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Bootstrapping Your Business

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Bootstrapping Your Business Powered By Docstoc
					BOOTSTRAPPING YOUR
           BUSINESS
	

                                          J A S O N     N A Z A R	






                                                               Introduction
                                                          Hello, I’m Jason Nazar, the co-founder and CEO
                                                          of DocStoc, a company that helps small
                                                          businesses by providing them with documents,
                                                          videos and articles to help them start and grow
                                                          their business.
                                                          Docstoc is one of the 500 most visited
                                                          websites on the internet, and there have been
                                                          over half a billion people in the last 4 years who
                                                          at some point landed on our website.
      We raised $4 million to launch Docstoc over four years ago, and I haven’t raised a penny since
      then. We have been profitable for several years now, because I have always been focused on running
      a lean business and earning money. Our revenue streams are diverse, coming not only from ads, but
      our subscription and other products.

      Of course, launching Docstoc wasn’t easy. Before I had a
      product to sell, I needed to convince people to help me build
      it. While we were growing I learned the importance of testing
      and building efficiently.

      Even before I started Docstoc I started two companies that I
      didn’t raise any money for. From all of these experiences I
      began to realize that you can build any business you want with
      little to no money.
      In this eBook I will review the lessons I’ve learned myself and
      from other entrepreneurs about running a business on a
      budget. I know people who built a product with a on a couple
      thousand dollars, and created a business worth millions. If
                                                                                                                elle Bailis
      you’d like this to be your story, read on.                                                        by Roch
                                                                                              esigned
                                                                                      Edited/d
                                          PRINCIPLES
Entrepreneurs Sell Ether
 A lot of entrepreneurs like to talk about how they made their         I painted that picture in great detail, and then I infused it with
 first million, or their first 100 million. What people really want      the most important thing of all: my certainty. It’s your
 to know is the very first thing that entrepreneurs do to pull in       certainty that turns ether into a tangible entity, a form of
 the capital required to start making money. The answer: they          currency that you can trade with other people.
 sell “ether.”
 Great entrepreneurs, great leaders, great politicians and great
                                                                           IF YOU HAVE NO CURRENCY, ALL YOU AN
 religious figures sell ether. This means that they have the ability
                                                                           SELL IS ETHER. IT’S YOUR CERTAINTY
 to dream. If you don’t have money, experience or a product,
                                                                           THAT TURNS ETHER INTO A TANGIBLE
 what do you have to trade? All you can sell is ether. It means
                                                                           ENTITY, A FORM OF CURRENCY THAT
 you can paint a future experience for somebody in such
                                                                           YOU CAN TRADE WITH OTHER PEOPLE.
 specific detail, with such substantial intricacies that it feels
 tangible.
 When I needed somebody to design the first DocStoc                     This allows you to get people to do things for you before you
 website, I didn’t have any money to give him. I had to tell this      actually have the resources to pay them in the currency
 person that in a few months, he was going to get                      they’re used to. That’s a lesson that every great leader, every
 compensation, equity, and pride in creating this website that         great politician, every great entrepreneur has learned and
 thousands of people would see in a very short period of time.         applies on a constant basis.




Everything Can Be Negotiated
When you are starting a business, remember that whatever              If the person isn’t
price someone names, it’s negotiable. Don’t ever accept the           entrepreneurial enough to
first offer. Push back. Stand your ground. Be willing to walk          appreciate this opportunity,
away. Even if the price is stated on their website, you can           then I’d rather not develop a
almost always get them to negotiate. How? You offer them              business relationship
something in return that is potentially as valuable, if not more      with them. Those who
valuable, than what they want upfront.                                are willing to make this
                                                                      deal get something
When I first started my business I needed help from various
                                                                      even more valuable
experts, such as recruiters, accountants and attorneys. They all
                                                                      than a flat fee; access to
quoted an initial fee, and I responded with a proposal. I would
                                                                      a network of returning
tell them “You’re going to give me 30% off your normal rate,
                                                                      customers.
and in return I will bring you two more clients this year who
will spend at least as much as I do. If I fail to do this, I will     If you don’t have money,
compensate you for the full market price. But I promise you           figure out what other value
that I have such a wide network of friends, I will be an              you can offer, and always
invaluable asset to your business.”                                   be prepared to negotiate.
You Don’t Need a Product to Sell a Product

                                            After business school, a friend and I decided to start a company together. He was
                                            worried because we didn’t have a product. This is the first important business
                                            lesson I ever learned was that you don’t need a product to sell a product. Even
                                            when you’re building new products, it’s best to test how much people want it
                                            before it’s created.
                                            The biggest mistake people make in business is actually overestimating how much
                                            people want their service or product. Our tactic at Docstoc is to predict how
                                            many people want a product before we invest our time and money into making it.
                                            We do this by investing, let’s say $10,000 to drive 20,000 users into a webpage
                                            promoting a product that doesn’t exist yet. Then we observe what percentage of
                                            people who view that webpage want to buy that product. If a significant percentage
                                            express interest, we build that product for them, if not we move on. Hence, you
                                            don’t have to have a product to sell a product.




