When you start a business, there are many financing options to consider — friends and family, small business loans, angel investment, VCs — but there is no textbook solution for getting a new business off the ground.
One option that entrepreneurs, investors, and average Joes love to love is bootstrapping. Rather than seeking external funding, entrepreneurs who bootstrap their companies rely on savings, early cash flow, and conservative money management. The age-old concept of the American dream lives on in the world of startups — we have pulled ourselves up by our bootstraps.
My co-founders and I have confronted the good, the bad, and the ugly of choosing not to use outside capital in the inception and growth of Ampush. Here’s my take on the double-edged sword known as bootstrapping:
Retaining Full Control
Without a board to impose its ideas, timelines or limits, we are able to be opportunistic, nimble and adaptive. We determine which strategic vision to follow. Since we don’t have to wait for approval, we can execute that vision or make changes at our own speed. We also learn at our own pace; we make mistakes but keep going. By retaining full control of the company, my co-founders — the people who understand the business best and run it day to day — and I are in control of its future.
For every pro of retaining full control, there is also a con. As an independent, we are responsible for making decisions that might be unpopular with clients, employees or partners, but that are right for the business. We are also unable to tap into the valuable networks of board members because — guess what! — we are the board. Because no one is looking over our collective shoulder, it can take much longer to figure out that we have made a mistake. These are not impossible hurdles to overcome, but it requires a little extra work and reaching out to mentors in the industry to lend their expertise.
Clients Take Center Stage
We often see other entrepreneurs build businesses that their VCs or boards want them to build, rather than ones their customers want. We don’t have that problem; we know who butters our bread (our clients) and we keep them front and center always when making decisions. We’re focused on their needs and making their lives better.
However, going at it alone can put limitations on our flexibility. What happens if we lose our biggest client? Everything will stop until they come back or we find other clients. Sometimes building the right solution for our clients is expensive and, without an injection of capital, we have to be scrappy when it comes to R&D.
Managing Resources
Because there’s no “free” money floating around, each new team member knows and appreciates the value of a dollar. After all, the founders went 18 months without a salary and found a way to get their first clients and travel to conferences for free. At Ampush, we call this hustle. One of our mottos is Invest Rather Than Spend — it keeps the team focused on creative ways to solve problems. There will be times when we do need to spend on something or someone, like recruiting or internal tools. But we only do so if we can ensure that these expenditures will reap bigger rewards.
Without outside investment, near-term cash flow and revenue almost always matter. We constantly thread the needle: keep growing aggressively while managing cash flow and planning for rainy days. While this near-term focus ensures that business will keep driving forward, as revenue is the key to the future, bootstrapping can hinder forward thinking and building for the long haul.
Bootstrapping a company is no easy feat, but it comes with a whole host of rewards. We are in full control of our destiny. We focus solely on our clients and are always aware of our resources and how to get the most out of them.
BusinessCollective, launched in partnership with Citi, is a virtual mentorship program powered by North America’s most ambitious young thought leaders, entrepreneurs, executives, and small business owners.
