Sarah J Perry - Brave Bootstrapping: How to Grow a Global Tech Business Without VCs

How to grow a global technology business without VC funding

SARAH J PERRY

Bootstrapping a business while raising a family requires some sacrifices. I am taking this opportunity to express my most profound love for, and appreciation of, my children Danielle and Alex. For the times I was at my desk, or in my own head, instead of being present with you I am sorry. I think it was worth it and I hope you do too. I am so proud of you both.

To friends and family who listened and supported me over the years, I sincerely thank you too. Particular thanks to Chris and Zivanayour support, patience, and love, even at times when I have been less lovable, are very much appreciated.

I am a co-founder of SnapComms, an enterprise messaging software company. We bootstrapped SnapComms to 1.5 million paid users in 75 countries and growing (at time of writing).

Distorted perceptions

I wrote this book because I think theres a perception problem that needs to be addressed. Businesses are not considered good unless they have the credibility of VC dollars and are growing at 10x+. I believe it creates the wrong pressure. People are starting businesses with a 3- to 5-year exit strategy on day one. The focus is on growth, scale, and making investors wealthy. Often the cost is a negative impact on people (founders, employees, and customers) and values.

Bootstrapped businesses offer sustainable growth

Growing at a slower but more sustainable rate by providing value that customers are willing to pay for from day one is considered safe and boring. Safe? Maybe. Boring? Absolutely not. I think it is an infinitely more enjoyable and sustainable ride for founders and employees.

Is this really innovation?

I find it interesting that innovative startup companies seem to:

1. Have an idea (or borrow it)
2. Get seed investment
3. Grow beards and buy office bean bags and a Ping-Pong table
4. Series A Investment
5. Series B+ Investment
6. Sell out and make a pot of money

Few make it to the final stage, but lots want to be part of the cool club.

Well-funded Unicorns disrupting business models are not here

Well-funded Unicorns disrupting business models is not what this book is about. Those founders are welcome to their highly diluted, uber fast growth. The pressure to deliver an extreme growth target against an inflated valuation is no fun at all in my mind. Many VC-backed entrepreneurs find themselves diluted to very little and sometimes even sacked from the companies they founded. Bootstrapping offers a slower, more rewarding, and agile growth approach with little dilution.

Its OK to be different

When you bootstrap its OK to be different (old, female, a minority, working part-time, managing a disability, whatever your flavor). No one really cares. You have no investors to impress and few or no PR interviews to hold, so you can be yourself and focus on creating a great product, engaged staff, and satisfied customers.

Bootstrapping is more common than you might think

According to Inc Magazine (September 2017 edition), 70% of the Inc 500 fastest-growing companies used their own personal savings as start-up capital. Seventy-four percent said their growth was funded all internally or mostly internally.

Product-market fit and happy customers

I believe founders need to spend more time finding productmarket fit and making customers happy. Asking customers to pay for your product is a fantastic litmus test. Its evidence that you are on to something, or not. Chasing VC dollars can mask poor product-market fit and potentially be a disastrous distraction when founders could be spending their time focusing on meeting customer and market needs with their offering.

Some business models need VC dollars

Not all business models lend themselves to bootstrapping. Regardless, I hope that you will find some inspiration and useful insights in this book. Perhaps this book will help you delay funding and/ or make VC dollars go further. This will mean less dilution and hopefully a better level of later investment on better terms (because your business has proven itself).

Lessons from the trenches

Throughout this book, I will share the experiences we gained by bootstrapping SnapCommsthe tactics, tools, and systems we used, the books we read, and the best online guides.

You write your own story

Each company and founder is different. This is just our story and our learning. I hope that by sharing this book, you can bypass some potholes and find your journey a little more comfortable and more enjoyable. Take what you want and leave the rest or revisit it later as your business grows.

You are in good company

Above all, know that as a bootstrapper you are not alone. Despite what you regularly read in the press, there are many more successful bootstrapped companies than there are Unicorns. VC-funded companies represent less than 1% of businesses, and a large percentage of these funded companies fail.

There are various options for funding a startup, depending on the type of business, founder preferences, and which stage of growth a business is at. For completeness, lets take a quick look at the different kinds of funding available.

Pre-seed and seed funding

Pre-seed funding is usually for amounts of less than $100k, whereas seed funding is typically in the range of $100k to $1.5m. Sources of funding at this stage are sometimes called friends, family, and fools. This is self-explanatory. Angel investors also fit in at this stage. Angels are usually high net worth individuals (often cashed-up entrepreneurs) who support the startup community by investing at an early stage.

Crowdfunding

There several crowdfunding sites that allow you to raise money from the public, either by pre-selling products, providing incentives for investors, and/or merely appealing for donations. Crowdfunding is typically not suitable for B2B offerings. Even the B2C startups tend to find it can require a significant investment of time to do crowdfunding well. There is no such thing as easy money.

VC funding

VC funding can happen at any stage in the life of a business. Names given to the different funding stages are usually based on the amount and timing of the funds as follows:

Series A & B = typically $500k to $5m investment

Series C+ = typically >$5m investment

IPO

An initial public offering (IPO) is when a company is listed on the open share trading market and raises money by issuing and selling shares to the public.

Bootstrapping

A bootstrapped business is a business that doesnt sell shares to investors and instead finds other ways to fund the growth of the company. Some of these are:

• Founder savings
• Founder credit cards
• Government grants
• Entering competitions and winning prizes
• Redundancy payouts
• Bank loans (possibly for a home renovation that doesnt happen)
• And most importantly, customer funds:

• Charging for the development of the initial product and/or services
• Pre-selling products or services

Bootstrapping is sometimes known as organically grown, self-funded, or customer-funded.

Bootstrapped businesses need to run with lean operations and get good fast. They need to acquire paying customers quickly to stay in business and grow.

In the early stages of bootstrapping (until customer revenues can support the founders) the founders may have side gigs such as contracting, selling books or online courses, or selling consulting services. Alternatively, they may work full time or part time and start up the business in their spare time.