                                             TAC T I C S
Designer, Developer and Marketer

There are three things you need to
keep your business alive. In some cases,                        B ATTLE OF THE B AYS
one person might be able to embody
some or all of this.                                    A common mistake of startups in the Bay Area is that
If you have a solid designer, a versatile               they develop and design amazing and stunning products,
front and back-end developer and a                      but don’t prioritize their marketing.
good marketer, who were willing to
work for a year without salary, you                     On the other hand, Los Angeles entrepreneurs are
technically have everything you need to                 excellent at leveraging their connections and getting a
launch a full product.                                  product out there, but they don’t focus on creating
                                                        products that are “sticky”
If you’re missing any one of these three
talents on your team, you will be                       An ideal approach is to combine these two approaches,
missing a critical part of the foundation               and place marketing and design on the same level of
required for sustainable growth.                        importance.
From Services to Products
Some of the most successful companies have started off as
service-based companies. The key is to shift from providing
a valuable service to selling a product. Here are two examples                        USERPLANE
of companies and founders that transitioned from services to
products:                                                                         Userplane was also a web
                                                                                  development firm run by
                                                                                  Mike Jones. They
                                                                                  developed an instant
                                                                                  messaging client for
                                                                                  internal use that ended up
                  3 7SI GN A LS                                                   becoming the chat service
                                                                                  for all of Myspace. It was
          37signals started off as a web                                          then sold to AOL for 40
          development service, and built out a                                    million dollars, and Mike
          project management software called                                      Jones went on to be the
          Basecamp to manage their clients’ and                                   CEO of Myspace and a
          projects. Customers liked Basecamp so                                   famous Southern
          much that they ended up building it out                                 California investor. His
          and monetizing it. It’s now their most                                  beginnings were in the
          famous product, and pulls them tens of                                  service industry, and grew
          millions in revenue every year.                                         from there.




The Six Week Cycle
  If you consider yourself an entrepreneur you’ve probably at least heard of The
  Lean Startup by Eric Ries. At Docstoc we live by this book, and focus on keeping
  our production lean and swift. We never launch anything that takes more than six
  weeks to develop, I kid you not.
  We launched a new product in a couple months called License123, which tells new
  business owners what licenses and permits they need to start their business.

  It was important that we got the product out immediately so that customers
  could use it, and guide us in the direction they wanted the website to go.
  Most of the time your product will end up transforming from what you
  originally intended. Don’t invest months making it perfect; if you spend too much
  time in incubation you won’t have the funds or wiggle room to experiment,
  improve and build out your product.
Leverage Deferred Compensation & Equity
This is similar to selling ether. Before you even have a      somebody the chance for ownership, to have a serious
product, you can leverage future compensation and             stake in something they’ve created.
equity for the company you are going to create.               The key for you is to be sure to put this developer/
Eventually, you will be raising money or gaining              designer/contributor on a vesting schedule, so that he
revenue from your product. If you don’t have enough           or she gets equity in pieces over a four year vesting
funds to hire a designer or developer, you can offer to       schedule. This will encourage loyalty.
pay them half now half later, plus extra kickbacks from       The most important thing is to sell them on this
future revenue or funding when you succeed.                   product as if it exists already, so they feel like they’d be
You can also offer someone equity, even before your           completely missing out if they chose not to be a part of
company exists or has a single share. You’re selling          it from the beginning.




                          MONETIZATION
7 Ways to Get Online Traffic for Free

                                                           A big thing most entrepreneurs overlook is how they’re
                                                           actually going to get users. Bringing in customers can be
                                                           incredibly costly if you don’t start thinking immediately about
                                                           how you’re actually going to get people to show up on your
                                                           website and use your application, your product or your
                                                                          service.
                                                                           Many new websites create a product, decide
                                                                           to spend X amount driving traffic to their
                                                                             website, and then hope it goes virally from
                                                                             there.

