"Today we have customers in 180 countries--in more countries than any phone company in the world, including AT&T and British Telecom. We have basically bootstrapped ourselves to this point."
THE APPEAL OF LOOKING HOMEMADE
COMPANY: Calzone & Co.
LOCATION: Redmond, Wash.
FOUNDED: by Mark and Madeline Peters in 1988
BUSINESS: Manufactures frozen food
START-UP CAPITAL: $5,000
ESTIMATED 1997 REVENUES: $2.8 million
My wife and I started with $5,000 in savings, but we never tapped the full $5,000. We just spent it a few hundred dollars at a time as we needed it.
"We found out pretty quickly we couldn't sell our homemade calzones unless they had been prepared in a facility inspected by the U.S. Department of Agriculture. Of that $5,000, I'll bet $500 was spent on letters, phone calls, and messengers to the USDA. We were rolling out the dough by hand. The USDA required that we have a marble rolling pin--wood wouldn't do, because it was porous. We bought one, and Madeline rolled out the first 3,000 calzones by hand. She'd been working about two weeks when the rolling pin fell off the table and broke on the floor. We stopped production for two days, and while I was searching for another marble pin, I found a used bench-type sheeter, which we used to roll out the dough. That was our first capital expenditure--$1,200. It was a technological breakthrough for us. That sheeter carried us through the next six years of production, to where we got to an average of 3,500 units per day. We ran two shifts.
"When you sell a frozen-food product, you're up against beautiful packaging. A Styrofoam tray--much like what they put ground hamburg in--was the only thing we could afford, but the trays kept falling facedown in the frozen-food section. So we had to constantly go back into the stores and stack them up again. When we were finally able to design packaging and try to break into the big markets, we demonstrated our original packaging as part of our presentation. We believe to this day that account executives were so amazed by the homespun product packaged in a plastic tray, that we won Safeway, SuperValu, and other major accounts. The appeal obviously was that the product looked homemade, so we've tried to maintain that appeal.
"We still have that broken rolling pin on a shelf in our office as a memento."
ANOTHER GARAGE START-UP
COMPANY: Open Systems Group Inc.
LOCATION: St. Louis
FOUNDED: by John Marx in 1989
BUSINESS: Provides computer-related professional services
START-UP CAPITAL: $1,000
ESTIMATED 1997 REVENUES: $3.5 million
I got married in September 1986, and I promised my wife that I wouldn't start another company until I had paid back all the debts--$60,000--of a company I had started in 1984 and closed in May 1986. I started Open Systems in my garage in 1989. I took out more than 15 credit cards and paid an interest rate over 20%. That's how I lived--made house payments, bought groceries--not how I capitalized the company.
"I felt I could have raised venture capital for Open Systems, but I had a long talk with my brother-in-law, a lawyer in Wichita. He discouraged me from selling equity in the company early. He felt I wouldn't be able to do the things I wanted, that the venture capitalists would want control. So I decided to bootstrap it and make my own way.
"I started in the garage, literally. Early on, I was on the phone with a vice-president of AT&T in Atlanta, and we were talking through the final terms of an alliance document. In the middle of the conversation, my dog barked. He said, 'Was that your dog?' I said, 'Yes.' 'Are you at home?' I said, 'Yes--I'm at home today.' Shortly after that, I went out and got an executive-suites office.
"Bootstrapping's biggest challenge is having the confidence that you're going to be able to meet the obligations that your family presents to you. I never worried for the business. Meeting customers' objectives is the easy part. What I always worried about was a business failure that would in some way hurt my wife and family."
LONELINESS: THE BIGGEST CHALLENGE
COMPANY: Sales Building Systems
LOCATION: Mentor, Ohio
FOUNDED: by Timothy F. McCarthy in 1988
BUSINESS: Promotes retail and restaurant chains' individual-store sales
START-UP CAPITAL: $0
ESTIMATED 1997 REVENUES: $4 million
Bootstrapping's toughest challenge is overcoming loneliness. The reason I started bootstrapping is simple: I was fired as the head of marketing for a large restaurant chain, and I didn't know any better. I'd had no experience in business. My concept was local store marketing for retail and restaurant chains. I'd take their poor, their tired, their homeless--the bottom-20% dogs that every chain has--and I'd fix them. I was prepared for aspects of business I wasn't used to, like having to sell all the time. And I was prepared for the fear of doing it on my own. But I wasn't prepared for the loneliness, especially in the first year. I hadn't realized how much support you get, in terms of both systems and people, from a regular-size company. But when you're on your own, the value of that support is obvious: having a real person at a nearby desk to bitch with, or having a legal department and a human-resources department. Now that I've succeeded, I help others start businesses, and when I warn them how lonely it is, they get this look of disbelief. 'Just wait until that first time you find you've got no one else to count on, and you'll see,' I tell them.
