Bootstrapping 101: Get to Know Your Customers Really Well
Founded by Pete Kight with $777
Pete Kight couldn't afford a sales staff back in 1981 when he started CheckFree, a company that pioneered the field of electronic-payment processing. So he sold door-to-door himself and, like many bootstrappers, he says his early experiences were both excruciating and useful. His first push involved knocking on over 900 doors at three apartment complexes. At the end of it, he had "learned an immense amount" about what would and would not move people to pay their rent electronically. One key lesson was to keep it simple. For example, the bank-supplied enrollment form said, "The system will automatically debit your demand-deposit account." The people Kight talked to didn't get what that meant and found it intimidating, so he took out debit, system, and automatically. His revamped sign-up slip said simply, "Your bank will charge your account and make the payment on the due date." That worked. Today, CheckFree's market cap is $4.6 billion.
- The Problem
Bootstrappers can't barter, right? If you have nothing, what exactly do you trade?
- The First Step
Pete Kight traded what he had--time and ideas. First, he got a property manager to trade him the after-hours use of a computer in return for rent collection services.
- The Next Step
Kight wanted to go to a conference to drum up sales. To avoid paying the entry fee, he talked the organizers into letting him give a speech on electronic payment. He then recited names off of nametags into a tape recorder to create a list of prospects.
- The Payoff
A subsequent direct mail piece drew a pile of responses. "That's when I realized I had a business," Kight says.
One Huge Mistake
By 1982, Kight needed to rent an office, a computer, and furniture. An apartment complex owner offered to finance these rentals and to co-sign on any future loans in exchange for 50 percent of CheckFree's stock. "When I signed over the papers I said to myself, if I'm successful, there'll be a thousand times in the future that I'll ask myself if I should have done this," Kight says. Seven years later, he worked with two venture firms to buy his investor out for an undisclosed but princely sum.