Points to consider before bootstrapping
The following facts about the startups’ investment are worth considering before moving further:
- 77% of SMB’s or startups have to rely on personal savings for the initial funds that they need. (according to Fundera)
- 99% of entrepreneurs, who seek funds, get rejected. (according to One Million by One Million (1M/1M) – a global virtual accelerator for startups.)
These facts point to a very significant question – why do startups fail to seek funds and eventually fail to sustain?
The number one reason is that the startups, during their fund-seeking phase, are not ready with the pre-requisites. These pre-requisites are quite important to convince investors to invest in your startup and also help you in your journey while you are bootstrapping. They play a crucial role to increase your odds of getting funded while you pitch to investors.
Before we present these points, let’s first understand the meaning of bootstrapping.
Bootstrapping- The Definition
Bootstrapping is building and growing a business with minimum outside investment. It means relying on your own resources to operate.
Here it’s important to note that bootstrapping is not just about using one’s own savings (money) but it’s about the resources that one can access. They can be:
- One’s Own Resources – the skill sets of the founding team, intellectual property owned, or the technologies developed.
- Other People Resources – the open source technologies, software, or the resources of your partners (e.g. infrastructure, intellectual property, etc.) that you can use by establishing strategic relations.
- Indirect Resources – the tools developed or utilized by the team members in their previously handled projects or professional experience, the unutilized innovative ideas of the core team member, or previously conceived business models for other offerings. Indirect resources can also be the raw materials, finished goods, components used in finished goods, or the manufacturing processes used in companies producing physical goods. These resources also play a pivotal role in uncovering profitable markets.
You as a startup should try to maximize your access to these resources and capture the most from them based on their availability, relevance for your startup, and free access.
Things to do before Bootstrapping
The following are the important points that you should take note of while bootstrapping.
1. Align your Resources with the Opportunity
The first rule of bootstrapping is to pursue a startup idea in which your accessible resources and the market opportunity are aligned. When they are aligned, your chances of successfully taking your startup forward (through bootstrapping) increase. All three types of resources should be carefully assessed.
For example, the founding team members should have complementary skills. If one of the founders is good at product development, the other should be good at marketing and promotion. The owned intellectual property like patents, any proprietary technology, open-source technologies, or any other resource should be analyzed with regards to its application in your current startup.
It should be noted that not all of the resources can be adapted and made to ‘fit’ for your startup. Selecting and adapting these resources to make them work for you is a skill that is built over time while you start to use them. So don’t worry if you face any difficulty in the beginning.
2. Sell services
While you are working on your startup, you can sell services that are closely related to your startup. For instance, if you are building a platform that offers customized, need specific Artificial Intelligence & Machine Learning based solutions to SMB’s (Small & Medium Businesses), you can provide a manual service to such SMBs that are looking for the solutions to problems that need AI/ ML intervention.
If it’s difficult to offer services related to your startup, there are multiple other services that you can provide to your clients as per your interest and skills. Logo design, data entry, content writing, web design & development, graphics design, project management, resume writing, business consulting; technical support, etc. are a few of the many services that can be offered to customers.
Once you have found the type of service that you would like to offer, you should follow the following steps:
a) Create a user persona – this is important as it’s obvious that you must know who truly needs your service before you start to offer it. You must be well aware of the problems faced by your target customers, their pains, needs, motivations, expectations, demography, etc.
b) Find the routes to reach them – You should find the channels to reach them in much the same way as you would do to find early adopters for your startup.
The following are a few of the ways through which you can reach your target customers to offer them your service:
- Content writing – you can start to share your content, tools, how-to guides, and strategies through blogs or articles either through your own website or guest post on platforms such as medium. The biggest advantage of this route is that it helps you to build your authority in your field of expertise. Your readers start to look at you as an expert in that field and are likely to buy your service or recommend you whenever they need it.
It’s interesting to note that you are following the same steps when offering your service while bootstrapping as you do in your startup. You first identify the needs of the readers (potential buyers of your service), their problems, their pains, the benefits they expect, and then delivering the relevant and suitable content.
To know what they need, you can conduct their interviews (either offline or through online routes like survey forms). While interviewing, you can straightaway ask about their expectations, interests, and needs. Google trends can give you an idea about what people are exploring. You can also use specialized tools like Buzzsumo to know what people read and share the most. Google search can also tell you a lot about people’s interests. You can learn about the top posts by typing for a particular topic. Many of the posts also have the comments section wherein people ask for help. You can write your answers there or you can even write articles that answer their queries.
Once you have started to build your content, it’s time to promote it. Find the relevant communities, forums, and groups on social media where you can share your content. Joining communities related to your niche on platforms like Reddit is one of the most effective ways to build an audience. Many people ask for help in such communities. If you can offer them exactly what they need – nothing like it! If your content provides value for the seekers, they won’t hesitate to share it.