                                                                             But remember: unless this traffic is bringing a
                                                                       higher value than what you paid for the cost of
                                                           acquisition per user, you can’t sustainably spend money to
                                                           drive traffic forever.
                                                           You can only sustain the cost of ads with AdWords or other
                                                           internet ads if you have a positive return on investment (ROI)
                                                           to spend. For new companies, this often isn’t feasible.

                                                           Over the years I’ve come across 7 free way to drive traffic to
                                                           your site. I’d suggest developing as many of these approaches
                                                           as you can, so that you’re not depending on one source for
                                                           driving users.
1) Search Engines                                             2) Press

Improving SEO is the first small change you can make           When you first start out and don’t have money for a
to bring in significantly more traffic without much             PR firm, you need to get your own press. This
expense.                                                      takes persistence, and I mean possibly months of
                                                              developing relationships.
At Docstoc there are 20 million people a month that
actually type in the docstoc.com. The other 20 million        Michael Arrington, the founder of TechCrunch, wrote
people enter queries for documents or resources               about Docstoc four times before we even launched
through search engines.                                       the site. Why? Because I built a personal relationship
                                                              with him.
I didn’t realize when we first launched Docstoc that
we would be a search-based company. But after seeing          When I was back in law school, I skipped one of my
a strong correlation between the amount of traffic we          finals when I heard he was going to a party. I crashed
pulled and how quickly our resources were increasing,         the party, and approached him. From his perspective,
I realized that growth couple be exponential.                 I probably came off as a stalker.

The more content we had, the more traffic we                   But I stuck around, bought a couple drinks for his
brought in. So the only metric that was important to          group of friends, and didn’t leave until I could have a
us that first year was growing the number of                   nice conversation with him and build a rapport. I
documents in our library.                                     worked on building a relationship with him until he
                                                              was willing to look at what I did, and eventually write
In the beginning our content was provided by our
                                                              about it. The single best way to get journalists to pay
users, so we would run contests for users to upload
                                                                                  attention to you is to follow them.
more documents. We built in features and incentivized
                                                                                     Go to their blog, post
uploading, and leveraged our community. We looked
                                                                                     comments, re-tweet their log,
for content in publicly
                                                                                     reach out to them and start a
available sources. We
                                                                                          conversation. Don’t ask for
made deals. We did
                                                                                              anything. Do things to
whatever we could
                                                                                              help them out, and
to grow our
                                                                                                   after 6 months,
library.
                                                                                                       you’ll have built
                                                                                                        up enough
                                                                                                        equity.




3) Social Media

Simply creating a Facebook and Twitter account before you have any followers probably won’t generate you new
traffic.
Try using social media outlets that will start a conversation with users, and have the potential to go viral. At
Docstoc, we got traffic through posting on link aggregate sites like Digg and Reddit and Stumbleupon. I also know of
major publishers that are driving a million unique visitors from LinkedIn referrals.
The Dollar Shave Club was a small startup with the great idea of shipping razors directly to men’s homes for a
dollar. All they needed was to be discovered. So they created and shared a short video all across the internet. The
commercial was hilarious, and quickly went viral with over 4 million hits on Youtube. This genius piece of marketing
was all they needed to generate an explosive amount of sales, and kick-start a sustainable company.
4) Partnerships & Deals                                    5) Refreshing Content
You can always find a way to make a deal with someone If your product doesn’t have refreshing content, it
to drive traffic to your site. Find a value proposition doesn’t give people a reason to come back.
you provide that they don’t have, that’s worth them
                                                       At Docstoc, it’s a very transactional based experience;
sending traffic your way.
                                                       people visit our site when they need a document, and
You don’t need a huge,                                                             then they leave. In order to
successful company to get                                                          retain users, we started
                                 YOU DON’T NEED A HUGE, SUCCESSFUL
the big guys to pay
                                 COMPANY TO GET THE BIG GUYS TO PAY creating original expert
attention to you. In the                                                           videos and articles, in the
                                 ATTENTION TO YOU. IN THE STARTUP
startup world, more than                                                           hopes that in after they
                                 WORLD, PEOPLE WILL WORK WITH YOU
any other industry, people                                                         come for a product, they
                                 JUST BECAUSE THEY LIKE YOU.
will work with you just                                                            return for original content.
because they like you.
I’m willing to make a bet on partnerships with smaller      6) Solve a Compelling Need
startups if I like their founder and I see them working
                                                            This one is pretty straightforward. People need three
hard. There’s no other industry like the web, where you
                                                            things in their life; love, health and money. If you
can leverage your own personality to get people to build
                                                            manage to find a solution that touches one of these
things with you.
                                                            three burning desires, that helps facilitate acquiring it
                                                            for your user, it will often sell itself.




