Although many startup founders dream of securing massive investments from VCs or Angel investors that catapult their companies to endless growth, the reality is that most startups never receive any sort of significant outside investment. Fortunately, it’s entirely possible to build a hugely successful company by funding it entirely through the use of your own resources, a process known as “bootstrapping”. In this article I’ll trace out 4 crucial strategies you can use to create the next bootstrapped high-growth startup.

What is “Bootstrapping”?

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Bootstrapping, which originates from the famous phrase “to pull oneself up by one’s own bootstraps”, refers to the process of using one’s own finances, grit, and resourcefulness to build and grow a new company.

Bootstrapping is the opposite of creating a business by accepting significant outside funding from venture capitalists (VCs) and/or Angel investors.

Businessdictionary.com provides a more elaborate definition of bootstrapping:

“[Bootstrapping refers to] [b]uilding a business out of very little or virtually nothing. Bootstrappers rely…on personal income and savings, ‘sweat equity’, lowest possible operating costs, fast inventory turnaround, and [sometimes] a cash-only approach to selling. … Most of [the] world’s startups still follow this road [to growth,] either because there is no alternative [available], or because of the unmatched control and independence it offers [as compared to raising funding from external investors]”.

A number of the most successful tech companies of the 20th and 21st centuries were initially bootstrapped by their founders, including Apple, AppSumo, Craigslist, Facebook, Hewlett-Packard, MailChimp, Microsoft, and Oracle (sources: 1, 2, 3).

Pros and Cons of Bootstrapping

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As with virtually all other major business strategies and decisions, bootstrapping carries with it a host of potential advantages and disadvantages.

Advantages of bootstrapping:

Disadvantages of bootstrapping:

With these pros and cons now better understood, let’s consider some key strategies you can use to increase the chances of successfully bootstrapping your startup.

1. Validate Your Idea

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Here at Appster we’ve written lots of articles detailing the fundamental steps of building a startup from the ground-up.

One of the very first aspects of successfully bootstrapping your startup involves identifying and validating a monetizable customer pain, calculating the size and demand of your projected target market, creating, testing, and refining your minimum viable product, and achieving product-market fit.

Part of these key processes involves validating your product idea.

Fortunately, it’s possible to do so without having to spend much money at all.

As my partner and co-founder Mark McDonald recently explained, startup founders can use one or more of the following 6 helpful strategies to validate their product idea before launching something in the market:

  1. The $20 Starbucks test (i.e., buying passers-by a coffee in exchange for honest feedback on your objectively-presented idea);
  2. The “knock-on-the-door” approach (e.g., using online surveys, polls, and personalized messages on Internet forums to gather feedback);
  3. Create a test ad campaign and measuring the results (e.g., building a cheap yet effective landing page that presents a unique value proposition and allows visitors to sign-up for (or even pre-order) your future product(s));
  4. Utilize a beta promotion site like st and promote your app to testers/early adopters;
  5. Attend meetups and in-person events to gather feedback and recruit assistance/advice from others in your industry; and
  6. Earn face-time with successful entrepreneurs (e.g., leverage your social and professional networks by having others introduce you to important leaders in your market niche).

Expanding on the 3rd point above, at 18 and 19 years old, respectively, my co-founder Mark McDonald and I designed a minimalist website in order to test our assumption that we could build a business helping entrepreneurs execute their mobile business ideas.

We hired an actor and created an introductory video, which was uploaded to our home page.

We spent around $100 on some specific Google Adwords and thereby generated traffic to our website. 

We managed to convert some of that traffic from leads to future customers.

We made telephone calls to our future customers in an attempt to determine exactly what they needed from us.

We discovered that there was significant demand for the type of solution Mark and I were planning to offer.

We then very quickly realized that we had to locate and hire some developers so that we could deliver results to our earliest clients.

A screenshot of what the original version of the Appster home page looked like:

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2. Embrace the Hustle

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Entrepreneurs love to recite the famous saying, “good things come to those who wait, but only the things left behind by those who hustle”.

