6 Characteristics of the Best Bootstrapped Businesses
The numbers were described as “stark.” After a decade-long frenzy, we are seeing venture capitalists pull back from investing in early-stage technology companies. Startup funding dropped for the first time in several years. Deals are still happening but VC firms are being more selective about where they funnel money. And they are sounding the alarm — cut costs, delay hiring, and buckle down for a bumpy ride ahead.
I see more sustainable company-building as a healthy shift. It also illuminates what I have been suggesting for years: Bootstrapping is a much better way.
When most people think about bootstrapping, they fixate on how a business is funded. Obviously funding is the key marker of a bootstrapped company. But it extends far beyond that. Bootstrapping is a mindset and can serve as an operating model for sustainable growth. It enables you to take a long-range view past the initial startup days. You focus on people, product, and profit.
This limited view of bootstrapping is one reason that my cofounder Dr. Chris Waters and I felt called to share another perspective. Aha! is 100 percent bootstrapped and highly profitable — a very different type of software company. When we launched the Bootstrap Movement earlier this year, we felt confident that others would want to join. Even still the reaction has been incredibly insightful.
Our experience building successful technology companies revealed how bootstrapping gives organizations the mindset needed to endure. And we are not the only ones.
More than 100 people signed the bootstrapper’s pledge and dozens of companies requested to join the bootstrap directory. Since we launched the Bootstrap Movement, I have heard from folks who are eager to learn the essentials of growing a business. Founding and running any business takes courage and conviction. That first step is momentous and each step after that builds on the last. Every bootstrapped company’s journey is unique and there is not a unified path. But I think there are a few universal characteristics that the most successful ones exhibit, honor, and refine:
You commit to the big idea. It is a solution to a problem that you know only you can deliver which means you will have to give everything you have to bring it to life. Document your assumptions, a light business plan, and what makes your company unique. We did this early on at Aha! when we captured what would become The Responsive Method — our framework for personal and business success. We added to and refined the tenets to reflect what we learned from the company's growth.
You cannot do it alone. The team and customers are relying on you to deliver what you promised. There will be folks who are attracted to your vision and excited to join a fledgling team. As the company grows, help those early hires grow into leadership roles. Dedicated teammates who are inspired by the company’s mission and driven to achieve will help you reach the next phase. Invest in onboarding, training, and mentorship — for others and for yourself. And make sure people are rewarded for their commitment, hard work, and achievement. It is one reason that Aha! has paid profit sharing to all teammates from the beginning. Everyone should benefit when the business thrives.
You need to make money. It might not be feasible for you to take a salary at first. But your business has to be oriented around turning a profit. If you are starting to see signs of progress, you might want to take a small loan to keep going. Do not conflate early interest with long-term viability though. As you acquire those first paying customers pay attention to what is resonating so that you can grow your initial use case over time. Experiment with what will bring more value to customers and the business.
You cannot afford waste. Bootstrappers do not have money to lose and this is a good thing. It forces accountability for decisions. Lean times are not unusual, especially at the very beginning. This is why I suggest trying to start selling and creating value as quickly as possible. Asking people to pay you will quickly reveal what you need to do to exchange real value with customers. It is one reason that Chris and I set a goal of acquiring 100 paying customers before hiring anyone into the company.
Your journey is yours. People will tell you all the reasons it will not work. Accept that you will not be like the others. You will be vulnerable at times to others who have more money to spend. Be humbled by the opportunity but, more importantly, thrilled that you and the team are building your way. You have the chance to do something that has not been achieved in the best way that you can.
You want to keep going. It is going to be a long journey so you better really enjoy the adventure and build something of value. Bootstrappers do not build a business for an early exit. Instead you have a long-term perspective. So you will want to make decisions through that lens. What will make yours a lasting company? What will you stand for? There are ethical and moral implications to consider. Think of what kind of business you want to build and how it will serve the broader community. Our belief in service to others inspired us to found Aha! Cares, create the Aha! Fellowship, and offer new fellowship programs to folks who are early in their career.
Getting started as an independent entrepreneur is hard. But if you want to build a lasting company, you must be ready for many hard journeys ahead — a bootstrap mindset gives you tools to do so.
And understanding how others have done it gives you a framework for success. From our experience, bootstrapping enables you to remain in control of your own decisions and the outcome. You are responsible only to your customers, team, and the communities you live and work in. Everyone in the organization will be encouraged to operate with purpose and be dedicated to creating real value. The way that you honor and refine the characteristics above will carry you through that journey.
Bootstrapping is for everyone. Will you take the pledge?