So you want to launch a startup? Because most of us don't have a ton of cash on hand or ready access to cash, beginning a startup means bootstrapping for 6-12 months until you finish fundraising or until you start making money. I started my startup journey during my first year in MIT's Sloan MBA program. Seeing my bank account dipping into single digits was a breath-stopping experience. I had to learn to cut costs and stop the financial bleeding, fast.
So how did I do it? Below are 3 tips to surviving the dreaded bootstrapping phase.
1. Cut the fluff
Coming from a corporate job before business school, I was used to purchasing items without much consideration of if I really needed it. I also used to set auto-payments on credit cards. This had to change. First, I went through every credit card statement, and removed all unnecessary monthly subscriptions or fees. Then, I got rid of credit cards I didn't use and set up alerts for when I spent over a certain amount. Lastly, I selected credit cards that had either rewards or cash-back to optimize spending.
2. Live a minimalist life
For the sake of your startup, consider the minimum you need to spend to live through a temporary phase of poverty. I know this sounds dire, but, for me, living a minimalist life was a lot of fun. First, identify the biggest expense items in your life, which are likely rent, transportation, food, social outings, and others. Then, identify which ones you can forgo and which ones you can do for less.
Rent: Living temporarily with friends or family is common, so don't be embarrassed--you have a bigger dream ahead of you. Alternatively, join incubators or startups that provide a living stipend. I joined Startup-Chile, which provided me $40,000 in grant money to cover living costs. It did mean living in Chile for the 6-month program, however, it was the experience of a lifetime and helped me a lot during the bootstrapping phase.
Transportation: This one may be one of the easiest costs to cut back on. Try to use public transportation, take advantage of ride-share, or live somewhere closer to where you travel to most.
Food: Yes, you may need to learn to cook or give up going to expensive restaurants (unless someone else is paying for them!) Forgo social events that would end up draining your wallet. Look for happy hours--they're light on your wallet, and light on your time engagement as well, so you can spend more time on your startup.
3. Start with One: Money, Market, or Media
This is probably one of the most important steps after a few months of cutting back and bootstrapping. How much initial funding you can get depends on the three M's: money, market, and media.
Money: Cash will first come either by fundraising or quickly getting your product or service to start generating revenue. By generating revenue, you also have a better chance of getting funded.
Market: Short of being able to generate income? Identify a niche market in which your product or service has a unique competitive advantage, and start demonstrating that this market wants your product or service. Doing so gives you the numbers you need to show traction, which in turn makes it easier to raise funds. It will also bring you one step closer to making the right product or service for your target market.
Media: Having a cool startup can get you media attention, which gets you noticed by funders or customers. Media outlets like social media such as Facebook and Twitter and crowdfunding sites such as KickStarter and Indigogo are all viable options. You can also gain media attention by applying for competitions and networking with journalists at events. However, this "M" is also the one that may be the most competitive since the barrier to entry is lower--many other startups also play the game of gaining media traction.
Bootstrapping is an art and a science. But if your startup dream is greater than your desire to stay in your comfort zone, then be creative and willing to figure out how to bootstrap past the initial startup phase.
Ting Shih founded ClickMedix, an award-winning healthcare technology enterprise born out of MIT Media Lab to enable health organizations to serve more patients through its eHealth platform. Her areas of expertise include mHealth solution design, competitive strategy, lean/Six Sigma process improvement and operations management. She spent five years implementing mobile health programs across 15 countries in North America, South America, Africa, and Asia to develop financially sustainable health programs through ClickMedix. The programs equipped health workers, nurses, pharmacists, and physicians with smartphones to capture patient symptoms information, images, and other related health data to be transmitted to remote specialists who can provide diagnosis and treatment advice. Ting is the Cartier Women's Initiative Laureate 2012 for North America. She holds an MBA and MS in Systems Engineering from MIT. In addition, she holds a BS in Computer Science and MS in Software Design and Management from Carnegie Mellon University.