                                                                                          An example of a
                                                                                          viral loop is
                                                                                          Highlight, an app
                                                                                          that connects you
                                                                                          with people that
                                                                                        are in a close
                                                                 physical proximity to you and share
                                                                 similar interests to yours.

                                                                 When you register, the app asks you to
                                                                 connect with your Facebook contacts,
                                                                 and because it’s an app about
   7) Viral Loop                                                 connecting with people, you oblige.
   A viral loop draws in customers, retains them and             Every user becomes a free marketer
   motivates them to return to the website                       that brings in 3 or 4 more customers,
   frequently. A great way to galvanize a viral loop is
                                                                 and creates a snowball effect.
   not only bringing customers back, but turning
   them into marketers themselves.
Start Charging Immediately: Test & Monetize Everything

                                            Too many entrepreneurs are scared to charge.You'll be surprised what
                                            people are willing to pay for, so test different prices.You don’t know what
                                            your product is worth until you know what someone’s willing to pay for it.

                                            If you find something that works, don’t be afraid to dig your heels in. A
                                            common mistake entrepreneurs make is they find something that starts to
                                            work and instead of going as deep as they can into that technique they
                                            look for more. If you find a way to bring in revenue, put your energy into
                                            getting better at it.




                                                              Use Variable Expenses
Manage Fixed Expenses                                         to Drive Revenue

 An important aspect of bootstrapping is managing              Your variable expenses, however, should mostly be
 your fixed expenses.Your regular expenses,                     driven towards making money. Maybe you’ll spend it on
 such as your rent, employees, server costs... those           AdWords, see if it brings in customers. If it doesn’t,
 are the expenses you want to keep as low as                   turn it off. Do what you can to leverage your variable
 possible.                                                     expenses for driving revenue.



The Best Time to Raise Money is When You Don’t Need It


         You may not want to raise money down the
         line, but you never know what will happen down
         the line. It’s now, when you don’t need money,
         that you should be forming strong relationships
         with investors and entrepreneurs, and showing
         them how well you run a business.

         Help people, network, build friendships, and
         whether it’s six months or six years down the
         road, these connections will help you raise
         money when you need it most.
                       PERSONAL RULES

The 50K Rule                                        Protect Your Downside
                                                    Avoiding Unnecessary Risks
I always dismiss people who say they don’t
have enough money to start a business.              There is no magic formula for deciding what risks to take. What I do
Especially if your business involves the            know, is that you should never take on a risk that’s not significantly
internet, there is almost no beta product           counterbalanced by a big upside. Don’t take on one big risk. Give
you can’t get off the ground for $50,000.           yourself the chance to make several mistakes, and to grow from them.
If they really need it, anyone can access           Starting a company is like running a marathon in a series of sprints.You
$50,000. Take out three credit cards, or if         should always be pushing yourself, but you can’t burn out or twist your
you’re still in grad school take out student        ankle on the first mile. Taking on too much risk at once can do this. Be
loans. If you’re working don’t go out, move         sure you have the resources and energy for the long haul.
back home and save up some money. Go to
ten different important people in your life
and as them for $2,000 that you will pay
back in the next couple years.

If you aren’t resourceful enough to get your
hands on $50,000, you probably shouldn’t be
starting a business.




One Year of No Salary
If you’re just starting out, you’d better be
prepared to take little to no salary. Be sure
you either have enough saved up or are living
in a situation where the pressure of paying
rent or bills won’t be hanging over your head
                                                     You’re Now a
every month. To be successful, you need to be        Promoter... Deal With It!
able to focus your energy and money on your
product.
                                                      No matter what you did before this, whether you’re an excellent
You will honestly have to stop spending time          programmer, an introverted designer, or you’re just incredibly shy... it’s
with people who aren’t bootstrapping because          time to face it: you’re now a promoter.You’re a salesperson, the
it will put you in a lot of awkward situations        number one fan of your product. If you’re not completely obsessed,
that you can’t afford. If it’s worth it, you need     living and breathing your product day in and day out, how can you
to commit to this for at least one year.              expect others to love it as much as you do?
				
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posted:5/30/2012
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Description: An eBook based on my speech at Startup Uncensored 19 on saving money, running a lean startup, and bootstrapping your business.