How to bootstrap your first startup

If you’re thinking of launching a startup, you’ve probably asked yourself: How much money do I need to raise and how am I going to do it?

Don’t worry, you’re not alone.

TechCrunch and the startup media create so much hype around venture capital and mega funding rounds that it’s easy to feel like you need external funding to build a startup. But that’s simply not the case.

You don’t have to raise a ton of money to get your startup off the ground. In fact, you might not need to raise any money at all. In fact, there are plenty of successful startups that have bootstrapped their way to success – without any outside funding from angel investors or VCs.

How did they do it? With limited resources and lots of hustle. In this guide, I’ll walk you through some the different ways to bootstrap a startup and how to improve your chances of success.

What is bootstrapping?

Bootstrapping is the process of using personal savings and sweat equity to turn an idea into a business, and focusing on sustainable growth by reinvesting the profits rather than seeking external investment.

Bootstrapping matters because it’s a great way for new founders to start their own businesses without getting bogged down by outside investment. By not taking on too much risk, you can focus your time and energy on building a successful business.

Some founders find that they can get their startup off the ground much faster when they are focused on building traction and generating revenue instead of pitching investors.

While bootstrapping your startup can feel scary, but it shouldn’t feel impossible. You just need the right strategy and a lot of hustle. Of course, this will also depend on the type of startup that you plan to build and how quickly it needs to grow for it to be viable.

One of the biggest advantages of bootstrapping your startup is that you can keep full control over it from day one. Instead of having to convince angel investors or VCs, you just need to believe in yourself and put in the hard work required for success.

The three stages of a bootstrapped business

Almost all successful bootstrapped businesses will go through three stages.

Stage One: self funded

In the first stage, you will be funding your business through your own savings and personal income. You will develop your idea and build your company’s most basic product or service. Initially, this probably won’t be super polished, but it will help you validate the market and generate some revenue quickly.

Stage Two: customer funded

In the second stage, you have started to generate meaningful revenues from your customers and no longer need to use your personal funds. This stage is all about scaling your business and making it as profitable as possible. You may be able to hire employees and begin marketing your business more aggressively.

Stage Three: credit

In the final stage, you have reached a point where you have regular and predictable cash flow that can be used to service debt. This allows you to take out a business loan, giving you access to larger amounts of capital than previous stages permitted. This is likely the point at which most bootstrapped businesses will raise funding from outside investors if they wish, or even look to an IPO.

How to Bootstrap a Startup: A Step-by-Step Guide for New Founders

If you want to join the ranks of successful bootstrapped companies, these tips will make your bootstrapping journey a little easier.

Don’t quit your day job (yet).

Your bootstrapping journey is just beginning, and you might be tempted to quit your day job right away. But for most founders, it makes more sense to bootstrap your startup while working a full-time job (or something part-time).

If you have enough savings in the bank that would cover your living expenses for at least six months or a year, then maybe you can quit your job right away. But if you are bootstrapping with credit cards, then it’s probably wise to keep a steady income coming in while you work on building your company.

This will help you to reduce the amount of risk that you are taking on and give you more runway before running out of money. The stress from not having a steady paycheck can also be overwhelming for many founders, so it’s best if your financial situation is somewhat stable until your business can support itself.

Determine how much money you need to get started.

When bootstrapping a startup, it’s important to be realistic about how much money you need. You don’t want to risk losing the opportunity or getting burnt out by working multiple jobs, but you also don’t want to overextend yourself with debt.

Take some time to think about your financial situation, and make a list of all the expenses that you need to cover. Be honest with yourself: how much money do you require each month? How long can you go without income before it becomes a problem?

Then write down all your assumptions about the cost of building your startup: will it just be your time? Do you need to buy any software, services, or equipment? How much money will you need to spend each month on your business?

Once you have worked out how much it costs to live, then add in the monthly expenses for building your startup. Now try to figure out where this money is going to come from. Be creative: do you have assets that can be sold? Can you cut some personal expenses? Could you get a part-time job or freelance on the side to generate some extra income?

If in doubt, it’s better to be conservative. You can always go back and revisit this later once things are going well (and your startup is profitable).

Decide if you’re going solo or with a co-founder.

