Is bootstrapping killing innovation or firing it?

[Justin Bellinger]

I've had a lot of discussions recently with friends who have chosen to bootstrap their businesses.

For many of us, there is no choice in this, either we can't convince angels or VC's to back us, for a whole multitude of reasons, or we've been there, and don't fancy it again until the premoney valuation makes it worthwhile ;).

Doing so adds a whole host of complications, the most obvious being lack of available cash during the bootstrapping phase.

I'm interested to know how many of you consider this a killer of innovation or a driver of it?

Discuss.

[David Locke]

Paul Walsh said:

Yes consulting can slow down focus but it does not have to. You can build a roadmap of features that you want to include in a product and then basically direct your sales to find customers who want those features and are willing to fund. You have to be flexible - idea priority #5 can leapfrog idea priority #1 if that is the order you sell them in, but you should draw the line at idea priority #20 or whatever - that's not strategic enough.

Keeping the IPR is far less of an issue these days. People understand TCO arguments. At worst, offer a limited time exclusivity.

I do think that bootstrapped companies grow slower as measured in things like headcount. That's not necessarily a bad thing. I have heard one speaker (David Connell, at a Cambridge conference) speak on this and he put a 30% max pa growth estimate in soft-start companies. He advised to only work on applications where there is lead R&D, which is similar to my point above. He also said that collaborative R&D projects were especially rubbish for executing product development - resonates with my experiences.

Justin Bellinger said:

A common theme in bootstrapping, however, is, for instance, consulting work, which brings in immediate revenue, to help fund other things. My experience so far is that *this* can remove focus away from the final goal - whatever that might be - because the drive for revenue (the consulting) can drive focus away from what you started out to do?

I'm not saying bootstrapping is wrong (and, as I pointed out in my original question, in many cases it is essentially the only way to get going), but my overall point it that, at times, it can kill innovation, or at least the innovation everyone started out to deliver.

Farhan Thawar said:

No, bootstrapping should ensure that you don't work on a non-dumb idea. You're forced to work on the right thing

Never accept consulting gigs that don't meet your stage-gating requirements around seats and dollars. Never accept a consulting gig where you don't keep your IP, and have client participation in your later marketing as a reference customer. Never accept a consulting gig if it takes you off the roadmap for your technical platform.

I don't roadmap products, just iterations of the technical platform. The products will be defined by the clients, but their upgrade paths will be defined by the technical platform. Client engagements shouldn't pull you away from your aims.

[yadu tekale]

i dont see a link between bootstrapping and innovation. i have worked with bootstrapped businesses and vc backed ones as well and there good innovative businesses in either camp just as there were dull businesses.

[G.C. Hutson]

Great topic...

Bootstrapping is an art form, all to itself. In essence, you are the coder, the lawyer, the CEO, the clerk, the receptionist, the accountant, the copy-boy (or girl) and in most cases the therapist.

My opinion, the proprietor "makes or breaks" the bootstrapping effort, not the other way around.

I would advise those who plan to build their project from the ground up (aka, bootstrap)... run it as a "lean and mean bootstrap operation," but don't give-up on VC's, angels or other capital influxes. The desire to succeed should drive your efforts of innovation. Funding it yourself, or bringing in outside money are merely tools used to build the model.

If you have something tangible and real... that you can show, and let an investor "play with," you're more likely to get funded. And if the first group passes... keep coding... keep bootstrapping... keep putting it in front of the right people.

Eventually... one of three things will happen... You'll quit (for whatever reason).... You'll get funded.... or You'll get rich... then quit.

Ultimately... the proprietor drives innovation. He (or she) simply chooses the paths they take to get there.

Again... great topic.

GC Hutson

[Ed Zwart]

G.C. Hutson said:

I would advise ... run it as a "lean and mean bootstrap operation," but don't give-up on VC's, angels or other capital influxes.

As a brand new bootstrapper, that seems like valuable advice to me. Keeping an open mind and being willing to change it seem to be characteristics of the successful folks.

[Ed Zwart]

David Locke said:

Stage gate that client's verical. You will need to get eight clients sequentially. When you stage gate each of them, ask yourself if their vertical has enough seats and enough dollars to justify entering the vertical as a stand alone business.

David, you've given me a lot of good stuff to think about in this thread. Would you mind giving me a quick bootstrapping-for-dummies version of what you mean by "if their vertical has enough seats and enough dollars to justify entering the vertical as a stand alone business"? I've looked it up and I think I'm understand stage gating, but "vertical" and "seats" don't make the best search terms! :)

Thanks

e.