Posts Tagged ‘Bootstrapping’
Tuesday, January 5, 2010 | Written by Erik Rostad
Posted under: Angels, Banking, Bootstrapping, General Thoughts, The Entrepreneur School, Total Entrepreneurial Activity, Venture Capital |
Tags: babson, Bootstrapping, entrepreneurship in 2010, entrepreneurship predictions |
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2010 will be the Year of the Bootstrapper. It will be the year of the Entrepreneur who can figure out how to do the most with the least.
2009 was a bad year for entrepreneurs. Most predictions for 2010 show a slight improvement in conditions and funding, but still, a difficult time to start a business. But we at The Entrepreneur School believe that now is as good a time as any to start your business.
The Wall Street Journal had a great article this morning covering the different funding avenues available for Start-ups:
Angel Investors
Angel funds fell by 30% in the 1st half of 2009. Predictions are that Angel funds will stay flat in 2010. An interesting fact about angel funds is that even though the total dollar amount invested has decreased, the number of start-ups funded has increased. Fewer dollars for more entrepreneurs. The bootstrappers will win.
Venture Capital
Average deal size in the 1st half of 2009 was $5.7 million compared to $7.5 million + average from 2005 – 2008. Venture Capitalists are saving their money for companies in the late stages of development or are giving more funds to companies already in their current portfolios. Bootstrappers will be a step ahead by not having to wait on the dwindling number of venture funds to come through and will also retain more of their company.
SBA Loans
Less than 45,000 SBA loans were approved from Sept ‘08 – Sept ‘09, which is 36% lower than the year before. Right now, SBA loans only make up 1% of start-up lending. This is expected to increase to 5 – 10% in the near future due to the government’s stimulus packages.
The end of the article describes how Babson College, which is one of the elite entrepreneurship universities in the world, estimates that the average entrepreneur needs $65,000 to get their business up and running. In this economy, with savings accounts, nest eggs, and house values in disarray, it will be difficult for most entrepreneurs to come up with $65,000.
We at The Entrepreneur School teach ways to start businesses for much less than $65,000. There are a number of businesses that can be started where Bootstrapping is considered for each aspect of the business. One of Babson’s professors, Dr. Zacharakis states this in another way:
“Instead of capital infusions, there might be a lot more exchanges of services or trading favors.”
Take a look at the first set of entrepreneurship lessons at The Entrepreneur School.
All info and statistics for this blog post were gathered from The Wall Street Journal on Tuesday, January 5th, 2010.
Sunday, December 13, 2009 | Written by Erik Rostad
Posted under: Creativity and Ideation, General Thoughts |
Tags: Bootstrapping, great inflection, information technology, thomas friedman |
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Thomas Friedman of the NY Times wrote an op-ed this morning about technology’s effect on the economy and on individual businesses. He follows the story of one company in particular that figured out a way to make a film on an extremely low budget.
The part that is important for entrepreneurs is to figure out how to use technology so that you can concentrate on your core competency. The Entrepreneur School is a big proponent of bootstrapping, and while it is tempting to spend a lot of time on all aspects of your business, it is also important to find new websites & tools that can help you complete your quality project in a short time frame.
Here is a quote from the article that highlights the current state of affairs with the banks and technology:
By being able to access all these cheap tools, Greer got to focus on his value-add: imagination. The customer got a better product for less money. But he didn’t create many new jobs. For that, he needs the economy to pick up. “If we could only borrow a buck and invest,” said Greer, “we’d all be rolling again.”
Here is a link to the full article:
http://www.nytimes.com/2009/12/13/opinion/13friedman.html
Tags: Bootstrapping, great inflection, information technology, thomas friedman | Posted under Creativity and Ideation, General Thoughts | No Comments
Wednesday, July 29, 2009 | Written by Jim Beach
Posted under: Bootstrapping |
Tags: bootstrap, Bootstrapping, entrepreneurs as the rich, going lightweight, inheritance |
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One of the most important things we want to teach at TheEntrepreneurSchool is bootstrapping. We believe very strongly in the benefits of bootstrapping. Some businesses require huge investments to get started, but many of the best businesses get started with very, very little money. Bootstrappers borrow $2,000 in capital or finance start-up with their credit cards. They cut corners whenever possible to save money, like learning to do their own web editing to save money.
