by Frank Gruber
“I'd already envisioned how I would spend my commission and the accolades I would receive from my firm,” she says. “The bigger mistake, however, was putting all my eggs in one basket. Not only did I lose the deal, but I had been so focused on getting this client's business that I neglected prospecting. Suddenly I had no pipeline. It was a harsh lesson I've never forgotten. I will never again let my pipeline dry up like that. No matter how busy we are, we must always be prospecting.”
Celebrate: Enjoy the Journey
The sales bell is one of the most iconic examples of celebration at a startup. Who isn't going to want to make that sales bell ring?
InsightSquared rings a sales bell when they sign a new customer, and everyone stops for a moment and listens to the sales representative, who starts by describing how the whole team contributed to the deal. Tech Cocktail also has a sales bell installed in our office, and it rings every time we sell advertising, gain new sponsorships, or ink new partnerships. Everyone looks forward to ringing it because they know how important sales are to the future of the company—but it also has a fun element to it, which is in line with our core values.
The sales bell takes advantage of the inherent competitiveness in all of us, which is another excellent motivator and fuel for celebration. Competition was a major part of the way that Social Tables got out of its own rut. The team created a picture of a puzzle covered up by blocks and broadcasted it onto a big screen in the office. Whenever someone made a sale, one block was removed. Every time a whole row of blocks was removed, the team went down to a nearby bar and took a shot or had a beer.
To incentivize the team, Parimi also took deals he personally closed and awarded the credit to other team members based on high performance—like making the most calls in a day. That way, the team was motivated to put in more and more effort, whatever the outcome.
“It became a culture of everybody helping each other and everybody trying to be number one,” he says. And it worked. In September 2012, after just pivoting to an enterprise company, Social Tables had zero sales. In 2013, it onboarded more than 1,000 clients and saw 20 to 25 percent month-over-month growth in revenue.
“Sales at startups has become both interesting, fun, and actually quite challenging. Once you figure out the method to the madness, it becomes one of the most fun jobs in the world,” says Parimi.
Celebrating money is great—it's what keeps you alive as a company. But on top of that, you can celebrate the relationships you're forging. Relationships aren't transactional. Even if you don't make a sale, handling yourself gracefully and being a decent person will have benefits down the road.
Final Thoughts
At Dwolla, the fun started right from the moment Taub was introduced to his contact at Alliance Data Systems, the fundamental partner who would make the other 47 partnerships possible. Milne sent that introduction, and the subject line was “My favorite introduction ever.”
Dwolla's partners also joined in with the spirit of fun and celebration, the idea that together they were blazing a path that would have awesome results for consumers. WunWun, for example, celebrated its partnership announcement with Dwolla by giving customers 3 percent off all Dwolla Credit transactions.
As for Taub, launching Dwolla Credit—after all his hard work building partnerships—was a moment of pride. “This has been the most exhilarating and stressful time of my life,” he says. “I've never been part of something so big.”
Part 5
Money
Chapter 14
Bootstrapping
I am a bootstrapper. I have initiative and insight and guts, but not much money. I will succeed because my efforts and my focus will defeat bigger and better-funded competitors. I am fearless.
—Seth Godin, “Bootstrapper's Manifesto”
What is bootstrapping? Leveraging yourself, undertaking something with no outside help, being self-initiated and self-sustaining. Or the original definition: pulling on boots with no help from others, using just your own efforts and strength. It's real life for entrepreneurs.
Bootstrapping is what most people do when starting their business. Maybe you use your personal savings or take on credit card debt until you become profitable enough to create a sustainable business. Bootstrapping can be a long-term plan or a strategy for the initial stages before seeking investment. With no outside funding, you become laser-focused on creating a prototype and finding your business some traction.
It's often said that 99 percent of businesses are bootstrapped. From Basecamp to GitHub to Plenty of Fish, plenty of startups are bootstrapped and proud. Entrepreneur Ryan Carson, the creator of DropSend and Treehouse, estimates that you can feasibly create enterprise Web apps for less than $50,000.
I've started a few different companies that all began bootstrapped. Tech Cocktail was proudly bootstrapped for its first seven-plus years. Early on, we used free or low-cost software solutions to get the job done. Our first event registration service was literally a comment string on a blog post. We bartered to get free services for our early newsletters, analytics, and social media management. Our first event even took advantage of free, donated wine and family and friends as alcohol pourers and guest greeters. It doesn't get more bootstrapped than that.
I've always admired fellow Chicagoan Jason Fried's bootstrapping approach. Fried started his consulting company, then called 37signals, in 1999. In 2004, his company built the project management tool Basecamp to improve its own productivity and collaboration. Two years later, the company rolled out a group chat application called Campfire and then a contact manager called Highrise. They bootstrapped the entire time with the mind-set that you need to practice making money, not spending it.
