rumored $30 million in 2010.
- Plenty of Fish:
- One of the most popular dating sites in the world founded by Markus Frind who started the business from his apartment.
- Over 150 million registered users worldwide as of Feb. 2020.
- Acquired by Match Group in 2015.
Follow up links:
- “Sweat equity” definition, https://www.investopedia.com/terms/s/sweatequity.asp
- Evaluating business ideas, https://www.investopedia.com/financial-edge/0412/5-essential-steps-to-evaluating-your-business-idea.aspx