Bootstrapped businesses have many benefits. First, instead of spending time raising money, the owner spends time selling things, learning what the market thinks of the product and the proper pitch to sell it. Also, this company learns to grow through internal profit-based financing, a much healthier route. And in the end, the entrepreneur ends up owning much more of the company.
I have two favorite entrepreneurial stats: the average US based entrepreneur ends up owning 8-10% of their own business. I have seen it quoted as low as 4%. That’s it! 4%! This happens because they sell off parts of the firm to finance growth, the “its better to own a small slice of a bigger pie” strategy.
My second favorite stat, from “The Millionaire Mind” by Stanley and Danko, you take all the self-employed, all the doctors with private practices, all the lawyers in partnerships, and all the entrepreneurs and add them up, you find that 86% of all millionaires are first generation millionaires. They got there in one generation. The rich are not inheritors or actors or sports stars, but individuals that made themselves rich in their lifetimes. Powerful stuff to me.
Anyway, I digress. I was reading BusinessWeek magazine (July 27, 2009). They had a good article about bootstrapping. Apparently, bootstrapping is back in style in Silicon Valley, but it has a new name, “going lightweight.” They refer to several businesses that are being started by entrepreneurs that live in their offices to reduce monthly payments. And, they quote a venture capitalist that praises them for going lightweight, treating it like it is something new!
Tags: bootstrap, Bootstrapping, entrepreneurs as the rich, going lightweight, inheritance | Posted under Bootstrapping | No Comments
Friday, July 24, 2009 | Written by Erik Rostad
Posted under: Venture Capital |
Tags: Bootstrapping, entrepreneurship, start-up funding, Venture Capital |
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We often hear conflicting stories about Venture Capitalist. First, we hear the success stories of funding that enabled Google, but we also hear horror stories of unmitigated evil perpetrated by Venture Capitalists.
As an entrepreneur, which side are you to believe? When should you use VC funding?
In today’s economy, entrepreneurs are trying to bootstrap their businesses as much as possible for a few reasons:
- To grow their business using cash flow as opposed to debt funding.
- To maintain full ownership of their company (funding collateral usually consists of a % of your company).
- To maintain control of the growth of their business.
But what happens when Venture Capital funding becomes necessary? What should you be looking for when seeking VC funds?
First of all, when researching Venture Capital firms, be aware that VC’s are not just about funding. Perhaps the more important issue is the experience the VC firm brings to your business. They are around businesses all day long. They have seen many failures, and a few home runs. They have their eyes on the market and can see how a new product could be better structured to meet the demands of the marketplace. Approach VC firms not just as financial partners, but as business partners.
Secondly, a VC firm can bring a certain clout to your business that is not present as a start-up. This clout can bring about instant recognition and credibility with both bankers and potential clients. VC firms have no choice but to brag about you to the market. It is in their best interest, and yours as well.
But be aware. Venture Capitalists must make a certain return within a tight time frame. To do this, they are likely to make drastic changes to your company (to the point of removing you as the entrepreneur). That is why careful consideration must go into seeking VC funding and limiting the % ownership (ie. level of control) you give to them. Before seeking VC funding, do all that you possibly can to bootstrap your business.
At the end of the day, you as an entrepreneur have a product or service to bring to the market. You want to be able to work with a VC firm that will help you bring the best possible product that will garner the most sales, making it a win-win for everyone involved.
Tags: Bootstrapping, entrepreneurship, start-up funding, Venture Capital | Posted under Venture Capital | No Comments
Tuesday, July 21, 2009 | Written by Erik Rostad
Posted under: Venture Capital |
Tags: 2Q investments, Bootstrapping, Venture Capital |
1 Comment
The Dow Jones VentureSource just released data regarding the amount of Venture Capital invested in the USA during the 2nd Quarter of 2009. The numbers are quite startling when compared to last year:
Venture Capital investments during 2Q 2009 were $5.27 billion (down 37% over same period last year).
Venture Capital investments during 2Q 2008 were $8.33 billion.
Venture Capital investments during 1Q 2009 were $3.99 billion.
The 1Q 2009 investment amount was the lowest since 1998.
What does this mean for entrepreneurs? Although VC funds have increased over last quarter, many entrepreneurs are concentrating on bootstrapping as many parts of their business as they can and only seeking VC funds for major purchases to bring their business to the next level.
Tags: 2Q investments, Bootstrapping, Venture Capital | Posted under Venture Capital | 1 Comment
