Grand Plans
Shoestring start-ups: seven fast-growing companies that were started for $1,000 or less, and tactics to borrow for your own start-up.
Cover Story
How to start a great company for $1,000 or less
It doesn't take a ton of cash to start a great company. All it takes is a little ingenuity and a lot of gumption, as the stories of these seven companies prove
If you're starting a company with $1,000 or less, you may find it hard to keep a straight face. In an era of stunningly low unemployment and long-running prosperity, you're likely to bump into the perception that almost anyone in the United States could scrape together much more than a thousand bucks, if not from personal savings then from a well-heeled aunt or uncle. And if you've got only $1,000 to sink into your business, can you expect to get it off the ground when it costs more than that to buy a decent laptop and printer? In this day and age, are there any real bootstrappers left?
The answer is yes. Not that their lot is an easy one, of course. Still, some people pull it off. In tried-and-true fashion, they work incredibly hard; they are amazingly resourceful.
Though some of the bootstrapping basics never change, every era offers its special opportunities. And in looking at companies started with $1,000 or less that have achieved at least $1 million in annual revenues, Inc. has identified seven paths to bootstrapping success peculiar to the 1990s. Those paths relate to changing economic and business patterns--tectonic shifts like the outsourcing of services and the downsizing of the workforce. In such trends many bootstrappers have found their big break, as exemplified by the company stories that follow.
PEEL OFF A DEAL
A business-management commandment of the '90s: Don't do in-house what an outsider can do better for you. In other words, thou shalt outsource. The commandment means opportunity for employees-turned-bootstrappers.
In 1994, Richard Maradik, then 25, was head of fund-raising for the Tennessee Republican Party, and 23-year-old Jay Graves was its information-services manager. Together they developed a sophisticated database to aid in their direct-mail fund-raising. "We went 10 demographic categories deep into each person," recalls Maradik. "We knew their household income, what kind of car they drove, and what magazines they read." That was a big election year in Tennessee, with contests for the governor's office and two U.S. Senate seats. Maradik and Graves's direct-mail wizardry helped yield an extraordinary $3 million for the Republicans, elevating the men to star status in the GOP firmament. "Because of the work we did," Maradik says, "Republicans came to us from around the country saying, 'We want you to do this for us."
So they did. On January 1, 1995, with blessings from their former employer, Maradik and Graves quit their jobs and, within days, deposited all of $15 in a checking account and persuaded a former GOP vendor to put his spare storage room at their disposal at no charge. Equipped with a card table and two phones, the two men were soon in business as DataMark Inc., a direct-mail database-marketing company. They peeled off a deal from their former employer, which hired them to do what they had been doing before as employees, and they signed on the Illinois Republican Party and two Nashville businesses as customers as well. "We got them all to pay us effective January 15," Maradik adds.
Fixated on cash flow, the founders often waited only five days after invoicing a customer before following up by phone. "For the first couple of years our average receivable was 21 days," says Maradik, who offered customers swift-payment discounts.
The company's 26 employees now work out of an office in a warehouse complex near the Nashville airport. While political work still accounts for 30% of its sales--in 1998 the total was $4 million, to 200 customers--DataMark has strategically diversified into the health-care, insurance, and retail industries. "We never wanted to be a political direct-mail company," Maradik says. "It's too volatile, and it doesn't create value."
MOOCH OFF A UNIVERSITY
No wonder so many hip young entrepreneurs want to start a business in a university dorm room. The rent is paid, all-nighters are a way of life, and a host of resources are there for the taking.
Bill Martin and Greg Wright, buddies since high school, were playing a round of golf on a New Jersey course in the summer of 1997 when a thought hit them like a bolt of lightning: why not parlay their passion for the stock market and the Internet into a business? That fall the then 19-year-old Martin returned to the University of Virginia; Wright, then 20, started his junior year at Rutgers. But that didn't prevent them from pursuing the business they had envisioned.
Actually, it helped. They had an extraordinary resource in where they were living. With free, unlimited access to their universities' T1 lines to the Internet, they created a Web site with a message board where their friends could chat about stocks. In the back of their minds, they hoped to generate revenues by attracting advertisers to their site. They didn't have to spend much money. They plunked down $75 for a New Jersey partnership fee, $70 to register their Web domain name, and $30 for the first month's hosting fee for their Web site.
Wright oversaw the operational and technical aspects of building the site, relying heavily on his roommate, who was studying computer science. "He learned a lot about Web applications, and he'd come back and apply that to our site," says Wright. "He once did a page design and then handed it in as a class project."
