Just like every superhero has an origin story, so does every entrepreneur.
But instead of tales of radioactive spiders and escaping from exploding planets, entrepreneurs talk about kitchen "offices," maxed-out credit cards, and realizing Peter is tapped out and can no longer be robbed to pay Paul.
Oddly enough most entrepreneurs--at least the ones that become successful--look back with fondness on their bootstrapping days: yesterday's struggles inform and even enhance today's successes.
It all sounds somehow romantic... especially from the outside looking in.
But what if you're not looking back? What if you're actually living the struggle? What does bootstrapping really look like--and more importantly really feel like?
To find out I talked to Brittany Hodak and Kim Kaupe, co-founders of Zinepak, a company that creates custom interactive publications for fans of music, movies, sports, events, and brands. (And a 2014 Inc. 35 Under 35 nominee.) (And two of my favorite people.)
Brittany and Kim have built a thriving business--but that doesn't mean they've forgotten just how tough it was to launch their company.
(For readability I've combined their comments instead of breaking them down into "Kim said" or "Brittany said." Plus it makes sense: where their business is concerned they basically speak with one voice.)
You funded the company with your own savings: no investors, no loans, no outside money.
True. It was 100% our money... but it's also 100% our equity.
We spent a lot of time crunching numbers to determine a break-even point, where we would money, and what "success" looked like.
We knew going in we could only afford one project at a time. For the first year or so we financed the next project with revenue generated by the previous project.
That makes cash flow--and getting paid on time--a huge issue.
We were pretty aggressive about getting paid. We did ask for deposits up front, and that's one way we helped our cash flow situation, but more importantly we were fairly aggressive with our partners. Even if that means you're a little annoying, that's what you have to do.
Plus, instead of pestering someone on the creative or product side, you're usually pestering someone in accounts payable--so that helps keep your working relationship positive.
In my experience, accounts payable is fairly immune to "pestering."
It's to our benefit that we're two young entrepreneurs. We love making cool stuff--but we also need to be processed and paid quickly. Our company is 100% us, so when we frame it that way, when we let people know it's personal and not corporation to corporation... people tend to respond because they understand where you're coming from and want to help.
We've had a lot of people say, "Wait, you're the one following up? You're in charge of your company... and you're doing this?"
We say, "Yes, it's our company. We're involved in everything. When you do business with us... you get us."
Ultimately business isn't company to company, it's person to person--and when you deal with people on a personal level they almost always respond positively.
Also in my experience companies are tight on cash also have to pay their vendors slowly.
When we first started we decided we would do everything possible to pay our vendors on time--and pay them in full. Every time we received a check we made sure our partners were taken care of even before we would take rent money. They got paid before we got paid.
That was really important to us. If we were going to walk the walk we had to practice what we preached.
On our one-year anniversary we celebrated by doubling our salaries. (Of course that just meant going from $1,000 a month to $2,000 a month.) By then we had used up all our savings.
Me, Kim and Brittany at the Inc. 35th Anniversary party
When you're nearly broke it takes a lot of commitment to stay the "no investors" course.
I had a chip on my shoulder about not wanting to take money because I didn't want to give up control. I had tried to be an intrapreneur when I worked for other companies and there was always a boss saying, "No, that's not a good idea."
Before we started Zinepak we talked to other entrepreneurs who had taken investment money who said, "I really want to do this... but the board says we have to do that."
We really felt that in order to do what we wanted to do, it was critically important not to just maintain most of the control but all of the control.
Even though that's definitely the hard path to take.
So what did that mean on a personal level?
Looking back, what we did almost naturally but would have tried to do even more thoroughly, was to look at our personal situations and warn our parents, friends, boyfriends, etc.
For example, you're not going to be able to drop $45 on a brunch with friends. You're not going to be able to afford that flight to see your parents. You can't bootstrap a company and maintain the same lifestyle.
Telling people that up front will make it easier--not easy, but easier.
The key is to really prepare not just for the financial but also for the personal cost. You have to be willing to say, "I will work as hard as humanly possible for as long as humanly possible... and a lot of things will have to give." That means outside interests, entertainment, and even some friendships.
You have to draw your own lines in the sand. Everything won't stay the same and you must be okay with that.
That approach also means the people who remain are even more important.
Finding and surrounding yourself with the right people is critical for everyone, not just entrepreneurs.
For us, that meant finding vendors who get what we do. We partner with small business owners by design--early on we worked with some huge vendors and they didn't care it was actually Brittany and Kim's money on the line. Finding people who really wanted to partner with us and wanted to succeed together really helped.
Of course so did the fact that we understand they need to be paid on time, too.
Yet you also provide product to huge corporations like Walmart. Lots of small business owners say the demands from the big boxes create major--and even impossible--challenges.
Ultimately you just have to deliver on what you promise to do. That's no less critical if you're getting product to a mom and pop than to Walmart. We've had great experiences with Walmart; all they want is for you to do what you agree to do.
Once a delivery truck couldn't get out on time and we thought we were going to miss a date. The warehouse was twenty hours away so we had three different drivers relieve each other... and they made it with seventeen minutes to spare.
It was incredibly expensive but we didn't have a choice because we were committed to doing what we promised to do. And we would have done that for any of our customers.
If you take that approach, working with a big box is no harder than working with anyone else.
Knowing what you know now, would you start your business the same way?
When we started the company the goal was to make physical music relevant.
In time the people we worked with said, "This is a cool product, but my artist won't release a new album for two years. What could you do now for our fan club?"
Basically they wanted a great experience for super fans, and that is the springboard for our next stage of growth. We're taking what we learned from creating content experiences for music and applying it broadly.
Essentially we can create great experiences for super fans... and super fans exist in all kinds of categories: sports, live events, brands, etc. We were just in the music space; now we're in the super fan business.
Oddly enough, if you had taken investor money that expansion in scope might not have been possible.
No doubt. Raising capital might have let us staff up and hired thirty people two years ago.
Now we have a great office space, but for a long time we worked from our apartment. Clients would say, "We'll swing by your office," and we'd say, "Um, it's under construction... so we'll just come to you."
It would be nice to have money to spend on frills and team getaways and things like that, but that's not the path we chose.
On the flip side, though, we still get to do the fun stuff. A friend just raised about $6 million and now about 30% of his time is spent managing his board. He had to hire two or three people to take on some of his responsibilities and, as he says, "I don't get to do the fun stuff anymore."
Managing other people's expectations--expectations they have a right to since they've invested in your company--is difficult and time consuming. And it's also possible that we would have been forced to stay a "music company." Our board might have said, "Look, music is what you know... and you need to focus on delivering XX projects next quarter so you can increase revenue by ZZ%."
We have it easier because we just manage how to get things done. We just manage making the decisions on where we want to take our business next.
Bootstrapping was hard. Bootstrapping is hard. But it was the best way to run our business the way we want.