Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Vivek Bhaskaran
[Editor’s Note: This week we’ll are running several guest posts by people who are boostrapping (or did bootstrap) their businesses. Today’s post is by Vivek Bhaskaran from Survey Analytics
. Read yesterday post by Hillel Cooperman
People often ask me what prompted me to start my own technology business. After all, numerous studies have pointed out the abysmal rate of self-started business success. Now that Washington Mutual is no longer alive, I can tell the real story — I simply did not want to go back to my cubicle in the WaMu Tower. And – get this — I was not even a full-time employee. I was a technology consultant at WaMu slaving away for The Man. As a consultant I could care less about the internal office politics and jockeying around, and anyone who’s worked in any company larger than a couple hundred employees knows what I am talking about, but the sheer inefficiencies introduced in the name of process was so debilitating that even as an hourly consultant I could not take it. Thus the idea of jumping out of a window was born!
There have been numerous discussions around the definition of bootstrapping. Typically technology entrepreneurs choose to go one of two routes – Bootstrapping or Angle/VC funding. Bootstrapping is the route we took. Again, I’ll be honest here – I took this route because I simply did not have any other option. Pitching to VCs/Anglels just seemed too far fetched and given my background of being a technology consultant, it’d take a massive leap of faith for someone to give me $100K of their hard earned cash. I didn’t even bother asking.
Here are some of the lessons I’ve learned along the way:
1. Realistic definition of Success
When we started developing the software we had a single short term goal in mind — not to go back to our day-jobs. What that meant, simply was to make enough money to sustain us so that we can then formulate a strategy to grow the business. If you analyze this closely, you can almost say that the short term goal was to figure out a way to substitute the role of an Angel. Keeping that in mind, we priced our software at a price large enough to make some cash in the short term. That kept us focused on making money — enough money to pay for the T1 Line, the servers etc. You can’t get to Phase II if you fail in Phase I.
2. It takes 2 to keep focused and moving forward
Paul Graham coined the term the “Trough of Sorrow” after the initial euphoria of starting something new. It goes something like this — Initially there is a lot of excitement about any new effort. Lots of energy and execution. A few days/weeks later as that energy dissipates you fall back to your normal equilibrium and then things pick up slowly – one customer at a time. That is the “Trough of Sorrow” — when you are no longer excited and pumped about your product — you begin questioning yourself — Is this shit going to happen? All my friends think QuestionPro is lame and SurveyMonkey is going to kick my ass since they are so much better known. How am I going to market without any serious cash?
To navigate the Trough of Sorrow you really need someone else rowing the boat along with you. In my opinion their financial incentives should be tied along with you in this journey. It’s imperative that your business partner’s financial position is the same as yours – if you have a trust fund and he does not – bad mojo. If he drives a 740 and you drive a Jetta – bad mojo. If he has a house in Queen Anne with a 4K mortgage and you are co-habitating with someone – bad mojo.
3. Customers Pay The Bills
One of the core principles that both me and my business partner decided was — it does not matter how big our company gets – it has to profitable at every step of the way. We looked at our business like an old-fashioned construction business. You try and get customers – they give you cash – you then get more customers. You fight for each and every customer. We also never hesitated to ask money from our customers – When we were in bootstrapping mode, we did whatever the customers wanted – provided they paid for it. Yes – this indeed lead to us boxing ourselves into random foxholes, but then that was the cost of doing business. The one thing we were never hesistant about was asking for money – we really needed the money. There is a proverb in every ethnic culture about never saying No to money.
4. Marketing is all about trying new ideas
I was having coffee with a buddy of mine – a relatively typical profile – Ex- Microsoft Veteran 10 yrs, Techie, quit MS to start something, Was looking for something new. He said something that raised my eyebrows – he said – “I am a tech guy – I don’t understand marketing – so I am on the lookout for a good business/marketing guy to be my business partner” — I called him on his BS – As a person who is starting a business, you eat, drink, sleep your business. Marketing is simply an extension of how you position it in the world. You simply have to be able to do it. Moreover as we discussed why he thought that way — and surprisingly he realized that was a function of being in Microsoft for 10 years — where the marketing and technology functions are clearly de-alieanted — that makes sense for Microsoft – not his 2 person startup.
5. Make money by selling to to the Rich
One thing we did early on was to profile who we were selling to and make some judgements on their propensity to pay. I have had many arguments with friends after a few drinks at George and Dragon about selecting your customers. The typical argument is that all customers are equal and they are God. I disagree. HR budgets are not the same as Marketing budgets or IT budgets. Traininig budgets are different than software purchase budgets. You could sell software for 3K and then charge 5K for training. When you are bootstrapping, 8K is better than 3k.
6. If you can talk the talk – you probably can walk the walk.
Guy Kawasaki has talked about this construct and Google has perfected this — the concept of “beta” — The software (and Web) marketplace is such that you can build and keep anything in Beta for as long as you want. Hell you can even charge users for a beta tool. Don’t be shy of trying new ideas and putting a beta tag on them. If they don’t work out, you can always kill the features – they were in Beta — but more importantly, you put features out there that you can get real-time feedback on to morph it into something that actually can be used. The key here is not to keep the entire tool (or service) in beta, but selective features in Beta — this allows you to charge users yet keep innovating at warp speed.
7. It’s the Journey and Not the Destination
Finally I always believed that we all had to have a ton of fun running the business. We of course wanted to make money, but quality of life was also out there high up on the priority list. If it meant working on the weekends and taking Thursday and Friday off — so be it. If it meant getting Mac’s instead of Dells and iPhones instead of Motorola ones – So be it. One of the benefits of bootstrapping (vs. Angle/VC funding) is that you are not chasing some artificial/excel imposed revenue target. Revenue forecasting for startups is neither math nor science – it’s guess work. Revenue forecasting for an Apartment business is math – can be done in Excel. Revenue forecasting for a Tech. startup is an attempt to make yourself feel better – if you are lending money to someone and want to hold his feet to the fire. The fact of the matter is that things change so fast and have such dramatic impact in the technology business that forecasting based on some assumptions where the premise does not make sense in about 6 months. Case in point: SEO – part of the reason why we were able to get into this business as late as 2004 is our lazer focus on SEO — In 04 few even knew about the term SEO – we focused on it and it allowed us to break into the market. Thus we never had a business plan, never had a revenue forecast.