The Bootstrapper's Dilemma
Bootstrapping - building your business strictly through sales - can be tough. A steady job might be too hard to resist. What's a founder to do?
All I’ve ever known is bootstrapping: starting a business with almost nothing, selling something to your first customers, investing that first revenue back into the business to drive more sales.
This isn’t the way of Silicon Valley.
If your “company” is a flashy idea sketched out on the back of a napkin, and if you can convince angel investors or VCs that your idea will be the next Open AI, well, who needs to make and sell something for a profit?
Bootstrapping isn’t the way of wealth that goes back generations, either.
Got a rich uncle? Maybe you can talk him into backing your business so you can start the race to riches near the finish line.
For most business founders, though, bootstrapping is their only option.
For the last ten years, my high school students have started real businesses and won countless competitions by selling and reinvesting. It’s a winning model when it’s the only funding source, that’s for sure.
They follow their teacher’s footsteps.
When I started my first company, I was an unemployed English teacher who wanted to keep teaching. Like many of my peers, I’d been laid off following 9/11, when foreign language students stopped coming to the U.S.
My first month, December 2001, I had two students who paid me a grand total of $20. I never saw them again, but I was in business. The next month or two I began keeping my students. I made a bit more than $20, and then a whole lot more, and by spring a thousand or two a month and growing.
It seemed to take forever before I was making any kind of money at all, not to mention employing other teachers, finding our niche, leasing our first headquarters, hiring sales and HR and IT and finance staff…. None of that came fast, as far as I felt it at the time.
It was a recession. Nobody offered me a job, so I kept going. My wife was earning well enough to keep us fed until the language school was up and running. Until all the growth I just described was upon us, almost (it seemed) by accident.
When you don’t have another option, it doesn’t take particular bravery or stick-to-itiveness to keep building your company. But I always wonder: what if, in that first year, someone had offered me good money and great benefits to drop my struggling little business and come work for them? Would I have taken the job?
Truth is, that is exactly what happened to me six months before 9/11. That spring, I had just registered my first language-themed business when a friend invited me to meet his partner. The two were starting their own language school, with deep enough pockets to pay me much more than I was making as a staff teacher at the school where we’d both worked for years. They asked me to be director of their new school. Pay? Status? I put my business on hold and took the offer.
Fate intervened, as it did with so many lives that September. We were lucky compared to some.
Fate gave me the push I needed to launch my first actual, money-making business. As I look back at that, I don’t have to wonder because I was there and I lived it:
I took a job instead of pursuing my first business idea.
As we at Benevolent meet with hardworking founders and explore investing in their companies, we’ve hit bad luck a couple of times. A great founder, some promising momentum, an interesting opportunity… then the founder takes a job.
Don’t misunderstand. Usually, this isn’t how it goes at all. If you’ve built a half-million dollar business over the past seven years, if you’re employing five or more full timers, if your customers love you and your business is growing, you aren’t going to take a job unless you’re just hopelessly burned out. That happens, but that’s not what we’re seeing.
Twice now, though, two of our favorite of all the founders we’ve looked at decided to pass on investment near the end of our lengthy vetting period. In both cases, these are very young founders running a business of one plus help as needed. Not typically what catches our eye. But in both cases there was something really awesome about the founder, about their hustle, about their creativity and talent solving tricky problems…. And then they backed out.
A month later, LinkedIn told us why. They took a job.
Please don’t misunderstand! First off, we’re happy for them. A solid job when you’re young and hungry: that’s really good.
The experience they’ll get on the job? As my friend Carl likes to say of his own first thirty years, they’re getting paid to make mistakes and gain wisdom on someone else’s dime. They’ll surely be better qualified to succeed in the future, if they ever start another business of their own.*
My partners and I have discussed options, and we continue to do so. Do we offer some founders a stipend, a modest living wage so they can afford to stay in business?
This is against the bootstrapper’s way. To the wrong founder, reliable pay could stunt their hunger – not just literally (No hunger? That’s good!), but metaphorically (not so good). If you’ll get paid this week regardless of results, maybe sales take a backseat to things that seem work-y, but aren’t helping your business grow the way it needs to.
We haven’t decided and don’t know if there’s such an emergency to answering this question of ours. Still, if it happened twice, it’ll happen again. Maybe for the best, but…. Well, I guess if I believed that I wouldn’t be writing this post today.
Before you judge the life choices of a founder one way or another, either pro-job or pro-keep-building-till-your-last-breath, I want to leave you with this: What if your business, done right, can employ hardworking, talented, deserving people whose lives are better for working with you?
Are you building something? Are you doing it with people who make you proud? Are your customers better for working with you? Please tell me all about it in the comments.
Meanwhile, as I always tell my girls, Don’t forget to win!
*Most of the successful founders I know have gone from owner to employee to owner to employee multiple times in their careers. Not always, of course. But I’ve done it, and I highly recommend it. Most first businesses are not overnight successes. Most founders have to try multiple times before one of their ideas gains real traction. Sometimes, there are some years in between. We’ve got to keep our brains and our bank accounts busy in between ventures, don’t you think?
By the way: Matthew and I have a new partner at Benevolent. Stay tuned for an intro to our friend Ken Goldman. Judge us by the company we keep :)