Originally posted on Wavefront on Wireless’ blog
Launching a startup on a shoestring budget is not as easy as it may seem. I had the opportunity to interview two entrepreneurs who’ve learned the ins and outs of bootstrapping their own tech startups within the last 18 months.
Here are their top 5 tips to help you bootstrap your own tech business:
1. Find the right partners.
When you are tight for cash and simply can’t afford to offer large cushy salaries, it pays to reach into your network to find the right partners.
When Marco Hunstad set out to launch Spotcast over 12 months ago, he reached out to his previous co-workers in the mobile and local search vertical who were looking for an opportunity to be a part of an exciting new startup. He offered to compensate them with equity, flexible work hours, the opportunity to develop their talent, and the ability to be creative in their work – all the perks that large companies can’t always offer.
“There is no company without the team – it is a partnership. We have each others’ backs and we are in this together – through the highs and hurdles.”
Marco and his partners built a company based on openness and trust – which is something that no amount of money could ever buy.
2. Set limits and stick within them.
Before you start developing your product or service at a rapid pace, sit down and set limits for yourself and any other stakeholders who would be affected. Marco sat down with his family and created limits on how much they were willing to invest and how far they’d be willing to go.
“We’ve had to make a lot of sacrifices. But I’ve always kept within our limit.”
Having a reduced salary to manage the company’s burn rate and extend its runway as well as working long hours requires a lot of external support from family and friends – especially with having a young family. Marco negotiated with his kids to turn their basement play space into an office. It reduced Spotcast’s overhead and further extended its runway for success.
“Everything is an investment we work tirelessly and extremely hard to make our commitments and milestones. As a company, we were focused on generating revenue and early stage validation from the start. We do a lot of A/B testing and when we find an opportunity, we run with it. Our team has very clear focus and at the speed that we move, we don’t spend a lot of time writing what we want to do. We just do it.”
Set limits and validate your concept at regular intervals to ensure it is worthwhile to continue pursuing.
3. Secure other methods of income to offset expenses until your startup generates revenue.
Not every startup founder is fortunate to have a partner or stakeholder able to make sacrifices or additional support before his or her startup generates revenue. Doug Hagedorn, the founder of Invici Technologies, puts a roof over his head and food on the table by taking on extra shifts at a bike repair shop on the weekends.
“Part of being a good entrepreneur is being creative. You have to come up with different ways to make and spend your money and time.”
He also notes that a second job isn’t just income, it’s also a valuable way to network in a different community and step away from the grind of a startup. “I would go crazy if I couldn’t do something else a few times a week and my ‘other gig’ introduces me to lots of people outside the tech scene who are often very important connections.”
Doug launched Invici Technologies immediately after completing his Master’s studies at the U of C and has ‘never had the luxury of earning a salary.’ Fortunately, Doug’s been able to borrow small amounts of cash from family and friends and has won many awards including a $10K cash award, Tecterra’s $50K Commercialization Support Services grant, Innovate Calgary’s Perfect Pitch Competition, and Startup Calgary Launch Party’s Biggest Social Impact Award.
Many founders offer consulting services on the to side to offset startup expenses. “It can be a nice cash buffer or parachute to fall back on if you need to close shop and walk away,” explains Doug. “Bootstrapping scares a lot of people because you’re so invested in the success of your company. But if you have a safe exit strategy then taking larger risks is less daunting”.
4. Take advantage of grants, vouchers, and tax credit programs.
In the early days, it is important to research non-dilutive financing programs and learn their specific criteria. There are great programs such as the Scientific Research & Experimental Development (SR&ED) tax credits, NRC’s IRAP, WINN Tecterra as well as the Interactive Digital Media Tax Credit (IDMTC) to name a few. Each program is different and some a cash investment upfront so you’ll want to be able to plan and start saving.
Doug recommends reaching out to the funders in advance and building personal relationships with them, if possible. That way, you get to learn their lingo, timelines, what companies or projects they’ve funded in the past, and how to present your technology in a relevant way before attempting the long, sometimes time-consuming application form.
Marco stresses, “finding the opportunities that align with your company’s vision. The money is there, but it has to fit with what your objectives are… You’ll need to learn to leverage [grants and programs] soon so you can factor them into your financials.”
FREE DOWNLOAD: Click here to learn about 20+ Grant Programs in this Ultimate Guide to Innovation Funding.
5. Keep your eyes open for mutually beneficial opportunities.
Sometimes the best business opportunities don’t involve an exchange of money for services. Look for mutual opportunities where you can offer value or share your insight. Doug explains,
“Sometimes the things that you need don’t come from money or funding – they are from relationships you’ve built while growing your business.”
Instead of finding ways to save money he has looked for ways to ‘not spend money.’ “Just ask. You never know what that person might need and what you could possibly offer in exchange.” For some tasks, Doug has asked people to show him the ropes and has learned to do things on his own. “If you can’t afford to pay someone skilled to do fifty hours of work, you can probably afford a few hours of basic instruction and ‘proofing’ or even teach them a skill they need in return.”
Every company is different and what works for some, may not work for others. What tips would you give other entrepreneurs who are bootstrapping for the first time?
Spotcast is a local discovery and marketplace app that immediately connects retailers and event promoters to consumers interested in their products and services around them. Consumers can also create time-sensitive and location-specific posts to share with other consumers around them such as deals, special finds, amazing events, and anything associated with a place of business or location. Spotcast is available throughout North America and is available for iOS, Android, and Blackberry 10 at get.spotcastapp.com
Invici Technologies brings spatial data to your fingertips. Our products provide a computer interface platform for blind and visually impaired users to explore, create, and share digital media and spatial information with unprecedented ease. www.invici.ca