We’re all bootstrappers now
It’s clear to me that we’re all bootstrappers now — not in the sense that you can’t find funding (good companies are still getting funded) — but in the sense that there’s a clear view in this economy that the hallmarks of bootstrapping are now (once again) in vogue.
Some of those traits:
1. Frugality - in the go-go, win-marketshare-at-all-costs environments, this goes out the door. Today–with a rocky economy–even well funded, venture backed companies are expected to be frugal with their investment dollars–or so I hear from executives. The simple reason is because there’s limited visibility, you’ve got to watch your bottom line and burn rate because you don’t know how long you’ll have to keep plugging away.
2. Profitability rules - Once upon a bubble ago (and this seems to occur with regularity) the concept of making a profit on your investment gets ignored in seeking to either get acquired or to reach an IPO. What I hear today is that making your operations profitable — out the door — currently is more important to founders and investors than it has been in the past. This is — again — for survival reasons, because good IPOs are missing, and acquisitions today are not predictable. Profitability gives you the ability to control your destiny and not be dependent on a well-timed acquisition.
3. Organic growth. This doesn’t mean you don’t grow fast, but instead, that you hire and grow your company depending on how much revenue you are bringing in. Usually, this is because finding funding is much harder, and if you do have to raise capital, you have to give away a lot (a lot) more of the company.
4. Sales, not Buzz. In boom times, oftentimes there’s a bigger focus on being cool, getting “buzz”, and being satisfied that those efforts eventually lead to sales. Usually, bootstrapped firms are too focused on signing up customers to care (too much) about how cool they are; they’ll instead spend their time selling and growing the business. This is really a side effect of #1, because when you decide whether to spend your one dollar on a cool party versus a dollar on closing a sale, you’re likely to spend it on closing that sale.
