Steve Murch - Bootstrapping: Less cash, more cowbell
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Steve Murch - Bootstrapping: Less cash, more cowbell

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  • Good morning everyone, I’m Steve Murch, a fellow entrepreneur here in Seattle, and I wanted to share a few thoughts about bootstrapping a business – what it is, why you might want to do it, and yes… how it even relates to the famous “Cowbell” sketch – one of my all-time favorites – from Saturday Night Live.
  • The job I’ve actually held the longest is that of a bootstrapper. In 2003, I set out to create a solution for me, as a cook, after my wife gave me yet another scattershot grocery list, after we had thrown away food from the fridge that could have been made into something better, and really just wanting some software that I could use to create a weekly plan of meals to make and grocery lists that came from them. I did that alone – just me and my dog, as Jonathan Sposato is fond of saying – but for the past few years we’ve had 6 great people, and are growing to about 12 over the next year.
  • Here’s what I’ve done – and I share this just to illustrate that I’ve had the opportunity to start venture-backed companies – at VacationSpot we raised $13 million – and I’ve worked at large, public companies like Microsoft. Regardless of the spot along the spectrum, all have their advantages, and all have had their challenges.
  • What kind of company are you creating? You have options. Most people are well aware that the kind of company you create has a dramatic effect on the kind of financing you’ll get.But flip that around and it’s also true. The kind of financial CHOICES you make will dramatically impact the kind of company you’ll have. So choose, very deliberately, a preferred path.
  • The typical path looks like this. If all you read were TechCrunch and VentureBeat, you’d think this is the ONLY path.
  • But there’s another way, and it’s the path I’ve taken over the past decade. And it kind of rocks. But you need to have cowbell.
  • What’s bootstrapping? It’s getting to traction – which in the classic sense is positive cashflow – without outside capital. It’s very hard to do, and you not only have to work like crazy to make it happen but the planets also often need to align to make it happen, but it’s magic when it does.
  • Look at these companies. They all bootstrapped to greater than $1 million in revenues, and many substantially more.
  • On the all-star list, these four companies bootstrapped their business all the way to IPO.
  • At the highest level, your financial choices are a tradeoff between Freedom and Accelerated Impact. For many of us in the software world, it IS possible to get to the same place, at a slower pace – 10 person-years of development can be done by 10 people in a year, but could also be done by one person in 10 years, as I’ve also found out.A professor I had at Harvard Business School that put it a bit differently – he called entrepreneurial finance a race between fear and greed – this expresses the same tradeoff in a different way.
  • You’ve got to look at two different things in assessing your financial choices – YOUR BUSINESS and also YOU.
  • I only have a few very personal datapoints, but I can tell you that either way certainly can work, if you get the variables right.
  • Let’s go back to the cowbell sketch and pick out one lesson. The gist of the sketch was that the song never was quite right. It needed something more. You’ve got to be the person that tells yourself, and the team, that it can be better. You’re NEVER going to get it quite right, maybe ever – don’t let it rest until it’s the best. Have a fever, baby.
  • The second lesson we can take from that sketch is that we all remember it. And many of us shared that meme… and here I am, 5 years later, mentioning this sketch and getting a chuckle or two.Why? It was memorable. It was literally remarkable – worthy of being remarked-upon and passed along.
  • You, as bootstrappers, have to have a remarkable product, an A+ team, a laser focus on the customer’s need, and a defensible niche. These are must-haves for you to survive as a bootstrapper.
  • Ultimately, bootstrapping is a statement about cashflow. And to a bootstrapper, the only thing that matters is cashflow. Not EBITDA, not even revenue and expenses. But pure cashflow – what goes into the jar, and how quickly it gets pulled out.

Steve Murch - Bootstrapping: Less cash, more cowbell Steve Murch - Bootstrapping: Less cash, more cowbell Presentation Transcript