Having a co-founder can be incredibly helpful for bootstrapping. You’ll have someone to bounce ideas off and hold you accountable when things get hard. However, it’s not always easy finding the right person with complementary skills who is also committed to building a company from scratch without any outside funding.

If you are thinking about starting a bootstrapped business with a partner, then it’s absolutely critical that you lay out ground rules and expectations ahead of time. This is not something you want to figure out once things get tense or when money gets involved. Make sure that you have a co-founder agreement in place.

Many new founders decide to start their first company on their own because they don’t know anyone suitable for the role, and they don’t want to wait until they find a person. This is also a good option if you are looking for more control over the business, but it means that you will need to learn how to do everything on your own or hire freelancers as needed.

Create an MVP (minimum viable product).

When you are building a bootstrapped startup, it’s essential to focus on creating an MVP. An MVP is not always a product! It is the simplest and most basic version of your value proposition that will help you validate your idea and start generating revenue.

Do not try to build the perfect product right from the beginning – that’s a recipe for disaster. Instead, focus on creating the minimum viable product for your business, which will cut development time and help you gather feedback from customers as early as possible.

There are many ways to create an MVP, such as building a landing page or using a one-page website to collect emails from potential buyers of your product. When you are bootstrapping, you don’t have the luxury of spending months creating a sleek website. Instead, focus on getting something out there as quickly as possible so that you can begin generating revenue and validating your idea.

Build an audience before launching your product or service.

When you are bootstrapping, it’s essential to be laser focused on your target market and what they need. Do not try to sell everything to everyone – that is a recipe for failure. Instead, focus on finding a niche market where you can provide value and help them solve a problem.

One way to build an audience is to create content around your topic of interest and share it on social media and other channels. This will help you generate leads and begin building a relationship with potential customers.

You can also find events where your target market is likely to be attending, and try to connect with them as much as possible. When you are ready to launch your product or service, you will already have an audience that is primed and ready to buy from you.

Sell services first.

Once you have identified a niche market that needs your product or service, the next step is to figure out how you will get it into their hands. One of the easiest ways to do this is by selling services first. This will help you generate revenue right away and reduce the amount of risk that you are taking on.

You can offer a free consultation for potential customers and then use that opportunity to upsell paid services. This will help build trust with your audience and deepen your relationship. You’ll get a better understanding of what they need and how you can help them, which will make it easier to sell your product or service down the line.

Think long-term when bootstrapping a startup.

Bootstrapping a startup is not a short-term strategy. It will take time to generate revenue and turn a profit, so don’t expect instant results.

This is why it’s important for you to think long-term when bootstrapping your business. You need to be patient and focused on the future of your company rather than trying to make money right away with quick solutions.

This is not an easy task, but it’s important to remember that Rome wasn’t built in a day. The key is to stay focused and motivated during challenging times, and always keep your end goal in mind.

Track your burn rate.

One of the most important things to know when bootstrapping a startup is your cash flow. This will help you to understand how much money you are spending and how much revenue you are generating.

It’s also important to track spending so that you can avoid cash flow problems. When you have a clear understanding of your financial situation, it will be easier for you to make decisions about your business.

The best way to track your burn rate is to create a budget and track your expenses regularly. This will help you stay on top of your spending and make sure that you are not overspending.

Understand all funding opportunities.

Although it’s important to bootstrap a startup, there may come a time when you need additional funding. This is why it’s helpful to know about various funding opportunities that are available for entrepreneurs like yourself.

You’re not limited to angel investors and venture capital firms; there are many other ways to fund a startup. You can also look for grants, loans, and other types of funding such as debt funding or revenue-based finance.

There are also crowdfunding platforms such as Kickstarter and Indiegogo, which allow people to fund projects that they believe in. These can be a great way for you to turn your customers into investors (as Monzo and Brewdog did).

Be prepared to pivot your business model.

Business models can fail for a variety of reasons, and this is why it’s important for you to be prepared for failure when bootstrapping a startup. If things don’t go according to plan, don’t panic, just think about what went wrong and how you can pivot your business model.

Pivoting can be a smart way to turn things around because it allows you to change course without losing too much time or money on your initial idea. The key is knowing when it’s time for new direction for growth potentials.

