Wednesday, October 24, 2007

Bootstrap or not Bootstrap?

Few tips of Bernard Lunn on what NOT to do when you're bootstrapping. 

1. Bootstrapping is NOT self-funding. "Real bootstrappers put in peanuts of their own money [and] fund with customer revenues."

2. Bootstrapping is NOT for the "build traffic and worry about monetization later" idea. If you can't see how to generate customer revenues right away, then get external capital (VC). This why bootstrapping is usually for selling to businesses, not to consumers.

3. Do NOT bootstrap and then raise VC. "Revenues won't impact the [VC] valuation nearly as much as you think…[so] bootstrap and then sell."

4. Do NOT trade equity for services. "The better vendors won't do it (they don't need to), so you get weak vendors who drop you when they get a cash deal."

5. Do NOT bootstrap to build a prototype and get funding. "That is viable [but] do it by moonlighting, or with friends & family money. But [this] is a "self funding bridge to VC." It is not customer-funding or bootstrapping.

Obviously Bernard has specific ideas about what bootstrapping is, and is not. By his accounting, Microsoft, Oracle, SAP and eBay all bootstrapped. I'm not sure I agree: eBay took VC money. (Bernard says eBay didn't need to; therefore, still a bootstapper.) But one important thing to consider, as Bernard notes: some businesses are ideal for bootstrapping (software) others are not (media).
via Found+Read

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