So you need to bootstrap a business. Do you know how far you can get without outside sources of funding?
It might surprise you to learn that startups in the U.S. are actually in a slump right now. It sometimes sounds like there’s a new business opening every minute. However, there’s actually been a slowdown for more than a decade. But that could actually be a good thing for your startup.
Some experts believe that we’re currently in a transition period between technologies. While all the big “old tech” concepts have already been played out, the industry is now poised to pivot toward new ideas, such as AI. Your startup can capitalize on this room for change in the market.
But to get off the ground, you’ll need entrepreneurship funding. You’ve heard of bootstrapping before, but what does it really mean? And is it right for your startup? In this guide, we’ll take a look at your options for funding.
What is Bootstrap Entrepreneurship Funding?
Bootstrapping simply means going as far as you can with your company, with as little capital as you can get away with.
Bootstrappers don’t have angel investors, venture capital, or other sources of large amounts of funding. They’re using personal income sources, or the revenue of the nascent company, to fund their startup.
There are pros and cons to this method. One drawback can be the fact that you’re often putting your own finances on the line, and you can stand to lose a lot. However, a benefit is that no one else is calling the shots. Since all the funding is your own, no one can intervene in your business decisions.
Bootstrapping won’t work for ideas that need big pools of capital to work. But for ideas that can get underway without much money, this might be the ideal way to start. Now, let’s take a look at how to make this source of entrepreneurship funding work.
1. Use Credit
A business or even personal line of credit is a first and obvious source for the funds you need to get started.
This certainly involves some risk, since your credit score can drop if your business doesn’t make the profits to pay back what you borrow on time. You’ll also be limited by how much you can borrow.
However, if everything goes well, you might be able to build up good business credit while funding your company without outside investment. As with all bootstrapping tactics, you’ll want to make sure to weigh your risks versus rewards before going with this option.
2. Ask Your Networks
If you have friends or family members with cash to spare, ask them to invest in your business. These small investments can go a long way.
Make sure to keep track of everyone who invests, and make sure to tell them what they need to know. Don’t make promises of returns that aren’t guaranteed. Ask them only for funds that they can stand to lose, and let them know that a loss could very well be a reality.
3. Start From Home
No matter where the funding comes from, make sure you spend it wisely. This usually means starting from home.
For most modern companies, office space is an unnecessary overhead cost. It might seem impressive to design a trendy office where everyone covets a spot at the water cooler. But do you really need one? Chances are, the same work can be done from home — and that’s usually a smarter way to do it.
Studies show that employees are often more productive when you let them work from home, anyway. The office doesn’t serve much of a purpose anymore, besides as a place to show off. But in the early days of your startup, you really can’t afford to invest in showing off.
If an office is essential to the kind of work your company does, see if you can start with a compromise instead. For example, maybe you can begin with a coworking space or shared office. Then, as you grow and make more money, you can gradually work toward moving into your own space.
4. Consider Crowdfunding
Some of today’s most successful startups got funding from platforms like Kickstarter. Crowdfunding isn’t desperate — it’s actually trendy, and a great way to get some buzz going about your business.
For example, a successful crowdfunding campaign often lends itself well to plenty of press coverage. These platforms allow you an easy way to share your brand story, even before the brand technically exists. And with a well-designed campaign, you might just end up with much more funding than you were counting on.
5. Tackle Marketing Yourself
Thanks to social media and other online marketing options, you no longer have to spend lots to create buzz about a brand. When you’re bootstrapping a startup, make sure to take responsibility for marketing.
With a startup, you and the brand can become inseparable. Don’t wait to start marketing until you have an established brand or a big marketing budget. As long as you exist and have your brand concept in mind, you’re ready to start spreading the word.
Learn about your target audience, and use social media and other online platforms to reach them. Create social media pages for the brand, even before you have something to sell. Use these pages to start conversations, find followers, and generate great content.
If you’ve already got an online following before the company officially launches, you’ll find it’s much easier to make sales after the launch.
Is Bootstrapped Entrepreneur Funding Right for You?
Of course, there are many different ways of funding a business. Is bootstrapping the best form of entrepreneurship funding? It all depends on your unique situation.
If you can get venture capital or an angel investor, by all means, do so. But don’t let the lack of these options hold you back. With these bootstrapping tactics, almost anyone can find the capital they need to get started.
Have more questions about the startup process? Working with a mentor can help. Connect with me here to learn more about how to make your startup a success.