While reading the articles on bootstrapping in this month's issue, I kept thinking of a conversation I'd had recently with an Inc. 500 CEO who had bootstrapped the start-up of his company, a brilliantly innovative business that will do about $100 million in sales this year. Never again, he said, would he go through that slow torture. Yes, he'd learned a lot, and the business had benefited enormously, but the bootstrapping process was just too damn hard. In his next business, he said, he was going to take advantage of the wealth he'd created and grow a lot faster.
I wish him luck, but I'm afraid he's making the mistake that leads so many successful entrepreneurs to fail on the second try: using their money to avoid precisely what made them successful in the first place.
Sad to say, there is an undeniable link between creativity and a shortage of cash, as this month's articles remind us. As tough as bootstrapping is on the people doing it, the experience often gives the company a staying power it couldn't acquire any other way. When you have no money, after all, you're forced to survive by your wits. In the process, you make the discoveries that become the foundation of the business--discoveries you would have missed if you'd had more capital.
Of course, there are exceptions to every rule. This bootstrapping package, for example, was put together by the very creative team of Mike Hofman, Michael Hopkins, Joshua Hyatt, Nancy Lyons, and Robert A. Mamis. And to think they all got paid.
Changing the Rules
You may recall that in January senior writer Edward O. Welles wrote about Chris Block and Jeff Burke of Block Trading, who were using technology to shake up the world of securities trading. Now he returns with the story of Pete Ellis of Auto-By-Tel, who is doing the same for the world of automobile sales.
Welles says that the similarity of the themes is just a coincidence, although he admits he's fascinated by companies with limited resources that are out to change the basic rules of large, established industries.
The trick, of course, is to find them. Welles came across Auto-By-Tel while investigating whether there was anything new to say about H. Wayne Huizenga, the Blockbuster billionaire who is making his own well-publicized bid to transform the automobile industry. There wasn't. But Welles found there was plenty new to say about Auto-By-Tel, a more interesting business, he thought, and one that the mainstream media had all but ignored.
"It's nice to have the freedom to write about small companies doing big things like this," he says. We're happy to give it to him.
You may notice the absence of Street Smarts from this issue. Columnist Norm Brodsky is taking the month off. So, for that matter, is Jack Stack, our Critical Numbers columnist. Rumor has it that Brodsky has challenged Stack to a bass-fishing contest to determine once and for all who's right about the economy. Both columns will return in September, assuming nobody drowns.