The Ultimate Guide to Bootstrapping Your Startup

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There is a lot of talk among founders about pitch decks and raising venture capital, but the reality is that venture capital is not for everyone, and is only suitable for some business models. So, what can you do if that's the case for your business? 

Bootstrapping. 

Bootstrapping your startup is one way to build the business from scratch without any outside capital. The ultimate benefit of doing that is that you get to call all the shots in the business. You are not answerable to anyone about business decisions, plus when it becomes successful, you keep all the money! 

We have compiled a detailed guide on how to bootstrap your startup, what that looks like, and the advantages and disadvantages of bootstrapping.  

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What is a bootstrapped startup?

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A bootstrapped startup is a business built from scratch without any external capital, and the startup owner can use personal finances or existing loans to launch and grow the business. It’s a great example of how businesses can thrive without spending tons of money.

As a bootstrapped business, the business owner does not need to share equity with any other partner. However, self-funding could involve using credit cards and deposits. The main benefit of bootstrapping is the ultimate control a business owner has over the decisions. Plus, you don't need to worry about creating a pitch deck!

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How to bootstrap your startup

Bootstrapping a startup requires significant personal savings, bank loans, and profitable business ideas in the pipeline. The focus should always be on immediate profits and growth of the business. 

Here is how you can bootstrap your startup: 

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Small loans with big advantages 

If you get a microloan or an SBA loan, the idea is to use it wisely. Pick loan schemes from banks cleverly to ensure you do not need to take a second one in a short period. Make sure the loans are repayable without losing your assets in worst-case scenarios. 

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Avoid outsourcing 

Instead of hiring someone to do different tasks, you may learn those skills yourself. For instance, dip your toes in marketing online and learn as you do it. You can find one person who may be a good salesperson as well as a team leader. As your company grows, you may outsource these tasks.

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Create a strong team

Pick flexible workers who are up for contributing their maximum. Look for dedicated employees who will be loyal to the brand you are creating. Make sure you appreciate their efforts and reward them accordingly in the future. 

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Focus on profitability

Your focus should be on quick profitability so you can replenish your savings, pay back loans, and reinvest the money into the business. So, even if the growth is slower than expected, you will have funds to further use creatively. Focus on easy-to-grow marketing ideas in the beginning.

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Frugal spending

You will have to be clever about money and how you spend it. Choose second-hand equipment or go for a less luxurious office building. Focus on saving money and using it to the maximum. 

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Stages of bootstrapping: 

• Beginner stage: The business owner may borrow money from friends or use personal savings. Meanwhile, they can work their main 9-5 job to keep the family afloat. Other finance options are personal credit card debt or sweat equity in the form of work.

• Customer funding stage: The first stage of business growth and income generation is the customer-funded stage, where the money comes from the initial business. 

• The credit stage: Includes hiring new team members, buying new equipment, and upskilling. The main focus will be acquiring more capital for the business via loans. 

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Advantages of bootstrapping

• You will not have to pay back anyone if only personal savings are used. So, you will get experience if the business is unsuccessful or get heavy profits if it all works out. 
• The rights of the business will always remain with you. 
• There is scope for extreme creative ideas in financing a new business from scratch so that you can run freely with some unique ideas as the business owner.
• More business development ideas and products can be added to the startup without third-party approval. 
• The success of the business may bring external financial support later on. 
• Unique startups often offer more to consumers and become popular quickly.

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Disadvantages of bootstrapping

• Bootstrapping comes with a huge risk of losing your savings and the business needing to work out. 
• Due to limited funds, business growth may need to be faster.
• You may feel stressed about putting your savings into business ideas and marketing and trying ways to find more personal capital.

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Top 9 bootstrapped companies

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Let's take a look at some famous companies that started off as bootstrapped startups: 

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1. MailChimp

Founded in 2001 in Atlanta, MailChimp succeeded with its unique digital marketing idea. Ben Chestnut and Dan Kurzius started the company as a side hustle for email campaigns. However, due to its popularity and financial growth, MailChimp achieved success in no time. In just one year, users jumped from 85,000 to 450,000. 

