This week TechCrunch Europe interrogated your hive mind on the subject of bootstrapping your startup. Most startups bootstrap for at least part of their lifetime and how it’s done can determine whether you make it as far as exogenous funding. We also asked founders what you should spend money on even when your resources are limited.
In the next two weeks we will look at getting funding and dealing with investors. Please send any tips on these subjects via email or Twitter.
• If the idea is time-sensitive, reconsider bootstrapping
Nathan Vingoe, KangaReview
When you are funded you can do more, do it faster and get to market more rapidly. So clearly, if the idea is time-sensitive or easily copied, get funding. Funding also brings with it a network of people who have been there and done that. The greater the number people involved, the more likely it is that suitable opportunities will cross your path.
• Do the expensive work yourself
Feargal Finnegan, stealth-mode startup
It helps if you can do as much of the complex,expensive work as possible yourself and offshore tasks which can be done on the cheap, e.g. UI work. However, avoid off-shoring companies that do not have solid technical references. My experience has been that the quality delivered can be so low that the overall cost of the software would be more expensive over the long run once you factor in fixing bugs and refactoring.
• Have a sideline
Several founders suggested having another line of income. For Sam Barnett from Struq, which tailors ads to a user’s interests, the sideline was ad arbitrage. This means buying adwords from Google and selling to Yahoo at a profit. This didn’t take much time away from the product but provided a steady revenue stream.
Stefan Richter from muchosmedia suggested consulting or selling advertising space on your blog (if it’s popular) to keep the company’s product development going. He also recommended approaching potential advertisers directly and suggesting a fixed price. This pays much better than Google ads.
• Avoid false economies
Daniel Sim, Plug In SEO
Control costs but beware of false economies. Spending a week writing an app that you could simply buy in for $30/month doesn’t make sense. Conversely, relying on a web host that makes your product too slow to use means it’s time for an upgrade. Take on free (or very cheap) debt early while there’s still ample cash in the bank. Spend everything on 0% credit cards and view your cash strictly as a reserve.
• Know when to quit your job
Knowing when to give up your job is tough. Matt Rogers from Aroxo says it’s worth talking to your employer about moving to part-time working, or even switching to a consultancy arrangement to provide you with time to manage your start-up. Before quitting make sure you have enough cash available to complete the development cycle, even in the worst possible release timescale.
Micheal Backes from eVenture Capital Partners told us how in his first startup, the founders set revenue targets for the partners to each step in one by one from their “real world” jobs. This allowed organic growth to fuel company size as opposed to getting VC money.
• Sell early
Stefan Richter, muchosmedia
My company is a one man band and since I’m primarily a techie it is lacking some sales and marketing skills. That didn’t stop me from pulling in a handful of sales. Those sales generate small but recurring revenue which provide a valuable lifeline for any early stage company.
In fact you can sell your product before it’s even ready. Right now I am working on my next idea and I already have a few clients for it lined up, based on a functional prototype. What could be more motivating than paying customers to get your product out the door?
• Less is more
Another tip received from several founders is to keep the scope of the first release small but functional. Kimengi, which makes a text content recommendation engine, launched a blog network recommendation widget in order to get things moving even though it’s only a small part of the final system. Mathys Van Abbe from Mobypicture suggests picking a small, simple problem within the scope of the company and solving it. This will also make the resulting product easy to use. Daniel Sim from PluginSEO advises startups to focus on a few, very happy customers.
• Get a face to face working space
The founders of Kimengi are convinced that you need a consistent amount of face to face time to produce quality work so this makes it worthwhile to get an office, especially if the company has more than two people. Kimengi also came up with the creative solution of sharing their office with other businesses. Andy Gill from Chatbadge thinks that co-working spaces are ideal. The main benefit is the opportunity for networking, feedback and collaboration with other co-workers.
• It’s ok to spend money on the right people
Mathys Van Abbe, MobyPicture
Don’t focus on small financial inequalities. If one partner needs a salary while another can manage without it, then give that partner the salary to keep him in the business. The key thing is to keep motivation high and the momentum going. Pay experts if they can take some aspect of the business to a new level, e.g. design or advertising.
Several founders also said that you should only hire people (freelance or otherwise) when you are sure that you can pay them. Your employees should not have to take the same risks as you since they are not getting the same rewards .