Bootstrapping to the Extreme (or "Consulting Your Way to Millions")
9 comments
In the Harvard Business Review book on entrepreneurship, the first question is, "What are your goals as an entrepreneur? What are you hoping to get out of the business?" That's an important question.
If you're wanting to build a company that will have a higher chance of survival and where you'll retain control, and ideally aren't going into a market that's about to tip and become something highly competitive, then bootstrapping can work well.
The line that investors use when you're talking to them, at least in my limited experience seemingly universally, is, "Speed is a key factor in this market." That doesn't mean much coming from an investor, but if you know that it's true then taking investment can be an important step. Also at an early phase the money that you get isn't all that important. If you're lucky enough to find a good investor, it's the connections, advice and reality checks that make all the difference.
If you're wanting to build a company that will have a higher chance of survival and where you'll retain control, and ideally aren't going into a market that's about to tip and become something highly competitive, then bootstrapping can work well.
The line that investors use when you're talking to them, at least in my limited experience seemingly universally, is, "Speed is a key factor in this market." That doesn't mean much coming from an investor, but if you know that it's true then taking investment can be an important step. Also at an early phase the money that you get isn't all that important. If you're lucky enough to find a good investor, it's the connections, advice and reality checks that make all the difference.
It sounds like bootstrapping's been really successful for you, but it sounds like it required a lot of patience. I mean, it's easy to be passionate about your brilliant startup idea, but about consulting?
Maybe it's just that I don't like the client management. I can see that some folks would enjoy building new things regularly, maybe trying to extract common functionality to a project, but most of my contracts have just been fairly drudging.
Anyone who's bootstrapped by consulting care to chime in?
Maybe it's just that I don't like the client management. I can see that some folks would enjoy building new things regularly, maybe trying to extract common functionality to a project, but most of my contracts have just been fairly drudging.
Anyone who's bootstrapped by consulting care to chime in?
Agreed. You make it sound so easy, dude! :-)
One of the key things you need to have if you're a startup is determination/perseverance, but the timescale is 2-4 years of building something you're really passionate about.
If you're trying to build out a consulting business you need the exact same qualities, over a much longer timescale working on things you may not be remotely passionate about.
I'm constantly torn between building to flip and building to flip so that your next venture can be built to last. Looks like that's what you did and it worked, thanks for the wonderful post!
One of the key things you need to have if you're a startup is determination/perseverance, but the timescale is 2-4 years of building something you're really passionate about.
If you're trying to build out a consulting business you need the exact same qualities, over a much longer timescale working on things you may not be remotely passionate about.
I'm constantly torn between building to flip and building to flip so that your next venture can be built to last. Looks like that's what you did and it worked, thanks for the wonderful post!
Interesting concept. I started my company as a self-funded/bootstrap system. We did consulting for the first 10 months and were very successful and got our company honed to a very solid level not only financially, but conceptually as well. We were able to come up with a lot of development methodologies and standards that were in a sense a "warmup" for what we plan to do in the future.
However, I am glad that I spent the last 10 months mostly working for other people? No. As of today, we no longer do any consulting and are moving forward with our first product development title that we plan to launch in the first quarter of 2009.
Honestly, I felt like the consulting held me back, and if I had to do it over, I'd probably limit my company's involvement with outside consulting to maybe 20%. You'll waste a lot of time not focusing on the goals of your business.
Its pretty idealistic to think you can run two companies at once, its hard enough making sure you do a great job with one, unless you are MAJOR balling and can hire essentially an entirely different staff, you'll end up dropping one of the balls.
However, I am glad that I spent the last 10 months mostly working for other people? No. As of today, we no longer do any consulting and are moving forward with our first product development title that we plan to launch in the first quarter of 2009.
Honestly, I felt like the consulting held me back, and if I had to do it over, I'd probably limit my company's involvement with outside consulting to maybe 20%. You'll waste a lot of time not focusing on the goals of your business.
Its pretty idealistic to think you can run two companies at once, its hard enough making sure you do a great job with one, unless you are MAJOR balling and can hire essentially an entirely different staff, you'll end up dropping one of the balls.
I agree bootstrapping can work well. The term "Bootstrapping" is quite a fuzzy term I think though...
Are these bootstrapping?
* Using your own savings. (Could be thought of as Angel from yourself).
* Using an existing profitable business to fund the new venture.
I think there are many many paths to the same end goal, and of course it entirely depends on what you're making. Servers are cheap - if you're making webapps, what are you going to use a ton of funding for? Hiring more help, but beyond that?...
Of course the best thing about bootstrapping is you can do as you please and end up owning everything :)
* Using your own savings. (Could be thought of as Angel from yourself).
* Using an existing profitable business to fund the new venture.
I think there are many many paths to the same end goal, and of course it entirely depends on what you're making. Servers are cheap - if you're making webapps, what are you going to use a ton of funding for? Hiring more help, but beyond that?...
