Yo BG squad!!
Welcome to the first email in the new Bootstrapped Giants newsletter.
This covers a favorite question and one where I have a strong point of view (and one I get asked a lot.)
“Jesse, what do YOU consider bootstrapped?”
Is it truly no outside money? Sub $10M raised? No institutional? Outcome relative to capital raised?
My answer: NONE of the above.
See, Bootstrapping is not really a financing type per se. (Fine: If you put a gun to my head on the above question, I would answer: the MAX a bootstrapped company can raise is a few million from NON institutional investors. The second you have institutional money, unless you’re a very experienced founder or have a company that just crushes, the weight of the VCs interests will overtake your own.)
But really: I think Bootstrapping is a mentality.
And I’ll share 3 things you should OBSESS over if you want to have a bootstrapped mentality.
But first, let’s talk about the anti-pattern: Right now, VC is hurting and its harder to raise than anytime since 2008. But for a long time, RAISING money was easier than building a business. And so lots of entrepreneurs tricked themselves into thinking the GOAL of a business was to RAISE money, and then raise more money. And so the opposite of BOOTSTRAPPING as a mentality is: making decisions based on WHAT will excite future investors RATHER than future (or current) CUSTOMERS.
So what are the core things you should obsess over (regardless of your financing) if you want to build a Bootstrapped Giant?
I call them the “Three Cs”:
- Cash Flow
Ok maybe 4 Cs :). Let’s take a look at each one:
In my experience, no business has actually started until a customer has paid money for a product or service. This is the point where it all becomes REAL. Sure you can build a product for 2 years before this time, or strategize and validate for 6 months or just ask around for advice. But until you sell something to someone, you do not have a real business.
For a bootstrapper, this usually MUST happen quickly/soon (because you have no $!).
Beyond the benefit of speed to customer, the only people giving you money are customers. There’s no confusion on who butters your bread (same is not true when you go raise money).
I LOVE this combo of fast to market and customer centricity.
For examples, GrowthAssistant had its first customer within 30 days of starting. Aux Insights, a consulting biz I started for PE firms who needed digital marketing help, had its first customer in 100 days. This model WORKS.
There will be A LOT of conversation around Cash Flow in Bootstrapped Giants. I’m going to share lots of tricks for negative working capital, asset backed lines, margins and million other ways I’ve focused on cash flow.
So for the time being, I’ll keep it simple: Bootstrappers KNOW their cash flow and CONSTANTLY focus on it (regardless of cash in the bank). Simple question: how much cash did your business use or generate last quarter? How about last month? And last week?
Last WEEK is the key question. Bootstrappers do regular check-runs to know all cash in and out, have cash flow projections (13 day and 13 week) and know their cash position, always.
(Don’t worry if you don’t know a lot of this, I’ll explain it all soon.)
One of the key philosophical parts of bootstrapping is doing MORE with LESS.
Accountability for yourself and your team is an absolute must in this situation. For me, this comes down to 3 things:
- Measure everything - know your numbers whether its paid ads, organic posts or sales calls
- Have a high bar - do things really REALLY well, take your time
- Scale results/revenue before costs - make sure something is working and can make money before you move to “add resources.”
The last one maybe the most “important” philosophically. There have been a lot of sad stories lately about high flying startups going belly up, having huge downrounds and poor IPO's
To me, this is the ultimate cost of an “add resources then show revenue” mindset. Of course there is nuance here as a business evolves but that 3rd principle can really take you far.
So that’s it! My definition of what makes someone a BOOTSTRAPPER and the philosophy (regardless of cap table) of a Bootstrapped Giant.
Have a great week ahead!
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