Successfully Self-Funding and Bootstrapping a Startup
The Pivotal Tribes meetup group brought together a panel with experience in bootstrapping and self-funding their own startups at London’s Google Campus earlier this month for a Q&A session to gain their insight into how it is possible to build a business through your own cash flow and with no outside finance.
The panel consisted of Rob Waller (Founder & CEO of Status People), Amanda Boyle (Founder & CEO of Bloom VC), Trenton Moss (Founder & Commercial Director of Webcredible), Marcus Warry (Founder of Archie and Doris Accountants and the Real Debate Club) and James Hunt (Marketing Manager at Y-Cam and founder of several startups). The chairperson was Jonathan Lea.
To review the live Twitter feed for the event see the @pivotaltribes timeline.
The discussion began with a general question on how it is possible to start a business with little to no capital. A common theme that the entire panel shared was that to succeed down the self-funded route is entirely possible, but involves a lot of hard work. Rob went as far as to say that starting out this way was, with hindsight, a ‘stupid idea’. Amanda disagreed and thought most business concepts can be proven with less than £1,000 and Marcus said the key was to try and get to the proof of concept stage with 100% equity. The panel recognised the starting point is normally less than ideal, such as working from home rather than in an office, but if the founder has a strong will to succeed then it is possible.
The audience were curious as to whether not having any technical knowledge should act as a deterrent to starting up. Rob stressed that it is important to utilise people with the skill sets you yourself don’t possess. Partnering up with others can make your startup much stronger. A technical person, Rob thinks must be both a problem solver and a good communicator. Trenton didn’t follow this route, and just worried about the lack of technical knowledge further down the line. He recognised this was not the ideal option, but you must take risks when you are a startup.
Once the startup is off the ground, it is important to consider how best to market and sell the concept. Importantly, Amanda said that you must know your customers from the outset – many startups waste money on advertising to the wrong audience. She offered useful advice on approaching people: do so when they are not at work, as they are more accommodating in a social environment. James also recognised that marketing must start very early on in the process: at the idea stage. Networking is a key way to market, because your business idea can be sold into people. Similarly, use of social media and blogging will encourage people to talk about your idea. Trenton took the approach of marketing himself as an expert, with a fundamental belief in his product, and this led to confidence and belief from others in his startup. Marcus reiterated this point, in that if you make sure your clients are happy they will contribute towards the marketing of your product. Of course, despite all the above, Rob pointed out that marketing a new startup successfully can also come down to luck – his app was fortunate to benefit from some ‘self-marketing’ around the US election.
The audience were keen to explore how to fund growth in the early stages. Trenton stressed that you must do ‘everything on the cheap’ – he used the example of buying a fridge for his business for £12 from eBay! The panel all agreed that you must be very careful with expenditure in the early stages, and plan the use of your budget wisely. You must also expect to experience hard times financially.
Jonathan Lea asked the panel about the dangers of employing people too early on in the startup process. Marcus said that it is best not to take on employees at all in the early stages as this makes the business easier to scale. Contractors are easier and more flexible to work with. However, when using people externally such as this, Marcus thought it was still important to make them feel a part of the team (for example, invite them to the Christmas party). Amanda talked of her startup which had just 17 staff and 400 sub-contractors – you mustn’t take on staff until you have the means to pay them. Rob’s startup currently has no employees, and he just works with freelancers. Rather than employing people, you can work with freelance partners who have different and complementary skillsets. These partners, however, must ‘ultimately be willing to make the same sacrifices as you’. The consensus was to wait for as long as possible before employing people to keep costs low and allow the startup flexibility.
Again on the idea of a team, the audience wanted insight as to whether it was best to start out alone or with others. Jonathan’s legal background has meant he has seen many personal fall-outs because a team didn’t work well together. Amanda said that if you first work out what you want from your team, you can then invest the time and effort into finding the right people. She found that starting up two companies alone was both difficult and quite lonely; all Amanda’s successful experiences have been in a team. Trenton experienced the opposite and worked best alone, as he thought starting a business with others just opens the door to friction and disagreement. Trenton thought partnerships worked best where there was one ‘driving force’ and one ‘complimentary person’. Marcus explained that the best way to avoid friction is to have a written agreement sorting out the personal incentives from the off. Amanda highlighted, that bringing in someone else does not necessarily mean giving up a large amount of the equity in the company.
The panel shed light on their hardest moment throughout their startup adventures so far. James believes in organic growth, so for him it was bringing in a partner and also working incredibly long hours. The panel agreed that an incredible amount of effort must be invested in the early stages. Trenton found the rejection surrounding cold-calling difficult to cope with, and Rob once missed a detail in a contract which cost him £5k. He said he took advice from mentors to focus him and give him new direction and determination. Marcus took the approach of appointing a ‘Head of Client Services’ to delegate some of the problems and take the strain of the hard times off of himself.
The Pivotal Tribes session highlighted that succeeding with a self-funded startup is not for the faint hearted. James said you need to invest sheer hard work and experience some good luck. Rob pointed out that over time of testing an idea, it will evolve and could change completely. A perceived failure can in fact develop into success. You must learn to take criticism well and not expect everything to go well straightaway. To avoid failure, an entrepreneur must be open minded, flexible, organised and above all very resilient and committed so that they will put in the required effort to make their business a success.
If you are interested in attending future events, please join the Pivotal Tribes meetup group – we have two events announced for early next year with some great panelists already confirmed.