Launching a business with limited funds is a real challenge. Many entrepreneurs are long on energy and enthusiasm but short on credentials. Today there is more money than good ideas and people tend to fund raise big money with only one tool: a good powerpoint.
Sometimes when you have a lot of money, you have more chances to make big mistakes and you need to deal with the investors that might have a different strategy than yours. On the other hand, it gives you more flexibility to test ideas, pivot and adapt to market trends. Money will also allow you to hire more talented people and create a network effect quickly. But the reality speaks by itself. According to Venture Economics, Inc:
“7% of the investments account for more than 60% of the profits, while a full one third result in a partial or total loss.”
However, starting a business with limited funds requires a different mind set. That different approach is sometimes the magic formula for success:
1.- Get operational quickly: the sooner you make a sale, the better.
2.- Cash is king: sometimes growth shall be sacrificed by cash generation as bootstrappers always look for quick break-even projects. A well funded start up can afford to pursue several strategic goals but a bootstrapper must earn money from day one. Even if having no cash will limit the strategic options, being able to develop cash flow means that your concept is good.
3.- You are the salesman: a bootstrapper will go from door to door selling their products. This might seem a time losing strategy. However, insights from the customers are very important to determine the real value we are providing and how we can improve our service.
4.- Motivation of employees: a bootstrapper needs to motivate its employees by providing them other incentives rather than money such as upgrade opportunities, options, etc. This can be very positive as inexperienced people will be more flexible to adapt to the culture of the company.
5.- Sustainable growth: a bootstrapper will only take the decision to grow if he can afford it. Many companies fail because they cannot control or finance the growth.
To sum up, in my opinion, neither bootstrapping nor raising big money without showing results is a good option. Finding a right balance between both will result in a healthy and sustainable growth for your company.
If you are actually bootstrapping, my advise for you is: be patient and stay resilient. It a very good way to test the viability of a business before engaging in huge investments!