Bootstrapping and Alternative Sources of Funding - Entrepreneurship 101 (2013/2014)


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“Bootstrapping” is the act of building your business using your own funds and revenue from customers, instead of raising money from outsiders such as angel investors and venture capitalists. Most start-up companies use bootstrapping, or alternative sources of funding such as crowdfunding, to build their ventures.

This discussion explains how you can pull your company up by its bootstraps.

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Bootstrapping and Alternative Sources of Funding - Entrepreneurship 101 (2013/2014)

  1. 1. So  you’ve  got  a  great  (validated!)   idea,  tested  your  business  model,   and  you’re  ready  to  launch  your   new  startup…  
  2. 2. Now  you  need  money  (and  lots  of  it)!  
  3. 3. Bootstrappers’  Hall  of  Fame  
  4. 4.    
  5. 5. •  Starting a business with little capital or formal investment" " •  Using your own finances (savings, credit card, loans) or ‘friends, family and fools’" " •  Selling your time/expertise on the side (consulting)" " •  Selling an early product to fund company development" " •  Leveraging other sources of funding (government grants, crowdfunding)" " "
  6. 6. •  Bootstrapping is the only option for companies that won’t grow quickly or provide a significant ROI to investors" " •  Even companies who will get investment later may need to reach certain milestones/levels of traction on their own first" " •  Some entrepreneurs choose to bootstrap to maintain control/full ownership over their company" •  Forces you to focus on priorities and leverage what you have (time, expertise, money)" " "
  7. 7. Start-up capital is NOT the leading predictor of success: " " •  Companies started with <$1000 as likely to be profitable as those starting with >$100K" " •  Companies launched with <$10K achieved almost as rapid a median growth rate as those that were loaded with start-up capital before company’s first sale" But size affected: " " •  Companies with >$100K seed capital employed on average 150 people and had $21M in revenue; <$1000 seed capital had 56 employees and $13M sales"
  8. 8. •  Keep overhead low! •  Share office space or work from home" •  Use QuickBooks, Wordpress. etc. and other affordable technology solutions" •  Low fixed costs; keep costs variable" " •  Leverage relationships! •  Tap network for discounted services/deferred fees" •  Use advisors and mentors" •  Find employees who will share the risk (and upside)" •  Leverage suppliers to only get paid when you make money" •  Paid product development: customer that needs your solution badly" " •  Do-it-yourself marketing and hiring! •  Use interns and contractors to keep costs flexible" •  Pay commission-only for sales people" " •  Money management! •  Line up credit before you quit your job" •  Look for service opportunities related to your business" •  Focus on sales not just product development" " •  Pick the right business (short selling cycles, recurring revenue)" "
  9. 9. A search tool on the MaRSDD website to help entrepreneurs connect to more than $30 billion in 4,500 government funding programs •  $26B in grants and $4B in tax credits. " •  Average grant size among the top 500 recipients is about $1.8M. " •  About 1.5% of grants are over $10M" •  76% of grants are paid to companies and about 95% of these are paid to SMEs" •  28% of recipients are based in Ontario " •  Top sectors are manufacturing, media, and tech" " " " ! !
  10. 10. •  Kickstarter: Passed $1 billion in pledges from 5.7m people in 224 countries; Canada: 1400 projects had $44m in pledges raising $14m" " PROS   CONS   Validate  an  idea   Lots  of  failed  campaigns   Pre-­‐sales/Sell  first  product     Launch  too  early   Build  market  awareness   UnderesFmaFng  cost  of   fulfillment   No  equity     Wrong  price  point   Works  well  for  NFT/arts  ventures   Wrong  product  
  11. 11. Pg 13" The Crowdfunding Success Pattern! " Learn how your startup can leverage and maximize crowdfunding from Brian Meece of RocketHub. " Crowdfunding Change: Tips and tricks for social innovators from Indiegogo! " Amy Lesnick, Head of Social Innovation and Non- Profits, Indiegogo, discusses how crowdfunding has become a transformational tool for social innovators." "