It may take several attempts before finding the right fit, but once you do, you’ll be on your way to success.

Stay focused and motivated.

Bootstrapping a startup can be challenging, but it’s important to stay focused and motivated during difficult times. Remember why you started your business and keep your end goal in mind.

Loneliness and mental health issues are a real problem for startup founders, especially if you’re a solo founder. So, don’t neglect your well-being. There are a lot of amazing communities focused on bootstrapping and early-stage startups, so get involved in one or more of them and try to connect with them as much as possible.

Just make sure that you take some time for yourself so you can recharge and continue working hard on your startup. Remember that this is a marathon, not a sprint!

Build in Public.

Many successful companies have used #BuildInPublic as a marketing platform, enabling the founding teams to successfully bootstrap their startups.

The transparency required to Build in Public can feel really scary, but the payoff is worth it. It helps you gain trust by showing your audience that you have nothing to hide, which will make them more willing to work with or invest in you down the road.

When you’re bootstrapping a startup, it’s essential to get rapid feedback from your target market and potential customers, and building in public can help you do that. It can also help you build a community of supporters who believe in what you’re doing and want to see you succeed.

Know your strengths and outsource wisely.

Bootstrapping a startup can be difficult, so it’s important to outsource work wisely. But, before you do, make sure you know your strengths and weaknesses. Don’t spend money on things that you can do yourself or that someone else can do for less money.

There are many online services that offer affordable, or even free options for outsourcing tasks such as logo design, website development, and social media marketing. So, make sure you take advantage of them and focus your time and energy on the things that are most important to your business.

If you need someone to help with the logistics of running your company, consider hiring a virtual assistant or an online bookkeeping service like Bench Accounting. These types of services can save you time and money while allowing you to focus on building your business instead of handling administrative tasks, such as payroll processing and tax filing.

Be patient, but track progress.

Bootstrapping a startup is a long process, so it’s important to be patient. But, that doesn’t mean you shouldn’t track your progress. Make sure you have goals and milestones that you’re working towards and keep track of how well you’re meeting them. This will help you stay motivated during difficult times.

It can also help to have a plan for the future. For example, if you’re bootstrapping your startup because you don’t have enough money to fund it yet, but you know that eventually you will be able to raise funding or sell equity in exchange for cash infusions, then make sure that’s part of your business plan and timeline so that when those things happen, they don’t derail your efforts.

Avoid vanity metrics.

When you’re bootstrapping a startup, it’s important to focus on the numbers that actually matter. This means avoiding vanity metrics and tracking only those things that will help you make decisions about your business.

For example, rather than tracking how many followers you have on social media, track how many leads or sales came from your social media efforts.

You should also make sure that you’re tracking the right things, such as conversion rates and customer lifetime values. Tracking metrics that don’t matter can lead to poor decision-making and missed opportunities for growth because they aren’t relevant to your business’ success or failure.

Do things that don’t scale.

One of the best pieces of advice for bootstrapping a startup is to “do things that don’t scale.” This means that, at least early on, you should focus on building relationships with your target market and potential customers. You should be prepared to do whatever it takes to get their attention and keep them interested in what you’re doing.

This might mean that you spend a lot of time on social media, answering questions in online forums and commenting on blogs. It could also mean that you host free webinars or meetups to talk about your product or service and why it’s useful to them.

It’s important not to over optimise or scale too quickly when bootstrapping a startup because you need to make sure that your customers are satisfied with what you’re doing. If they aren’t, then you’ll have bigger worries than inefficient processes restricting growth!

Be prepared to work hard.

When you are bootstrapping, there is no magic bullet – it’s all about hard work and dedication. You will need to be prepared to put in long hours and make sacrifices. You’ll also need to be prepared for setbacks and failures along the way.

The most important thing is not giving up when things go wrong or don’t work out as planned; this is just part of being an entrepreneur. If you’re not willing to do that, then startup life probably isn’t for you!

FAQs

What is bootstrapping?

Bootstrapping means self-funding your new business. Bootstrapping a startup typically means that the founders are using their own personal savings to finance the business through its early stages. Bootstrapping can be a slow process, but it can also be very rewarding when your business can grow and become successful.

