Today we at CLARA closed a 1 million dollar round of funding that will provide the working capital we need to scale up and get us ready for world dominance. Until now we have been making every penny count in bootstrap mode. I’m writing this to explain my thoughts about bootstrapping, what it has done for us and why others should do the same.
When I first heard that we should “Bootstrap" it left a huge question mark on my face. I immediately thought about my statistics courses in the university; why in the world would my start up need to to derive estimates of confidence intervals for estimators of parameters of some statistical distributions. I actually thought about some of the R programs I wrote and started thinking how that could be applied. I eventually said that there was no need for that anytime soon, maybe a few years down the road. That left an even bigger question mark on the face of the guy I was chatting with.
It turns out that Bootstrapping is also a phrase in business finance. It’s about keeping a tight fist on all your expenses and knowing that Cash Flow is more important than your mother. Something we’ve always been keen on doing but never had the correct lingo for it. In the past two years, we’ve put a huge emphasis on doing stuff that people, especially the people that pay us, like. The team has been very focused on organic growth and building our company the way we want.
In my mind, starting with little to no cash and working your way up is a very healthy start for a young company having to figure out how to make a great product.
Here are my Top 6 reasons why I think it’s important to start by bootstrapping:
We managed to justify a greater evaluation of our company simply by waiting. The founding members will still hold a majority stake in the company for years to come. This is not all done with out help so we will of course continue to learn from the best around and surround ourselves with big thinking leaders.
When we started CLARA we knew exactly what we wanted to achieve. We didn’t write the typical mission statement because we found that was too forced. Instead we had two mantras that we still look at today when we are thinking about our next moves.
First: we want to help companies understand their customers.
Second: we want to make the environment for market research better by developing the technology needed.
This is our vision. Staying true to it is more important to us than anything else. These mantras are embraced by every member of our team which help with every decision they have to make throughout our development.
By bootstrapping we’ve had the freedom to build the company our way, not just copying some culture from outside ‘owners’. We have a simple rule banning cords on the floor because that interferes with all the skateboarding and just recently we cracked open a wall to fit in our new bar. Those things, and hundreds more like them, form the companies culture; our culture.
When you show results, asking for money gets a lot easier. There are loads of people out there with great business plans who say that all they need is X amount of millions so they can build the most awesome products you’ll ever see. That’s not gonna happen, unless they’ve already made someone very rich. By building cash flow and getting solid reoccurring revenues, you are not only getting the money, you are also getting the best proof there is that you have something worth investing in.
Once you don’t need money, you’re in a great position to talk to investors. There’s nothing more frustrating to them than someone not needing their money, and that’s a good thing. We got to pick the very best investor that suited our “super awesome growth strategy”©. Our new boardmember brings in a vast amount of knowledge in the high-tech start up scene and a great international network since their venture fund invests in the US, Europe and Asia.
When bootstrapping, you’re making sure that your team members don’t become too spoiled and careless. The team understands that their paycheck totally depends on their efforts and it really makes them sprint to perfection!
I’m truly honored to work with such a great team. I love you guys!
By bootstrapping, we’ve never had to owe anything to anyone. At one point we had the option to borrow money from the banks, but chose not to because we knew we could pull through. When you are running a company in an economy where a greater majority of companies are legally bankrupt, the young debt-free start-up is the prettiest girl at the ball.
Being dept free is awsome when negotioting, whether it’s lowering the rent at your new office or talking to some VC’s. Put yourself in the shoes of a VC investor, would you invest in an tail of old dept? Or would you look at the young energetic start-up that only needs money to grow, expand and scale their proven technology
How to bootstrap?
I sincerely recommend focusing on organic growth and building up your start-up the Bootstrapping style, here are a few tips from what we’ve done over the past 2 years.
To save money, we’ve …
… applied to every grant there is, and received all of them, minus one
… borrowed desks and chairs from a great friend!
… bought used computers
… bought used sub-par servers, and thats actully helped us write even better and faster code!
… borrowed (read: stole) internet from a neighbor… eaten noodles!… never paid rent, by jumping between incubators
… stolen pens and a stabler at client meetings
… used cheap post-it notes and scotch tape
… attended all lectures and cocktail parties known to man that have free food and drinks
… only hired people we desperately need, and brought them in as shareholders as well
… drunk beer with very smart people, instead of paying for expensive consultants
… and loads of other stuff!