The hard things about bootstrapping a startup

Image credit: erizof

I’ve been running ContractIQ as a bootstrapped company and it will soon be four years into that journey.

For most parts, I have been a student and practitioner of the ‘art of bootstrapping’ a cash-flow positive, healthy EBITDA company that has a long runway. We are growing and if we chip harder and harder at it, that magic year is not too far off where the undiluted outcome is equal to or better than a diluted outcome for a funded company’s founder.

That is the premise and one of the promises of the bootstrapping world — retain your freedom, execute the way you think is right and grow at a measured pace, build a healthy & real business. You’ll see the double rainbow one day.

It’s true. I believe in it too.

But (here comes the ‘but bomb’), there are some untold and darker sides to bootstrapping that can kill your company. Let’s talk about them, because it’s important.

When you don’t raise money, your story is completely self-made. That’s only good if you have the smarts and discipline. Herein lie the problems:

You owe an answer to nobody

When you don’t have to answer to anybody, your confirmation bias can take you down to dark alleys with dead ends. You do something because you think you are right. When you don’t have to answer or defend, every realization comes after execution and not through borrowed wisdom.

You are not in a hurry

There is no exit window because there is no investor. There is no peer cohort because you are not a part of a portfolio. You peer cohort is other bootstrapped startups about whom you may or may not know much. Worst yet, there could be confirmation bias there as well, as each one of you would be treading down the same path at the same pace.

You think you can execute in a vacuum

Some markets give you the luxury of being one among five players and yet be successful. Some don’t. Certain marketplaces like hyperlocal or transportation don’t allow you to pace growth — you own the place or you don’t. Bootstrapping to profitability does not mean much in such cases.

You are in a hurry