Bootstrapping your startup can allow you to excel to new heights as an entrepreneur and a creator.

Anita Campbell does a great job outlining the ingenuity and talent that founders can develop when they embrace the bootstrapped approach:

“Bootstrapping brings out the best in entrepreneurs and the best in those they work with, too. They are enthusiastic, passionate and relentless. They don’t give up on their dreams and they never stop learning. They also end up learning a lot more about themselves along the way and end up accomplishing a lot more than they might have originally thought possible. Bootstrappers wake up earlier, spend longer days at work, know how to keep their wits about them even under pressure, know how to eliminate unnecessary distractions and are often very productive”.

One of the crucial things to which Anita points here is the importance (and necessity!) of learning as much as possible when operating as a bootstrapper.

The reality is that founders who do not take on external investment typically cannot afford to hire sales or marketing teams or public relations (PR) firms.

Instead, they have to do it all themselves—at least during the early stages of their startups.

The point is that you need to hustle to make a bootstrapped startup work.

Invest time into studying sales, marketing, PR, recruitment, accounting, general business practices, and so on—these are crucial aspects of business that you can learn and apply yourself.

Remember that true hustling is ultimately about doing what 99% of the population won’t, i.e., doing everything possible to create a growing business and refusing to quit no matter how many obstacles are thrown in your path.

Make cold calls and send cold emails, attend conferences and meetups, talk to your customers in person, blog about the ongoing growth—the trials and tribulations—of your company with your online followers, etc.

3. Focus on Profits; Make Cash Work for You 

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Cut your personal experiences, watch your cash like a hawk, and implement a business model that generates cash quickly: these are 3 crucial recommendations offered by Rodrigo Santibanez at Fast Company.

Many others similarly emphasize just how crucial it is for bootstrapped startups to focus on generating profits by utilizing short cash conversion cycles, i.e., processes that allow every dollar you spend to return to your business as quickly as possible so that you can reinvest those earnings and achieve growth.

Insisting that producing profit is the “first law of bootstrapping”, Anita Campbell stresses the necessity of bringing and reinvesting cash into a bootstrapped business:

“Bootstrapped companies must focus on profits to keep on going. They have no outside investment dollars to spend—no ready pile of money they can tap into. Bootstrapped companies [therefore] can’t afford to waste money. They must make money, if they are to survive. The profits they make are what fund the business. … And [because of] that, a bootstrapper needs to develop paying customers. He or she has to be able to make payroll, pay the bills, and still fund the company’s growth—all from the money the company earns”.

How can you achieve a positive cash flow state for your bootstrapped startup?

Two key strategies we’ve discussed in the past are driving down customer acquisition costs and improving your customer retention rates, each of which requires different tactics to execute successfully—see here, here, and here.

More practically, if you’re building a SaaS business then one technique to bring as much cash into the company as possible is to offer discounts on monthly payments if users buy an entire year all at once. 

As an example, Slack uses this very tactic to promote its annual billing: 

For more detailed information on the economics of running your startup, be sure to check out these recent Appster posts: 1, 2, 3.

4. Be Resourceful and Gutsy

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Anthony K. Tjan nails the need for bootstrappers to be resourceful—i.e., to “bite down on their mouthguards”, refuse to give up, and exploit every last angle and opportunity—when he states:

“Great entrepreneurs have the guts to go after big ideas. They are willing to put themselves out there when most worry about, ‘What will others think?’ The definition of entrepreneurship that Harvard Business School Professor Bill Sahlman made prolific—‘the relentless pursuit of opportunity without regard to resources’—forms the center of the entrepreneurial mindset. Entrepreneurs don’t worry about the resources they lack, but about the resourcefulness required to get the big idea done”. 

Resourcefulness is a skill that must be developed.

And there’s no better way to train oneself to become scrappy, dexterous, and possessed of ingenuity than to build a startup from the ground-up.

What are some examples of resourcefulness?

There’s never been a better time to launch a startup.

Your only limits are your own creativity, passion, and willingness to bring your dreams into reality.

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