The self sufficient entrepreneur and the power of bootstrapping

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					         The self sufficient
entrepreneur and the power
           of bootstrapping
          Tim Keane
          Golden Angels
          Network
          Kohler Center for
          Entrepreneurship
Entrepreneurs start businesses
to…
 Change the world.
 Solve a big, serious problem.
 Create a new solution that’s faster, less
  expensive and more intuitive.
The world looks to America for
 The power of innovation to improve their
  lives
 The secret to the uniquely American
  experience
 Silicon valley founder nationalities
Is now a good time?
 Where was Silicon Valley in 1896?
 How many recessions between 1902 and
  1912?
       For how long?
   How many industry companies were there
    between 1896 and 1930?
Who will the winners be?
   The ones who:
       Focus on big opportunities
       Test their concepts and move rapidly to Plan B
       Create disruptive solutions to real problems
       Employ risk-transferring business models
       Have great teams
       Have proprietary knowledge
       Are great salespeople
       Understand bootstrapping, risk and finance
What might your analogs be?
Top ten mistakes startups make
1.         No direct customer feedback in the beginning.
      1.       No real pain
2.         A commitment to the Field of Dreams
3.         No wisdom from those who’ve gone before
4.         A top down forecast
5.         …combined with a hockey stick growth curve
6.         …and no comparables
7.         The “Swiss Army Knife” plan
8.         A business model with aggressive timetables for adoption, no acquisition costs
           and lots of assumptions
9.         No competitive analysis
10.        Undefined go to market plans
Said another way: Business concepts
are refined by collisions with reality
   Almost what the customer wanted – but
    not quite
   Too much spent on building the first
    product without customer feedback
       This means slow, expensive testing where
        the alternative to being right is bankruptcy
   So secretive that while doing this they
    never learn from anyone else
And…
   We “fit” a forecast.
     “If I only get 1% of this market…”
     “A growth rate of only 20% per year will result
      in…”
     “These are really conservative numbers…”

     Amazingly all revenue and expenses scale
      proportionately for the next five years as
      profits grow…
And…
 A product for every market.
 Unproven assumptions.
 No acquisition costs.
Everyone needs to be a
bootstapper!!!!
 Mostly forever
 But certainly 100% of all companies at the
  beginning
 Investor financing limits your choices,
  reduces your timelines and often lowers
  your IQ
The #1 Question: Will the dog eat
the dog food?
Bootstrapping
1.   Builds a solid business
2.   Having lots of cash only delays starting
     to sell
3.   Few bootstrappers waste much money
     or much time
4.   You can’t lose what you do not have
5.   It’s low risk
6.   The founders keep all the ownership
Few businesses need – or should
want – equity investment capital
   Why?
     At very early stages it costs a lot of money.
     Most don’t have the explosive growth
      required to make the equation work
   Bootstrapping early creates more
    alternatives.
       If growth develops, finance it later
Bootstrapping


   Is This The Right Product or Service?
     High margins are better
     Underserved customers are better
     Customers often know what they want
     For your business:
         What might your margins be? How will you
          increase them?
         Are your customers underserved? Why?
          How do you know?
Bootstrapping


   Immerse Yourself
   1.   Talk to prospective customers – lots of
        them – track what they say
   2.   Where is the biggest underserved
        opportunity? – why?
   3.   Can’t sell? You’re not an entrepreneur.
         Nothing really starts until you have a
                        customer!
Bootstrapping

  Become the Expert Yourself
  1.   Don’t let others interpret the customer for
       you.
  2.   Don’t rely on secondhand knowledge or
       conventional wisdom.
  3.   Do rely on original firsthand sources of
       information.
Bootstrapping

  Think in Black and White
  1.   Keep business decisions simple.
  2.   The idea is to produce a product or
       service for less than someone will pay
       you for it.
  3.   Perfect is the enemy of good.
Bootstrapping

  Plan for rough times ahead
  1.   Every business runs out of cash.
  2.   Squeeze yourself first.
  3.   Too much money makes you stupid.
Bootstrapping

  Consider partnerships carefully
  1.   Partners can be frustrating
  2.   Most ships have one captain; define
       roles early
  3.   Establish up front how a partner will
       leave the business
  4.   Decide in advance how you will resolve
       disputes
  5.   Fewer partners is better
  6.   Resolve issues quickly
Bootstrapping

 Just Jump In!
 1.   Find a little niche
 2.   Use a name that means something to your
      customer
 3.   Provide exceptional customer service
 4.   Big bucks are made by simplifying a business
 5.   Get customers to pay up front when possible
 6.   Get everyone to think like the owner about
      expenses
 7.   Maximize experimentation by embedding it in
      the company
Will the dog eat the dog food?