- Emailing – You can start to email those who shared your content, liked, or commented on your posts. These are the people who are familiar with you as they have already started to engage with your posts. Share your quality content with them through emails.
- Freelancing websites – There are many freelancing websites such as Upwork, Fiverr, and Freelancer wherein you can find the relevant buyers for your services. All kinds of services such as data entry, content writing, graphics design, project management, etc. can be offered to the interested clients through these websites. You just have to make a simple login account on these sites to start offering your services.
You can reach your potential clients through the three routes stated above and start to earn enough cash to help you sustain while building your startup.
3. Sell Intellectual Property
Many times, you own a patent or trademark that cannot be used in your current project (startup). If your patent can offer value to a particular market either as a standalone product or a part of a bigger product, it can be licensed or sold to interested parties through offline route or online platforms like Ideaconnection. Ideaconnection helps you to crowd sell your patent or invention; though it’s not free and charges a fee for this service.
You can also license your pre-owned trademark to interested companies operating in the same domain.
If you have written a book, you can also sell it through Amazon’s kindle direct publishing platform. The platform allows you to publish your books for free and reach a large number of audiences.
4. Expense Breakup
For each of the stages of your startup viz. idea, validation and scale-up, make a rough estimate of the amount of money you may need.
- For the idea-stage you may need money mainly for the domain, hosting, reaching to customers for interviews, marketing on social media, and analytics. At this stage, you do not have to build a product. You just have to see if the problem you have picked is worth solving i.e. the prospects really crave to get it solved.
- For validation, you may need money mainly for marketing and hiring the right people to build a team. A team at this point can be you and your co-founder.
- For scaling, you may need money for taking legal services, marketing, and further hiring.
The good news is that up to the validation stage, you do not need to spend anything on most of the things. Customers’ interviews can be conducted through free online surveys.
A simple landing page to communicate your idea to the prospects and get their feedback can be built cheaply. Those interested will sign up and can then be interviewed over email, phone calls, or in-person depending on their preference. The page does not have to be fancy. Only the value that you promise to deliver to them with core features needs to be communicated.
In our article on 3 steps before MVP, we have pointed out the importance of problem identification. So if you choose to solve the problem of your customers that matters to them the most, they will push you to deliver them the minimum viable product. Your marketing efforts then become easy as much of your promotion will be done by such prospects through sharing on social media, or among their business community (if you are in a B2B space).
When you intend to pre-sell, you need to interview as many of your prospects as possible. Be prepared to interview more than 100 customers. Interviewing for customer identification and validation is one thing and seeking help from them to fund you is another.
You can do the following three things for pre-selling your product to your potential customers.
a) Build a relationship: It’s super important to have empathy for your customers. If you care for their problem/ challenges so well that it’s visible in your commitment to delivering them the exact solution, they would like to hear from you more frequently.
b) Build trust: When the promise that you make to your customers are very well-aligned with their expectation – even more than that; not just well aligned but also visible in some form, it becomes easy to convince them to deeply believe in you and this puts you in the green zone of pre-selling your product.
The promise can be made ‘visible’ to your customers through your history/credibility of delivering the promised value in the past or through anything that very closely simulates your actual product that you intend to offer to your customers – which your customers can easily understand and believe in.
If your product is software/ an application, the simulation can be a ‘no-code’ app built by using drag and drop features of free/ low priced app development platforms or just a visual guide with a series of steps showing the working of the app using simple drawings on paper.
If your product is hardware, you can build a simple, working 3D model showing just the core features that matter to your customers.
Remember that this is done after you have rightly understood your customers’ problem and found a solution that is immediately acceptable to them after multiple rounds of interviews.
A good example of showing a ‘visible’ promise through simulation is a company called Groupon. It didn’t start with a marketplace site. It started as a blog (on WordPress). The founder posted deals manually daily. Once the orders were received, he manually generated PDFs and used to send emails containing the voucher and coupons to customers.
c) Crowdfunding: Crowdfunding can be effectively used when you have got a hardware product to sell. Many sites like Kickstarter & Indiegogo provide you a platform to showcase your product to millions of potential buyers.
Other platforms like Celery allow you to pre-sell your product via your own website. You can simply invite your interviewees to your site where they can see the designs of your product. If you have a working prototype, you can show it through a video with yourself using it. Using Celery, you can capture the orders now and charge for them later when you are ready with your product.
To Wrap up
Bootstrapping can be tough as you have to manage your limited funds judiciously. Therefore it becomes quite important to know the ways through which you can generate funds for your startup and get useful and relevant resources for free or cheaply. Thus, the above five points can provide you significant help in your bootstrapped journey.