  • BOOTSTRAPPINGLESS CASH, MORE COWBELL
  • ceo & founder
  • MY CAREER, IN PNG FORMATBootstrapped Venture-backed Large Companies
  • YOU HAVE OPTIONSIN FINANCING YOUR VENTURE.
  • “TYPICAL” SUCCESS PATH Venture Acquisition, Capital IPO Angels or… Remain Private Bootstrap seed startup 2nd stage 3rd stage
  • ANOTHER WAY * Acquisition * IPO * Attractive venture money * Private income-machine Bootstrap
  • BOOTSTRAPPING IS...TRACTIONWITHOUTOUTSIDE CAPITAL
  • BOOTSTRAPPED TO $1MM+ AND PROUD
  • BOOTSTRAPPED TO IPO
  • BENEFITSComplete control: • Culture, products, employees, partnerships, financing, strategi c directionZero dilutionWriting your own checks gives you focusLess time spent raising capital, managing upwardsLess revenue to profitabilityLess guiltEasier exit/merger decisionmaking
  • BENEFITSComplete control: • Culture, products, employees, partnerships, financing, strategi c directionZero dilutionWriting your own checks gives you focusLess time spent raising capital, managing upwardsLess revenue to profitabilityLess guiltEasier exit/merger decisionmaking
  • RISKS• Far fewer resources• Well-funded gorilla• Less visibility & strategic oppy• No external validation of value• IPO path far less likely• Cash constraints• Flying solo is tough!
  • VENTURE FINANCINGTRADEOFFFreedom Accelerated Impact
  • VENTURE FINANCINGTRADEOFFFreedom Accelerated ImpactBootstrapping Revenue Loans Angels Other debt VC
  • IS BOOTSTRAPPINGRIGHT FOR YOU?Your business • Capital requirements • Revenue and cost pace How quickly can you get to positive cashflow? • Attractiveness to investors now vs. future • When is venture money “cheap” or “expensive”? • Likely $100 million or less total market cap?You and your team • Are you more interested in a “lifestyle” or “go big or go home” experience?
  • AT WE CHOSEFreedom Accelerated Impact Institutional VC • Venture money awash in 1997 • Capital requirements were perceived higher • Brand-building spend required • Raised $13 million easily and quickly acquired by in 2000
  • WITH I CHOSE:Freedom Accelerated Impact • Maximize freedom • Minimize downside risk • Low capital requirements
  • Cowbell Lesson #1: HAVE A FEVER, BABY: ITERATE. Your first take is NEVER going to be quite right.
  • Cowbell Lesson #2: BE REMARKABLE. LITERALLY.What about you is worthy of being “remarked” to someone else?Double-down on that.
  • YOU MUST HAVE• Remarkable, enchanting product• Superb team A+ players at every position• Laser Focus on the customer’s needs• Defensible niche
  • CASHFLOW, CASHFLOW, CASHFLOW• Be frugal spending it• Be scrappy getting it
  • CREATIVE SOURCESOF CASH• Forgoing salary and benefits• Advance revenue from customers• Crowdfunding (Kickstarter et al)• Founders, friends, family, credit cards• Side consulting gigs• Revenue loans• Barter• Stretching payables, shortening receivables• Your current job
  • YOUR BEST SOURCE OF CASH• Revenue from ready, paying customers
  • RIDE A WAVE• iPhone• Windows 8• Android• Facebook• Windows 8 phone• iPad and Tablets• Twitter• Xbox, Wii• Cloud-computing… and more
  • Registered Users 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,600,000 1,800,000 1,400,000 0 Jan-04 Apr-042004 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-072007 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 released iPhone app Oct-08 OUR WAVE: MOBILE Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
  • Registered Users 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,600,000 1,800,000 1,400,000 0 Jan-04 Apr-042004 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-072007 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 released iPhone app Oct-08 OUR WAVE: MOBILE Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12
  • LEADING INDEPENDENT COOKING APP 7 million downloads
  • BOOTSTRAPPINGTHOUGHT LEADERSEric Reis (Lean Company) • Measure it • Release a Minimum Viable Product (MVP) • Iterate quicklyJoel Spolsky (Fog Creek)Jason Freid (37Signals)
  • GO DIRECTEvery intermediary between you and the end-customerwill require: • Time • Attention • Resources • Capital
  • SHORTEN THE SALES-CYCLE • Long sales cycles are cash-eating hogs • Pick a beachhead and dominate it
  • TEST THE MARKET INSMALL WAYS• TALK to customers!• Coming Soon Page• Run a CPC campaign (Adwords) on that page, and test interest
  • UNDERSTAFF• Contract to hire• Remote contractors until revenue visibility is clear• Priorities are clearer, risks are lower, and culture is easier to cement
  • POSITION AGAINST ALEADER• Ride their wave• You will be categorized anyway
  • JUST-IN-TIME• Do not buy something until you need it
  • USE OFF-THE-SHELFWHEN IT’S NOT CORE Just some of the tools we use.
  • MANAGE YOUR OWNPR LIKE A PRO• Contribute to third-party blogs and sites• Guerilla marketing• “Newsjack”• Think like a journalist, and tell the story Example: RecipeScan™
  • GET PERSONAL WITHCUSTOMERS• Listen to how they’re using your product• Make changes and respond• Put some poetry in what you make• Turn them into your best marketing vehicles
  • “WHAT YOU DO IS WHATMATTERS, NOT WHAT YOUTHINK, OR SAY, OR PLAN.” Jason Freid, Rework
  • “I WANT YOU TO REALLYEXPLORE THE SPACE ” Thanks. @stevemur @bigoven