Bootstrapping your business
30 May 2007 in Business | Comments enabled

Another topic I hear about a fair bit is regarding bootstrapping – how do you get started when you don’t already have millions? I refer to this situation as bootstrapping and it’s not as hard as it sometimes can look from the outside. Bootstrapping is far more important when you’re launching a products company, as opposed to a services company, as there will be a sizable time frame between launching the company and launching your first product.

What we do at Mindscape

When we founded Mindscape we did so because we wanted to create an awesome software products company. The challenge was that we all need to eat and live so we decided that doing some consulting work would allow us to pay the bills while still enabling us to spend the majority of our time developing products. So far this strategy has worked very well however there is a need to be careful.

Beware the “easy” dollars

I fully believe that services companies simply don’t scale in a manner that provides the right level of return on your investment. Margins are thinner, managing people is very hard and you get that all as baggage in exchange for being able to make easier money at the start. Those dollars can look attractive but if you’re not careful you’ll find yourself a few years down the track owning a services company with no products. Be vigilant and ensure you’re only providing services that you require to deliver on your product vision.

Developing a product “on the side”

Personally, I wouldn’t waste my time trying to build more than a wobbly prototype on the side of your day job. Simply put, you tend to exchange your best hours of the day for money already so you’re already giving your product a weak start on life. I’m not saying it’s impossible to do this, it’s just much harder. You also need to be careful about intellectual property with your current employer if you want to juggle your product development on the side.

What about investors?

You could certainly go and find people to invest money in your company in exchange for equity at the very beginning and many people do launch in this fashion. It is always taught that if you want to become wealthy you need to learn to utilise OPM (Other Peoples Money) however this can often be a sign that you’re obsessed with your idea more than the business itself – if you really want to see your product make it to market you’ll have no concern doing a day a week consulting to help see that vision through. There are additional intangible benefits to gain from this:

  • You build your network by engaging new clients
  • You can bounce ideas about your product off people you’re working with
  • You start building your company name and brand
  • You get paid money so you can afford to live :)

I think all too often people have a view that somebody should pay for their idea and be lucky to get a small cut of the equity. Prove that you’re really committed and willing to make sacrifices before looking for investment. Ideas are a dime a dozen, it’s the execution, the team and the business that delivers success and ensuring you don’t go out of business in the early days for lack of cash is all about executing well.

- JD


1 comment. Add your own comment.

thinking in geek » Blog Archive » Products vs Services says 12 June 2007 @ 04:35

[...] JD writes: I fully believe that services companies simply don’t scale in a manner that provides the right level of return on your investment. Margins are thinner, managing people is very hard and you get that all as baggage in exchange for being able to make easier money at the start. Those dollars can look attractive but if you’re not careful you’ll find yourself a few years down the track owning a services company with no products. Be vigilant and ensure you’re only providing services that you require to deliver on your product vision. [...]

Leave a Comment

Name (required)

E-mail (required - not published)

Website

Your comment: