Bootstrapping: Great Companies Started with Less than a Thousand Dollars

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Low-End High Tech
MC2 Microsystems · Founded: 1988 · Start-up capital: $200 · 1994 revenues: $3.2 million · 1995 projected revenues: $7 million

Paul Lewis knows unchecked overhead can signal ruin. As chief executive of MC2 Microsystems, a computer-networking company, he has seen clients with the spare-no-expense attitude. "I'd have some hotshot CEO wanting to buy the biggest and best computer system," says Lewis. "I'd know the guy will be out of business in six months."

No mere observer of the start-up process, Lewis launched his own company with $200 while in college.He operated from his dorm for two years before relocating to a space sandwiched between a sewage-treatment plant and a nuclear-dump site. Hardly chic, but, Lewis argues, "the rent was cheap." He assembled a motley assortment of garage-sale office accoutrements, but at first he managed with no furniture at all. "When I interviewed my first receptionist," recalls Lewis, "she sat on a cardboard box. I stood." And he chose his used phone system for its hold music. Though the office phones rang only four or five times a day, Lewis insisted that his receptionist answer and put every caller on hold to hear the music. "Would I answer the phone if I'm the CEO?" he reasoned. Nevertheless, he had no title on his business cards, so he could claim to be the CEO, the vice-president of sales, or the service guy. "I was whoever they wanted me to be," he says.

You might expect a computer-networking company to have the latest technological doodads, but doodads eat cash. Accordingly, Lewis's own network was "a joke," but workable and cheap: whenever MC2 installed a new computer system, Lewis carted away the client's old system -- for a fee -- to his office. He took a similarly lampreylike approach to keeping his technical staff up to speed. Lewis either wheedled loaners from manufacturers or had the new equipment delivered to his office, where he and his staff held in-house training sessions before its installation at the client's office.

Lewis pressed clients for money up front: half or a third as a deposit. But large companies demurred, he says. "There was no calling them to push a check through and no getting money up front." Because of this "bit of a hiccup" in cash flow, "we needed a little shot in the arm." That shot came in the form of support contracts on the networks Lewis installed. Monthly billing kept cash flow consistent and made contract renewal easy, says Lewis. "We'd just bill the next month." -- Christopher Caggiano

Assume the Position
Metro Services Group Inc. · Founded: 1987 · Start-up capital: $900 · 1994 revenues: $6.4 million 1995 projected revenues: $7.5 million

Creating a company from nothing isn't so hard, according to Jeremy Barbera. He says it's really just a question of positioning. "If you don't position your company as successful, no one on the receiving end is going to assume it is."

Barbera started his direct-marketing company, Metro Services Group, with just $900 in personal savings. Though he worked at his living-room table, "the best thing I ever did," he says, was to rent a Madison Avenue address for $200 a month through a business incubator. Barbera knew that the clients he wanted, large financial-services firms, "needed to at least think that we were a 'we.' "

From the start, Barbera aimed for major-league clientele. But how do you get the attention of American Express? "You have to be a little arrogant and say that you're capable of doing something that someone else isn't," he says. "Otherwise, there's no reason for them to take a chance." His company, Barbera explained, had skills American Express lacked. "I said, 'We'll get you more new clients than your staff can. We'll deliver a client to you next week. And if you don't believe me, you can pay us on contingency.' " Barbera made good on his cheeky promise. Right on schedule, he handed over the New York City Ballet, which American Express had courted fruitlessly for 15 years. American Express put Metro Services on retainer, unknowingly becoming its first client.

Barbera played elaborate charades to maintain Metro's bigger-than-we-really-are facade. On a typical day, he would phone a client to discuss a proposal, pledging that when his secretary finished typing it, he'd have it delivered -- before 5 p.m. Hanging up, he'd rush to his word processor and type. Document done, he'd change into sweats and sneakers, climb onto his bike, and deliver the proposal. "I was CEO at 2 p.m., secretary at 3:30 p.m., and messenger at 4:30 p.m."

Barbera says he lived in fear -- well merited, as it turned out -- of discovery. As bike messenger he had befriended a client's security guard. When Barbera subsequently appeared downtown to meet with that client (this time in CEO mode), he encountered the guard. She buzzed upstairs and announced, "Metro's messenger is down here, and he claims he has a meeting with you." Thinking quickly, Barbera responded to his customer's confusion, "Oh, my brother used to work for me delivering packages when he was down on his luck." Barbera sustained this multirole juggling for two years.

He leveraged the names of heavy-hitter clients to get extended payment terms from suppliers -- even before he had clients. As he scouted for data-management companies, he told them that he'd really love to throw a little sole-source business their way, but a client like, say, American Express needed longer payment terms. "I said, 'If you can't, we understand. We'll just find someone hungrier who can.' " Most he approached -- 19 out of 20 -- complied. Why? "I asked, as opposed to just taking it," he says. Barbera negotiated terms as long as eight months from many vendors, and, he says, "some even gave me a year."

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