“This whole tech world is not focused on that, and that is a dangerous, dangerous thing,” says Fried, who believes that being short on cash makes you hungrier. Some startups forget revenue amid the glamor of being an entrepreneur and the glitz of raising funding. They forget that survival is the only thing they should be focused on.
“I'm a big fan of the idea of longevity—just sticking it out. If you manage to stick around, you get successful,” Fried explained to me once—and I couldn't agree more. Sometimes, entrepreneurs don't have enough passion for the idea to be patient with their journey. There are very few overnight successes, despite what startup lore would have you believe.
As a bootstrapper, Fried believes in having fewer employees. He says, “We work really hard not to hire people. We rarely hire. We hire like a couple people a year.” Today, Basecamp is 15 years old and has just over 40 employees. Hiring less puts less pressure on your company, since you're not covering the costs of more and more salaries. “I would rather feel the pain of hiring someone a little bit too late than too early,” explains Fried.
For the people he does hire, Fried believes that expensive perks and benefits are less important than giving them interesting and inspiring work to do. And most of the Basecamp team is remote, so they don't have to splurge on a huge office. They also don't spend money on marketing, except the time employees take to blog.
Jason Fried and Basecamp are leaders of the bootstrapping movement, which has rallied many entrepreneurs together around the cause of being independent. The barriers to starting up a Web or mobile software company have come down significantly over the past decade, making it possible to bootstrap. Thanks in part to the dropping costs of cloud storage and hardware, as well as the proliferation of open source software, you can start a company for far less money than ever before.
Bootstrapping is complementary to the lean startup practices I discussed earlier in this book. The lean startup approach doesn't necessarily involve bootstrapping, but lean startup practices are conducive to spending little money and keeping costs down.
Bootstrapping Tips
Here are some tips for saving money while bootstrapping:
Moonlight first. Starting out, you might want to keep your day job or go part-time. This may sound counter to the just do it t
one of the rest of the book, but if you're bootstrapping, you need to somehow fund your efforts. Keep in mind that things always take longer and cost more than you expect—and you'd rather not discover that after you quit your job and run out of money. Carson of Treehouse believes you should always plan to be 10 percent over budget and three months behind schedule.
Barter and negotiate. Get in the habit of asking for things in exchange for your services. You may not want to waste your valuable time on doing services for other people, but you have a better supply of time than money when bootstrapping.
Think about what you can offer others that they cannot refuse (within legal parameters—I'm not talking about selling your organs). Lawyers, accountants, printers, landlords, designers, developers—figure out how you can help them and talk to them about ways to work together. For example, an accountant might need a new website, and you could create one in exchange for accounting services.
Keep in mind that everything in this world is negotiable if you approach it from the right angle. Every time you go to spend money, ask yourself if negotiation is possible. Maybe you can lower the price or convince the seller to throw in something extra. “Make a point of telling everyone except for your users/buyers/clients that you're bootstrapping. You'll be amazed what people will do and the discounts they'll give to help you,” says Kelly Fallis, chief executive officer (CEO) of Remote Stylist.
Cut expenses. What is the bare minimum you can live on and still get your job done? That is the question you need to ask yourself—and then make the appropriate changes to your lifestyle to cut expenses. On the business side, Carson of Treehouse recommends that you skip the business cards and recruit friends as usability testers. Similarly, when you run into problems, Basecamp recommends cutting back on scope or features rather than increasing budget. Slimming down the project could get you to a launching point without blowing the bank. And always be on the lookout for ways you can automate processes.
Get creative. As a bootstrapper, you'll need to discover unique ways to save money. For example, when Patrick J. Sweeney II of dwinQ was building ServerVault, he needed bandwidth but didn't want to pay expensive setup and termination charges. He had a friend who owned a data center, so Sweeney rented the office next door to his. He recalls, “We literally crawled through the ceiling with a Cat-5 cable, and I hopped onto his huge bandwidth feed. I paid him only for what I used and saved myself thousands.” That same friend wanted to hire someone to get rid of old office furniture, so Sweeney got paid to take it off his hands. “The lesson is: if you want something, figure out how to get it for free. If you can get it for free, figure out how to get someone to pay you to take it,” says Sweeney. Great lesson—and exactly the creative thinking you need to be a successful bootstrapped company.
Cheek'd is a dating product where you give people you'd like to date little black cards with fun sayings, such as “I'm totally cooler than your date” or “I'm free this weekend.” The company was bootstrapped for three and a half years, working out of coffee shops and at home. Founder Lori Cheek came up with lots of (free) guerilla marketing tactics: she chalked the website address on sidewalks and slipped Cheek'd cards into random people's pockets, hoods, and bags. She used up her savings, then turned to her closet to sell her designer clothes for additional money. She also rented out her apartment on Airbnb and sold electronics and other belongings. “I've done everything I know how to do, and ultimately, I've built a brand and a company and thousands of people are using the service,” says Cheek. “It's the most rewarding feeling.”
What a Bootstrapped Startup Looks Like
Those ideas are all nice, but how do you put them into practice? Here's what bootstrapping looks like in all the different elements of your business.
Team: Initially you probably won't have the cash flow to pay a bunch of employees full-time. First, decide if you need them full-time—you may be able to get by with some part-time contractors until you start bringing in consistent cash flow. Another option would be to offer equity rather than a salary (do your equity research first!). Also consider hiring great people with less experience—who cost less—and then training them. Or, you might outsource to a country where labor is much cheaper.
You can always ask for help by going more public with your request. Find interns, volunteers, friends, and family to start. When Jen and I first started taking Tech Cocktail on full-time, we were living in the same building in two different condos. We decided to cut our burn in half by sharing one unit. Lots of entrepreneurs take this approach and decide to live together.
Marketing: Focus on content marketing and word of mouth as your cheapest options. (See Chapter 12 for more details.)
Workspace: Do you need an office? For free, you could work from home, coffee shops, the library, or a local college or university. For cheap, you could upgrade to coworking or shared space. If you do get an office, remember that leases are negotiable—ask to pay less now and more later, get the landlord to throw in furniture, or negotiate a month free.
Legal: Clint Costa, an attorney at Harrison & Held, suggests negotiating a fixed fee for entity formation. I've done this before—and because entity formation is generally a simple task, it makes more sense. Whether or not that works, ask your lawyer for a work plan with specific tasks and time/cost estimates. Some lawyers may even do work pro bono, take an IOU, or barter if they think you're a promising business and they want to earn your loyalty. I'm finding more law firms taking this approach with early-stage startups—after all, they don't really make much money on early-stage startups anyway.
Also, the more organized you are, the less time your lawyer will waste on the clock trying to sift through your disorganization.
Reward programs: Bootstrappers love taking advantage of reward programs. From credit cards that offer money back or points for free travel to programs like some of our partners offer, you can save a lot of money. For example, if you have a .CO domain, you have access to resources at go.co, including promotion, networking, and education. .CO offers things like free tickets to Startup Weekends, Google AdWords credit, search engine optimization (SEO) consultations, free or discounted coworking space access, and public relations help. And American Airlines runs a free program called Business Extra. If you sign up for the program, your company earns points for travel awards when booking flights on American, while your employees also earn AAdvantage miles.
For a list of bootstrapping tools, check out http://tech.co/book.
The Harsh Reality
Bootstrapping can be very rewarding, but it's not easy. It's a mind-set, and one that's sometimes difficult to maintain over time. Jen and I worked from home or from friends' office for years, used our savings to pay employees during a couple of tough times, and often worked seven days a week with very little downtime. There were definitely stressful times where we had to remind each other why we were hanging on to our dream.
Chase Boulter, cofounder and CEO of the bootstrapped company Titan Analytics, has been bootstrapping businesses since the age of 12 (he's now in his early 20s). “Bootstrapping is difficult. There is no other way to put it. When you reach that final sprint to release your product or service and the cash cushions that you and your cofounders have put away start to dry up, you really start to feel that determination (and stress) start to kick in. You have everything riding on this business. Your life, possessions, reputation, and so much more are at jeopardy,” says Boulter. “It is a harsh reality that many cannot survive this pressure cooker. For those who do, I can tell you that it will be one of the most rewarding and paralyzing experiences of your life.”
There may be days when you aren't able to pay the people helping you out, let alone yourself. Or there might be days when a customer doesn't pay you on time or decides to not pay you at all after you performed a service. Unexpected costs may arise that drain your account. Or some things may take 10 times longer than you estimated. Just like climbing a mountain or running a marathon, bootstrapping is somethin
g you need to prepare yourself for mentally. Don't wait until the shit hits the fan.
There's a great book about how to prepare for hiking the Appalachian Trail called Appalachian Trials, written by former Tech Cocktail team member Zach Davis, that we can learn a lot from. Davis believes that the difference between finishing the 2,200-mile Appalachian Trail and not finishing is almost all mental. The first month on the trail, you encounter hardships, but everything is still new—the pure excitement and adrenaline get you through it. It's actually the next two to seven months of hiking that beat you down. At some point, you inevitably ask yourself, “Why am I doing this?”
While bootstrapping your company, you feel the same excitement during the first few months. Each day you feel the energy that comes with the freedom of sailing your own ship; you bask in a newly discovered creative rush. But this is a marathon, my friend, not a sprint—and you have to be mentally ready for the long term. Before you start, take a page from Davis's book and make a list (adapted for our purposes) called “I am starting my company because…” and focus on why you're doing this. Here are some examples to get you going:
I am starting my company because… I don't want to work for anyone else.
I see this problem and want to solve it so no one else has to have this problem anymore.
I believe my ideas are important and should be explored.
I believe there is a better way to live and this will allow me to do it.
I believe in building a sustainable business that helps make the world a better place.