written by MO.com Subject Matter Expert Dave Lavinsky
When startup entrepreneurs seek funding for their businesses, they quickly realize the “chicken and egg” situation they are in. On one hand, they need money to build their infrastructure and generate revenues. While on the other hand, investors and lenders want to see that their infrastructure and revenues have already been established in order to minimize the investment risk.
As in all “chicken and egg” scenarios, there is no perfect solution. But one great solution is bootstrapping. Bootstrapping is the process of progressing your business with no outside capital. It allows you to start building infrastructure and revenues so that investors and lenders will then fund you to enable your future growth.
The strategy of a bootstrapped business is inherently different than that of a funded company. The bootstrapping entrepreneur needs to do more with less. They need to be more creative. They need to figure out how to generate revenues sooner. But since overcoming these challenges is what makes an entrepreneur an entrepreneur, we should embrace them.
While bootstrapping is challenging, it often produces superior results. Entrepreneurs are inevitably able to try and test things less expensively than if they had funding to throw at a challenge. And they become laser-focused on streamlining the path from here to revenue generation.
In bootstrapping, every entrepreneur must start by asking themselves what they need to accomplish in order to 1) raise money from outsiders, or 2) generate enough revenue to fund the business organically. And then once you answer this question, all of your energies should be focused on that one goal. Don’t get distracted by other opportunities and “bright shiny objects.” Rather, achieve that one goal, which is generally to build a minimum viable product or service and get initial customers to purchase it.
Because once you accomplish that, you have proven yourself and your venture. And that solves your part of the “chicken and egg” issue and opens up lots of outside funding opportunities.
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