Of course the best thing about bootstrapping is you can do as you please and end up owning everything :)
While i don't think many people will go to such an extent with bootstrapping (i think most people would be happy if they had 1 profitable company next to their startup) it is a perfect example of how you can use bootstrapping to make a little empire (at least in my eyes).
And while a essay is always inspiring (a good one anyway) it's also quite encouraging to hear such a success story, it makes it gives the whole idea a more realistic feel to it.
And while a essay is always inspiring (a good one anyway) it's also quite encouraging to hear such a success story, it makes it gives the whole idea a more realistic feel to it.
Seems like you have the strategy nailed down. I think you can pull it off by having few very focused areas. Try to get as much expertise as you can in one area so you can win all the big contracts.
Best of luck!
Best of luck!
Great story. This shows that bootstrapping can work, but it didn't guarantee that it will go that good.
So, if you have enough luck it will work, sometimes even that great. :)
Thank you for sharing. My own venture is going to be bootstrapped to a certain extent, although at this point it is less ambitious than your plan. Best of luck to you.
Whoops -- wrote that at 3am and rambles a bit. Point of the whole article: Bootstrapping works! (Sorry, my first submission to HN -- just been lurking)
PG wrote about bootstrapping and how that equates to consulting. Yes, bootstrapping DOES work. I've taken that idea to the extreme .. quite literally. My third company, Boylston Technology Group, is purely driven by consulting. The site is www.boylstontech.com, but a web site overhaul is slated to happen very shortly in the future so please excuse the ambiguities that currently exist.
At the moment, we have 15 people with offices in a great location in downtown Boston (directly above a Starbucks and the Arlington T stop). We work with large clients and have even managed to secure an endorsement from Maria Shriver for the firm (She is great). We expect to grow out of these offices shortly, although since we've only been here 9 months, we may use this space as a satellite office until the lease is up. Our revenue is in the seven figures and we are profitable.
This is my third startup and when I was doing my first two, Y Combinator didn't exist so I had to learn through trial and error. The lessons I learned from i2hub and from other ventures were invaluable.
However, I am not building to flip, but building to last. I am very metrics driven and have a need to see gains and losses in a measurable concrete way. Revenue is a strong focus for consulting services, as that business is the corner stone of a larger strategy. I'll get to that in a minute. I've also invested in infrastructure internally: we've custom built a platform to run our business. It runs off of webdevelopment.net, a domain we own. Every member of our company uses this system and our clients use it as well. It allows us to manage, plan, communicate internally as well as externally with the client.
My larger strategy is to get the consulting services to a point where it runs itself and is a foundational support piece of a larger business ecosystem with other companies we operate. Once it runs itself, it then effectively becomes a funding engine and will fuel the development of the other companies. One part is product R&D. We think we have a good web-based product and have begun development -- far enough where we've got paying piloted customers. A two-day trial brought $36K worth of licenses.
The other company-to-be is an internal financial trading tool. We've created an alpha version of a software that automatically trades commodities with a proprietary algorithm. The algorithm and the software was tested last year for two months on a small segment of the market and it produced $250K in revenue. To test it on a larger scale will require more attention from us, and to this end, we've secured about 100 servers in preparation.
Mid to long-term, I'd like to form symbiotic business relationships between the three entities and leverage the strengths of them: consulting services will provide the technical skillset and the initial funding, the product development R&D will provide greater potential scalability business-wise, and the automated commodity trader will later on provide diversification as well as additional funding. Once the trifecta has been created, the plan is to then expand to another business either through ground-up or via acquisition.
As you're probably already thinking, with several different types of businesses, management will become an issue. To this end, we've already started scouting a management team. One of our recent hires has over 15 years experience in project management and is writing a book on project management processes. We're also currently looking for a senior sales director, and then shortly after that we will be looking for a general manager for the consulting business. This will escalate me out of the consulting business and allow me to then focus on either product R&D or the financial trading tool and repeat the stabilization process there.
So, if you only need capital and not the great ancillary benefits belonging to YC gives you, bootstrapping does indeed work, and has allowed our company to grow and scale without outside funding. In my scenario, bootstrapping became a business unto itself.
Quick about me: My first startup was, at the time, a top-rated news site which ranked higher than craigslist, nike, and walmart, etc. My second startup, i2hub, was the number one file sharing service on colleges, with some interesting partners (one which eventually became the creators of the Graffiti app on Facebook, and the other was the Winklevoss brothers from ConnectU). Between my first and second startup, I also had a lot of experience working with companies like the original Napster with Shawn Fanning and Sean Parker, and several others. I've also either written or been involved with projects such as Lancraft, Tribes 2, TetriNET 1 & 2, Nestea2, and was an IRC Admin on the oldest network, EFNet. Full profile with more details available through LinkedIn under "Wayne Chang".
Oh, and for the ones that were around during the first bubble, MyAdvantage ("Get Paid to Sleep") was one of my creations that may have contributed a bit to your pocket change ;-)