07.01.2015

Bootstrapping: yes, startups can make it big without investors

Bootstrapping: yes, startups can make it big without investors

Image | Startbootstrap

It’s not the most common practice. In fact, those who do it are practically considered renegades of the start up community. Still, it’s not impossible: Small companies can grow without having to kill themselves finding backers to finance the take off of their entrepreneurial adventure.

The majority of startups follow the same formula. They play to the gallery and flutter their eyelids winningly in the hope of attracting an investor who will be able to ensure financing and kickstart growth. However, there is another way. One that’s less hurried, and at the same time much more stable and sustainable. In the sector it’s known as “bootstrapping” and it involves seeking out the best investor of them all: the client.

What’s wrong with the traditional way of doing things? Why not shelve the obsession with growing as fast as possible? These are some of the questions the entrepreneurs who have embraced “bootstrapping” as a form of financing have asked themselves. Why go through the hassle of hunting for million dollar investments in venture capital? All you have to do is focus on your product or service and finance yourself from the turnover. It’s as simple as that.

Technological startups have no reason to exclude themselves from this customer satisfaction centered practice. It is true that some companies will find it difficult to get going with “bootstrapping” (essentially those that need a large initial investment.) But we don’t have to scour the globe for examples of success stories. Here in Spain, a Murcian startup called Droiders has spent the last five years developing for Android and specializing in Google Glass. The only capital they rely upon is that which comes from own their own clients.

They aren’t the only ones. There are startups that have used “bootstrapping” to raise more than a million euros. If companies like Braintree (online payments) or Github (a web-based repository hosting service) have achieved it, then so can many more.

Of course, no one is saying that life will be a bed of roses for those that decide to shun the search for external investors. It’s true that the growth of your startup will be sustained directly by the sales from your most important clients; the ones that pay your bills. But this can be a double-edged sword with some of the following pitfalls.

  • Say goodbye to the race for first place: Bootstrapping won’t give your business the sudden injection of pace that an investor can. Instead it will grow more gradually and you will often have to resort to creative measures in order to keep up with your competitors.

  • Complete dependence on the economic climate: If there is even a whiff of crisis in the air your clients could start keeping their wallets in their pockets and you could be in trouble.

  • Contactless credit: Steering clear of investors can also mean steering clear of valuable contacts in the business world. It’s not impossible (or even essential) to find valuable contacts when you practice bootstrapping, but you could be depriving yourself of valuable knowledge and advice.

Your reward, however, will be that you are able to retain control of your own company and you won’t have a group of anxious investors peering over your shoulders, ready to claw back their money if they think you are misusing it. You won’t depend on them either for the good or the bad and no-one will make you close the door to success. Who said you had to run to get to the finish line?

Mobile World Capital Barcelona promotes entrepreneurship as a catalyst for mobile innovation and as a key agent for the progress of the economy and business community. The Programme of Entrepreneurship and Innovation (PEI) is currently one of the foundation's main efforts, and is meant to accelerate this transformation.

The PEI’s activities include 4 Years From Now (4YFN), an international mobile entrepreneurship event sponsored by Mobile World Capital Barcelona to place supply and demand in contact, promote knowledge transfer, and encourage networking among entrepreneurs, professionals, startups, accelerators, incubators and investors from around the world.

Mobile World Capital presents a global vision that effectively integrates mobile technologies into the fabric of the industries transforming our lives. Committed to expanding the mobile experience throughout Barcelona, Catalonia and Spain with strong support of the public and private sector.

Mobile World Capital is leading mobile transformation through commitments in Competence Centres, local Industry Development, and Entrepreneurship and Innovation programmes.

MWCapital offers an open platform and exhibition showroom where citizens can understand and experience how mobile is enhancing our lives: The Mobile World Centre, located in the heart of Barcelona on Plaza Catalunya.

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