Ideas & Resources

Whitepaper - Bootstrapping Your Business for Success


Knowing When & How to Approach VC Firms

Bootstrapping happens when a company develops with little or no outside funding. The company opts to fund its primary development and growth through internal cash flow using real customer revenues. The founders and a restricted set of early employees often forgo salary payments for equity in the company. Eventually these companies operate at a breakeven or profitable performance level by necessity. Some companies formed from breakeven or cash-positive corporate divestitures share these same qualities.

Bootstrapped companies find ways to generate revenue and sustain growth through consulting engagements, non-recurring engineering (NRE) engagements, value-added reseller (VAR) agreements, customer retainer fees, divestitures or protected supplier contracts with a parent company for a defined period of time, the classic “moonlighting,” and even waived compensation. They learn to generate revenue that funds growth and expansion until reaching a level of growth where it no longer makes sense to go it alone.

We explain why we think that bootstrapping produces superior businesses and explore the key issues around bootstrapping a business and choosing the right time to raise capital.