Bootstrapping 101: Building a Startup without a VC or Angel: Nov.13, 2012

Bootstrapping 101: Alternative Ways to build a Startup without an Angel or VC:  November 13, 2012  

Next month, on Tuesday November 13, 2012 at 7pm, I will serve as moderator for  the meeting of IEEE Entrepreneurs’ Network (ENET) on the above subject at the Foley Hoag Emerging Enterprise Center, 1000 Winter Street, North Entrance in Waltham, Massachusetts.   Below is the article I wrote for publication in the IEEE Reflector, about this presentation.

Entrepreneurs often think that the only way to grow their business is to raise capital from VCs or angel investors.  While outside capital can fuel growth, it also carries a considerable cost in terms of time expended, loss of equity and loss of control which can and often is avoided by most entrepreneurs.

Surveys indicate that for the last year ended, 2011, of the 543,000 new business created in the U.S., only 29,626 (that is, only 5%) received VC or angel investor funding at the seed or early stage startup phase.

And for many companies lack of VC or angel investment did not impede growth. In August 2012, Inc. Magazine published its list of the 500 Fastest Growing Private Companies in the U.S., and 77% of the founders of those companies set up using only their own personal savings, with two thirds needing less than $100,000 to get started.  And while 34% stated that access to external capital has been essential for growth, 42% have not utilized external funding in developing their business.  74%  have financed their growth over the past three years largely through cash flow from operations.

So, how do you do it?  In a word – Bootstrapping.  That is – using your own resources and effectively managing your cash flow to internally generate the funds that you need to operate your startup business.

On October 2nd ENET will devote the evening to “Bootstrapping 101” to discuss a series of topics that will include

  • Buying used, using eBay and craigslist and controlling your costs,
  • hiring part-time, interns and volunteer help,
  • using equity effectively and outsourcing for expertise
  • using barter, free resources, and building and using your network
  • testing small and adapting quick,
  • Keeping the day job or consulting to fund the business
  • Leveraging relationships including advances from customers and partners

Apple, Google and HP all began in garages with free rent and we will hear from three experienced CEOs who have also built their business by bootstrapping without VC or angel investment until they achieved important milestones and were well on their away and in some cases without external funding all the way through to the successful acquisition exit.

At the ENET meeting on November 13, 2012, I will moderate for these three speakers:

  • Karl Büttner, Chief Mentorship Officer, with the startup accelerator program and competition Mass Challenge, www.masschallenge.org  With over 20 years of both bootstrapping and VC-backed company experience, Karl is passionate about supporting entrepreneurs. Karl co-founded 170 Systems, an enterprise software company in 1990, and saw it through two decades of growth and profitability, culminating in a successful acquisition. Karl led the company as CEO as it bootstrapped to become a profitable, worldwide market leader with a Fortune 1000 customer base using the company’s software products and services in over 90 countries – all before taking VC funding which fueled further growth. After joining MassChallenge in its inaugural year as a judge and mentor to many teams, Karl is now focused full-time on making the mentorship experience the best it can be for both the emerging companies and the participating community. Karl is also a mentor with programs such as TechStars and the MIT Venture Mentoring Service.
  • Barry Morris, CEO, NuoDB Inc., www.nuodb.com, a 21st century database that addresses the challenge of web-scale applications for the cloud. Barry is an accomplished software CEO with over 25 years of industry experience in the USA and Europe, running private and public companies ranging in scale from early startup phase to 1,000+ employees. He loves to build companies around industry-changing paradigm-shifts in technology.  Barry joined IONA Technologies (NASDAQ:IONA) in the very early days and ultimately as CEO led Ireland’s most successful software company through its strongest period of growth, all completely bootstrapped.  Later, as Chairman and CEO of StreamBase Systems, Barry took an MIT project and built it into the market pioneer and leader in Complex Event Processing .  In addition to great deal of consulting work over the years he has served on the boards of many startup companies in Boston, Ireland and South Africa.
  • Erica Zidel, founder and CEO of Sitting Around, www.sittingaround.com , an online community that makes it easy for parents to find and coordinate babysitting co-ops in their neighborhoods.  Completely bootstrapped, Sitting Around serves families in 48 states, as well as in Canada, Australia, Hong Kong and the U.K. Boston-based, its website has a user base to over 7,000 families on the site and 1,500 registered sitters.  The mother of a young child herself, Erica knows all too well the challenges parents today face, especially when it comes to finding great babysitters. Ever the entrepreneur, Erica launched her first business at age 7, a moderately successful jewelry stand that employed all her friends (and sold exclusively to said friends’ parents).

For more information or to register for this meeting, go to www.boston-enet.org

Hopefully, this networking event will be helpful to entrepreneurs in small and early stage companies I represent.  Hope you too can join us.

*     *     *

Additionally, in preparation for this meeting, you can also see my slides from an ENET presentation several years ago where I moderated and spoke – “Getting Initial Funding – Taking Your Company From Zero To Something. My presentation discussed:

  • Non-VC cash sources:  loans, SBIR-STTR, Mass. & local agency programs.
  • Commercial sources of revenue from customers, suppliers, from strategic alliances and product and application licensing,
  • Bootstrapping strategies to manage cash flow, delay payments, avoid fixed commitments to preserve cash in the company.
  • Non-cash and thrifty techniques to add value to the enterprise, including cost effective ways to build management, build a board, gain technology and protect with IP “on a shoestring”,  and
  • Tending to the needs of founders including maintaining outside revenue streams to again make cash go as far as possible.   

For my slides, LINK: https://robadelson.wordpress.com/2012/06/04/getting-first-funding-without-vc-or-angel/

Also, I earlier wrote an article published in Mass High Tech that discusses use of SBIR and STTR grants, requirements and strategy, “Federal Grants are an Overlooked Source for Bootstrapping Startups.”

For my Mass High Tech article, LINK:  http://www.masshightech.com/stories/2003/06/16/focus2-Federal-grants-are-an-overlooked-option-for-bootstrapping-startups.html?action=emailfriendform

 

If you are entrepreneur or engaged in a startup or early stage company and need assistance of legal representation on contracts, initial funding or other matters,  please let me know.

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