A group of vignettes that examine various successful companies that were started with $10,000 or less.
Cover Story
Great Companies Started with $10,000 or Less
Even years later, when a successful founder has cleared all the hurdles and is puffing on a stout Macanudo, he or she probably couldn't describe starting a business with $0--or even $10,000--as easy. At least not as easy as having real money. With 80-hour-a-week doggedness that even the well-heeled venture crowd has to admire, modern-day alchemists squeeze gold from the likes of charge cards, donations from relatives, favors from customers and vendors, double-mortgaged homes, and overlapping day jobs. They perform that remarkable transfiguration in cellars, kitchens, windowless offices, garages, and, on occasion, the backs of vans.
Gathered through interviews with fast-growing companies that have made the Inc. 500 list, the bootstrapping accounts that follow include every part of the country, cover disciplines from weed control to international telephony, and involve businesses with annual sales of as little as $2.8 million to as much as $280 million. The classic bootstrapping entry into commerce is a headfirst leap taken on faith in the system. It's capitalism's version of a high-wire act without a net: one misstep, and you're done for. That the practitioner prospers is confirmation that free enterprise performs as advertised, as do the freest of spirits within it. Who needs sophisticated investors, high-powered M.B.A.'s, or capital-gains-tax reductions when bootstrappers can get the same results from hard work, extraordinary imagination, and an unending supply of free-for-the-taking chutzpah?
WITH A LITTLE HELP FROM DAD
COMPANY: DeAngelo Brothers Inc.
LOCATION: Hazleton, Pa.
FOUNDED: by Neal A. DeAngelo and Paul DeAngelo in 1978
BUSINESS: Provides weed-control services for railroads, utilities, and large industrial sites
START-UP CAPITAL: $2,000
ESTIMATED 1997 REVENUES: $12 million
"My brother, Paul, and I started out mowing lawns part-time while we were in high school. My father lent us $2,000 to buy a pickup truck. For three years, whatever we made we left in the bank.
"Bootstrapping takes a lot of creativity. You have three desks in an office instead of two. You pile stuff up to the ceiling. You end up staying in a building longer than you should. The same thing with personnel: You hire people to do one thing, but if they can also do two other things, you tend to have them do all three instead of hiring additional staff or contracting out. You start with two people. There's obviously a point at which you need to hire the next person--all the way up to the 200th employee we have today. And we're making some of the same kinds of decisions now: when do you commit to a full-time person? If you don't have a fat bank account to draw on, you tend to get creative about how you answer that question. You break up a job and let four people take on an extra 5 or 10 hours a week to get the job done. Or you rely on your accounting firm to pick up bits and pieces of your business until you bring in a controller. It's like that with every position: the first human-resources person, the first safety director. The hardest thing is figuring out whether you should commit those dollars or continue trying to be creative for as long as you can."
NO MONEY FOR MARKETING
COMPANY: Telegroup
LOCATION: Fairfield, Iowa
FOUNDED: by Fred Gratzon in 1989
BUSINESS: Resells domestic and international long-distance services
START-UP CAPITAL: $0
ESTIMATED 1997 REVENUES: $280 million (Inc. estimate)
In 1988, when my wife was pregnant, I got fired from a business I had founded and had to give up a salary that I'd thought would never go away. While I was trying to figure out what to do, I stumbled on a way to discount AT&T long-distance calls. I had been well known in town, and now I was going around to my friends with my hat in my hand, asking them to buy my long-distance program. I was humiliated, but I needed to support my family. I was operating out of a spare bedroom and making only local calls. There was no capital involved. Zero.
"I was going to do this only until I reached a plateau of $2,000 a month. After a month I started to think, 'This is really lonely. I need someone to do this with.' My wife was terrified. She saw a partner as additional overhead and yet another obstacle to achieving our goal, survival. I thought that if I had another brain helping me, we could have fun, be creative, play the business game, and make it into something. A good buddy, Cliff Rees--he's now the president of Telegroup--had a job with a faltering software company. I'd go to his office every day to fax my new orders to AT&T. It was exhilarating every time I got an order, and I'd bound up the stairs to his office. When I explained the business to him, he expressed interest, so we joined forces. Thank God, I attracted a brilliant partner.
"Because we didn't have any money to spend on marketing, we decided to use independent salespeople to represent us. We gave them a commission based on the customer's bill, a percentage that was much more than AT&T, MCI, and Sprint were paying their salespeople. In fact, we still do that today.
