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Bootstrapping: The Road Less Travelled

March 27, 2019

Why Choose Bootstrapping?

Whenever I meet aspiring entrepreneurs, more often than not, once they’ve finished telling me all about their wonderful, amazing, out-of-this-world, never-before-seen idea(s), they conclude by asking, so do you know any investors I can contact?

I’m here to point you in another way. Bootstrapping.

Bootstrapping does not mean that you drain your savings to build a company or wear your shoes out chasing investors. Instead, it refers to building your company using money from Customers.

I know this path first-hand as I was in a hard tech* company that was bootstrapped from 0 to $120M—customer funded all the way. The main founder often talked of putting $4,000 on his credit card in the first month of the company’s life and paying it off from revenue before it came due. He was very proud of that. I joined as the fifth employee and stayed until there were 900+.

In the early days, the company did contract or work-for-hire projects to pay the bills while taking full advantage of government programs that funded R&D, investment tax credits (ITCs), and the like. The company began to develop its own products from Day 1, and while they were quite simple at first, they got more complex as time passed.

An early high point was building foundational products that enabled the first cable modem networks to develop in the late 1990’s. Then, we became an original equipment manufacturer (OEM) to Cisco and helped them grow their Cable Business Unit from $0 to $$$BIG.  

At one point, our CFO liked to tell investors that 60% of the traffic on the Internet flowed through our gear. Sometime later, we built other products based on my master's research work to support Verizon’s multi-billion $$FTTH rollout across the United States, and we grew some more. I could go on and on. By our peak, we had become adept at delivering product in the telecom, cable, government, and consumer sectors to a range of demanding customers from small to Cisco to the government.

Our competitive advantage was our expertise in RF, which to many was a mystery not far removed from magic, and we developed significant expertise in RF (0–48 GHz), digital, analog, MPEG, FPGA, network processing, Ethernet/GbE, Fiber, CATV, software, and more. All hard tech through and through.

When we proposed novel products and signed significant deals, it was often the case that we really didn't know how we were going to do what we had promised, but we knew our history and our proven capability, so we drove on and succeeded more often than not.

Bootstrapping does not mean that you drain your savings to build a company or wear your shoes out chasing investors. Instead, it refers to building your company using money from Customers.

Doug Fast 
Founder & CEO of Dark Water Tek
Venture Connection Mentor-in-Residence

So why am I telling this story now? Because bootstrapping is still a viable option! (Can you say non-dilutive?)

What’s more fascinating is that the vast majority of companies in America, including approximately 350 out of the Fortune 500 list, came into existence without a formal business plan, business model, or external funding. Sam Walton, Bill Gates of Microsoft, Larry Ellis of Oracle, Michael Dell of Dell Computers, and John Mackey of Whole Foods all successfully bootstrapped their companies, as did the founders of many successful web-based companies like Zynga, Braintree, Storm 8, and Curiously.

There are also notable examples closer to home in Vancouver, including Stemcell Technologies, Zaber Technologies, and the Vancouver-based dating website Plenty of Fish, which was bootstrapped by Markus Frind from his apartment to become one of the largest dating sites in the world with more than 38 million users and 6 billion monthly page views. These are just a few of the many, many examples in every industry and city that you can imagine. Yet bootstrapping is not taught in any course at Harvard, Stanford or Wharton, and there are few books or articles on it.  

Regardless of how you plan to wrap a business around your idea, you owe it to yourself to understand the bootstrapping mindset in detail. Besides, after you bootstrap your business to serve masses of loyal customers, then investors might proactively seek you out to get involved...and you can have the pleasure of turning them down :) or not.

To better appreciate this mindset, start by reading Colossal Bootstrapping by Robert Hargrove.

You can also read the blog post I wrote on my bootstrapping experience.

 

If you have questions, comments, thoughts, etc., please reach out.

Doug Fast

*I use ‘hard tech’ to mean a company where there is a doubt that the technology can be built at all. It often involves some mashup of software, firmware, hardware, and the like. But when physics and the laws of nature get involved, that’s ‘hard science’.