Why is bootstrapping so hard?

Bootstrapping a startup is difficult because you have to find creative ways to grow your business without relying on outside investment. This can be a challenge, but it’s also an opportunity to get creative and learn a lot about running a company.

Why bootstrap a startup?

There are several reasons you might choose to bootstrap your startup. You might want more control over your business, or you’re simply not interested in raising capital. Bootstrapping allows you to retain ownership, which can be a huge advantage if you’re looking for long-term growth and success with your company.

Who should learn bootstrapping?

Bootstrapping is an essential skill for founders. It teaches you how to create a profitable business model and generate sales leads, which are two of the most important things when starting any new venture. Learning about bootstrapping also helps entrepreneurs focus on what’s important – building a sustainable business.

What does bootstrapping a startup involve?

Bootstrapping involves many aspects of building an early-stage business, but here are the two most important challenges you’ll be solving:

• Creating a product or service that people want to buy
• Growth hacking your way to sales and profitability

When is bootstrapping a bad idea?

Bootstrapping is a great way to fund your startup, but it’s not for everyone. If you have well-funded (venture-backed) competitors, it might be difficult to compete without outside investment. Additionally, bootstrapping can be more difficult if you’re in a high-risk industry.

What are the pros and cons of bootstrapping your startup?

There are many benefits to bootstrapping your startup. You’ll have more control over your business and its direction, which can be a huge advantage if you’re looking for long-term growth and success with your company. However, bootstrapping also means that you will need to generate cash flow quickly, or you’ll soon burn through whatever capital you have. It’s difficult at times, especially if you’re building a deep tech or hardware startup – or having to deal with sluggish Enterprise sales cycles.

What are some good bootstrap startup ideas?

If you’re looking for bootstrap startup ideas, here are a few of our favourite areas to explore:

• Online courses
• No-Code SaaS
• Workflow Automation
• Niche e-commerce and DTC
• Micro SaaS
• Browser extensions

The best bootstrap startup ideas are the ones that can be launched quickly and easily, without a lot of upfront investment. And they should also have a clear path to profitability, so you’re not stuck working on your business indefinitely.

What are some examples of successful bootstrapped businesses?

There are plenty of successful bootstrapped businesses out there, but here are a few notable examples:

• Shutterstock – Jon Oringer, a software developer and amateur photographer launched Shutterstock in 2003. He charged $49 monthly for unlimited use of his 30000 photos that were already on hand – this eventually led to Shutterstock being worth over 2 billion dollars after it IPOed in 2012!
• Shopify – When Tobias Lütke and Scott Lake tried to launch an online store for snowboarding equipment, they were frustrated by the existing e-commerce products on markets. So Lütke, a programmer, built his own from scratch. Shopify was bootstrapped for 6 years before raising a Series A and going on to IPO in 2015.
• Wayfair – When Niraj Shah and Steve Conine launched Wayfair, they went against the typical playbook by not spending money on advertising. Instead they bought domain names that matched common search terms and redirected customers straight to Wayfair! The company is valued at over $6 billion today, with many considering them one of the most successful bootstrapped startups.

You can discover more successful bootstrapped businesses in our post, 27+ Bootstrapped Startups that Prove External Funding Isn’t the Only Way to Build a Business

Key takeaways

Bootstrapping is a great way for new entrepreneurs to get started, but it’s not always easy. It requires patience and persistence, as well as the ability to take risks without knowing how things are going to turn out in the end. You’re never guaranteed success when bootstrapping your startup – but then again, who ever said that starting your own business would be easy?

While there’s no one-size-fits-all answer to how to successfully bootstrap a startup, there are a few things to always keep in mind.

1. Start small – don’t try to build the next Facebook right out of the gate. Start with a small product or service that you can sell quickly and easily.
2. Focus on profitability – make sure your business is profitable from the start, so you don’t have to rely on raising outside investment.
3. Generate sales leads – this is one of the most important things when starting any new venture. Learn how to generate leads and convert them into customers.
4. Make do with what you have – bootstrapping is all about using your resources wisely. Don’t be afraid to get creative and make the most of what you have.