The platform's user-friendly interface helped many small businesses in email marketing. By 2020, Mailchimp's revenue was $800 million, which grew over 20% compared to the previous year. 

The main credit for MailChimp's success is free email marketing and customer-centric service. New features like the Shopify partnership allowed users to benefit from email marketing.

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2. GoPro

Brainchild of Nick Woodman, GoPro is an American manufacturer of high-quality wearable cameras. These cams can be worn on the body to record videos of experiences like adventure sports. The user does not have to maneuver the camera as it is entirely hands-free constantly. 

This concept of on-the-go recording became popular. People even started strapping their pets and kids with GoPro to watch their POV—the initial $10,000 in bootstrapping led to a massive success for GoPro. The company's initial public offering (IPO) reached $2.96 billion in 2014, thanks to its consistent growth. 

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3. Zoho

Zoho is an Indian unicorn multinational company with over 80 million users. It is a SaaS-based company that was started in an attempt to compete with Google and Microsoft. 

This users-centric company with Zoho office suite software and web business tools surpassed $1 billion in profits in a few years. Zoho became big under Sridhar Vembu's vision and the decision to stay private instead of raising an IPO. Their business is currently spread in over 150 countries.

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4. GitHub

Founded by PJ Hyett, Tom Preston-Werner, and Chris Wanstrath, GitHub is an online hosting software. The platform allows users to share code files and collaborate with developers worldwide on open-source projects.

It started as a side project, and the founders quit their jobs when the platform was popular. Their main focus was to perfect the features as per the user's feedback. Currently, over 100 million GitHub users upload developing portfolios and benefit from code files. Later, in 2018, Microsoft paid $7.5 billion for GitHub rights. 

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5.  Basecamp 

Established in 1999, Basecamp is a SaaS company offering project manager software. The company has had a massive success due to its feedback-centric approach. Even when they lacked external funding, they were able to resolve most customer issues with management tools. 

Keeping things simple for the users attracted more attention, leading to success. They removed unnecessary features and only used solutions that customers wanted. Another reason behind its success was saving funds by remotely working.

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6.  SparkFun

SparkFun was started by Nate Seidle from his college apartment, proving you don't need a large office to do a million-dollar business. The idea was to sell electronic parts for projects of any level. This allowed the users to create products with their custom designs and needs.

The business was bootstrapped with just $2500 from credit card debt. SparkFun Electronics's current revenue is more than $18.0 million. 

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7.  Lynda

This is a one-of-a-kind startup founded by Lynda Weinman in 1995. The business started by providing educational courses online. Lynda added her teaching resources that were targeted towards her students. 

With time, the concept became popular among students and teachers and became Lynda.com. LinkedIn bought Lynda for $1.5 billion in 2015. This shows a small idea from an individual can turn out to be worth billions.

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8.  TechCrunch

TechCrunch was founded by Mike Aiington and Keith Teare in 2005. It is an online resource for technical and entrepreneurship blogs. Millions of users read the content while also sharing their own stories on the platform. 

TechCrunch is a platform that keeps its users hooked with breaking news on technology and analysis of new tech companies. Over the years, they have built a portfolio of more than half a million entrepreneurs. The company is currently valued at $25 million. 

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9. Plenty of Fish

Here is among the most popular online dating sites. Started in 2004 from Markus Frind's apartment, it has become a common dating place for over 150 million users. Plenty of Fish is valued at $575 million as it is a reliable subscription-based platform for users. 

The dating app/website sees a growth of over 65,000 new users each day. They can still use the app even if they don't pay for premium features. It is available in 11 languages in more than 20 countries. 

There, you have all the essential information on bootstrapping a startup idea. All you need is a venture that has the potential to turn into the next big thing. Besides that, the ability to take risks and work towards your business goals will help you achieve immense success. 

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