Virtually every conversation I have with an early entrepreneur goes like this:
Them: Jesse, I'm building this and that, will you invest?
Me: Why can't you bootstrap this?
Them: Well, I need money for X, Y and Z
Me: Are you sure you need those things?
Them: Well, I guess I only need X.
Me: Ok, so why can't you bootstrap?
Them: Well, Where do I get $$$ for X?!
So let's answer this critical question. Some businesses can truly start with zero, especially in the services realm. We started GrowthAssistant with <$1,000 (domain name, email stuff, design work). But some businesses need a little bit more. Where does a bootstrapper go?
Before I answer that, there is one REALLY important issue in the conversation above: de-scoping your initial business.
Doordash has this value I love: dream big, start small. The easiest way to limit capital needed is to have a VERY thin wedge. Find the fastest way you can validate your idea while getting the ball moving.
Here's a recent example: someone pitched me on money management for influencers. Cool idea I dig. But needed millions to start running ads, build their software, etc. My idea: Can you start a newsletter on this topic for next to nothing?
If you are successful: you will have distribution + validation. If not, maybe you'll save yourselves years of a bad idea.
So assuming you've de-scoped your business. A good target is <$100K to get to profitability.
So where do you get that money?
There are only a few options:
1. Yourself/Your Family - When I started Ampush, me Nick and Chris took our savings each of $33k and put together $100k to go pursue our entrepreneurial dreams. Combined with credit cards (see below), it was enough to hire a couple contractors, design a booth, get some customers and run some media.
If you can do this or feel comfortable asking a few friends, this is a solid path.
2. Customers - This is the BEST place and the least considered. Kickstarter is an example of this for consumer businesses. In a services business, you can charge upfront and then go deliver the service.
For GrowthAssistant, we swiped credit cards and then went to find the first few GAs.
Even in some software businesses, you can get a company or companies to pay you a deposit before you've built it! There will be future emails where we talk about how to sell, position this, etc but the big thing is: you have to have the chutzpah to get out there and "fake it til you make it."
3. Financing - When I was first starting, this meant credit cards. Oh did we USE credit cards. $20k zero interest best buy credit card got us all our laptops and equipment. $50k of zero interest credit cards to buy our ads. We loved the credit cards (yes our credit scores declined by about 100 points the first 2 years…).
Today however, there myriad of CREATIVE financing options. Companies will send you money again your revenue in ecommerce. Others against your ARR in SaaS.
Thursdays email will be my go to list of different financing sources. I won't give it its own section but there are lots of Grant programs out there (for example if you move to St. Louis is Arch Grants.)
4. Supplier/Partnership - Sometimes there's a supplier who makes say T-shirts, and they want to get ecommerce distribution but have no idea how.
A bootstrapped deal here would look something like: "Hey, you guys put up the first $100k, give me your product and I'll give you 20% of the company." Boom.
Finding a "hustle" to get your first $50-100k is worth a lot. Not only does it get you money, but it teaches you how to sell and close which is incredibly valuable.
There's a great list to get started!
Last thing as a disclaimer: borrowing money especially with a personal guarantee creates a lot of personal risk for you and your family. When I did it, I was 25 and knew I could get a high paying job to pay off those credit cards. Make sure you don't get so far over your skis that you hurt yourself or your family trying to bootstrap, manage your risk!!
P.S - Reply to this email with what YOU want to learn from me! (Yes...I actually do use these suggestions!)