Lara Jeremko knows traditional start-up financing. She's an investment officer for one of the largest university endowments in the country and is constantly on the look for new opportunities. But in addition to her day job, she's an entrepreneur--a co-founder of 3D printing company Re:3D.

Any new venture needs money. But there can be terrible strings attached. Tech media company Gigaom shut down when investors turned off the cash tap. Even Amazon CEO Jeff Bezos has to keep investors happy these days, if he wants to remain at the company he started.

Re:3D's goal, fueled by a couple of engineers with NASA credentials, was significant. "It's a huge industrial quality printer that we sell for under $10,000," Jeremko said. It can build an object as large as 8 cubic feet with a resolution of 100 microns, which "rivals some of the most expensive machines on the market." But rather than look for massive investment, they went a different route.

One of the company's advisors is Tom Chi, who developed Google Glass. "He is a true believer for bootstrapping and rapid product development," Jeremko said. "He informed a lot of our thinking about it. He encouraged us to take a step back and look at creative ways to run our business and remain independent. It's great to have the brand value that a VC brings and also, of course, the million or two in cash, but bootstrapping allows you to remain independent, have autonomy over the company. You have complete ownership and you don't have pressure to exit [so investors can make their profit]."

Here are 7 tips Jeremko passes on for those entrepreneurs who don't necessarily need to scale a business as fast as a venture capital firm or angel investor might want.

Understand the VC model

Many entrepreneurs assume that the VC model is necessary or even desirable. But for many, it isn't. To put VCs into perspective, it helps to understand how they operate. Investors called limited partners put money into a VC fund. General partners choose which ventures to back. It's a portfolio strategy with a huge downside. "Eighty percent of venture-backed companies fail and don't return capital," Jeremko said. So the VC wants to make at least five times its investment as a return to cover its bets. The more money invested, and the higher the corporate valuation, the more VCs want to make. Miss the bottom-line goal and your company will likely be shut down or sold to another at a price to cover as much of the investment as possible. If your passion is to turn an idea into a viable and vibrant company, chances are that VC involvement could put an end to it.

Look for initial investments everywhere

You'll still need money if you're bootstrapping. Do your homework and significant research, because there are opportunities that can help give you a jumpstart without necessarily selling off control of the company. Re:3D got $40,000 from a South American accelerator called Startup Chile. "Unlike a lot of the ones in the states, we didn't give up any equity," Jeremko said. "With that money we were able to build a prototype." It required some juggling, as they received reimbursements for expenses, but it was worth the trouble. What Startup Chile received in return was work for a local 3D modeler and web designers.

Work hard to get noticed

The first product, called the Gigabot, was a big deal in industry. Given the capabilities and a price tag under $10,000 (industrial 3D printers can run $100,000 or more), the device offered a huge benefit to designers, engineers, and others that used rapid prototyping. To get attention, the company rolled out the Gigabot at the 2013 SXSW conference. "We got a lot of good press and were featured on the show floor in the Startup Chile booth," Jeremko said. The attention was perfect for the next step.

Ge the word out

To get manufacturing going, they created a Kickstarter project that acted as a pre-order system. "We sold t-shirts and vases that we printed at full scale," she said. "It was a great experience for us for market and price discovery because we started off sold at cost, which sold super quick." They received $250,000 in pre-orders, gradually increasing the price in stages from $2,500 to $9,000 assembled ($6,000 as a kit) as more units sold. The company has also participated in multiple competitions in the U.S. and Europe. "We go where other people aren't looking, so we were one of the only US companies devoting time to this competition," she said. "We stood out and became runner up. We made a lot of connections and now have a much strong foothold in Europe."

Stomach the risk

Bootstrapping is not for the faint of heart. Things could have gone badly wrong, and the founders might have faced significant losses. And yet, bootstrapping was a calculated risk. Market research suggested that the item would be hot. All they needed to do was be sure they could deliver something of quality. "We're paying ourselves below salary for the full-time folks," Jeremko said. "I think we've all come from humble beginning and didn't have a lot of money growing up. But we're all passionate about innovation and solving problems and making real contributions to society."

Be creative in hiring

Many companies go badly wrong when hiring. But you don't necessarily have to go the traditional route of recruiters and big salaries for talent. For example, one of Re:3D's advisers mentioned a group called Law Gives. Experienced attorneys who want to practice but stay out of the rat race can be a great help. Jeremko and company found an attorney with experience at both a major semiconductor manufacturer and law firm. "He also got interested in 3D printing along the way, so we bartered services for a Gigabot," she said. "We've done the same thing for software." For corporate sales, they contract with capable people who work for commission, a strategy that works because the high sales point lets the salespeople make money they consider significant.

Pinch pennies harder than you though was possible

Think you're cheap? After bootstrapping, you'll laugh at the thought of what you once assumed was frugality. "We have to be scrappy," Jeremko said. "We have to be resourceful, but we also have to be super-efficient." Whether you travel inexpensively, put off getting the office space, or make do with used office furniture, find ways to save money. You'll need it later on--and be glad you didn't give up ownership of your dream for a little temporary comfort.

Published on: Apr 6, 2015