How to Bootstrap Your Startup Through a Crisis
Written by Michael Cheng, CEO & Co-founder of Lumen5
TLDR: Make comprises, focus on your product and invest in your people
Today, being a founder is a little more frightening than usual. We don’t know what’s coming tomorrow, let alone months from now. We’re all feeling the effects of this pandemic on our startups. We all want to support our teams and dreams the best we can. Feeling the overwhelming uncertainty around VC mindsets from founders in my network these past few weeks, I’ve had the opportunity to reflect on how my experiences bootstrapping* startups could potentially help those looking for creative alternatives in these uncertain times.
I believe that to get to the next stage, you need to identify the current bottleneck. Some good news for early stage founders worried about funding—when your startup is in its early stages and you’re still trying to find product-market fit, more often than not, money isn’t the bottleneck. Usually, the bottleneck lies in the capabilities of your team or your product, both things you now have the time to advance.
To help you do so, I’ve compiled my learnings from bootstrapping Sniply, Lumen5, and a few other startups:
Come to terms with personal sacrifices
It’s not the most popular advice, but to pull your startup through tough times, you may need to pivot your way of life as a human, to improve the likelihood of success for your company. It’s a great benefit for early stage entrepreneurs to minimize their living expenses as much as possible. In many ways, your lifestyle defines your runway. In the early days of building Sniply and Lumen5, I would walk everywhere instead of taking transit, never owned a car, and made cost-effective alterations to my diet. With the city shut down, saving money has never been more convenient. As for taking a salary, I believe that founders are there to build equity value, while the rest of the team should be well-compensated subject matter experts. Therefore, the salary you’re taking right now should only be to cover your basic needs while you’re using your blood, sweat, and tears to build equity value for your startup.
Maintain focus on your product
The landmark of the bootstrapping journey is finding focus—you don’t have the resources to do everything, so you have to focus on the one thing that you’re really good at to succeed. There’s a strong belief among the Lumen5 co-founding team that sales and marketing should only be considered after you’ve built something worth selling. For our first two years of operations, we made no investments in marketing or promotions of any kind. We were fully focused and absolutely fixated on product development and crafting the perfect user experience from start to finish. We’re extremely passionate about good product design and for good reason. It can be very difficult, and expensive, to market a product that’s not quite ready for the spotlight. From our perspective, you don’t need marketing resources to get your first 10 users, or even your first hundred users. If those first customers truly enjoy and love your product, it shouldn’t be difficult to get them to recommend your product to a few others, and eventually reach your first 1,000 users organically. By focusing on product development and bootstrapping from customer revenue, we built our business to over 100,000 users before we spent anything on marketing. What better time than now to buckle down and focus on building the best product possible?
The product development process, in my view, is a very human process. No one ever truly knows what the solution needs to be. All you need to know is what problem you’re trying to solve, and from there you can begin to ideate. List out twenty possible solutions and narrow them down to three. Prototype those. Get them in front of your users. Find out what they like and don’t like, then iterate based on that feedback. In each of these iteration cycles, you continue to double down on the things that they do like, then either fix or get rid of the parts that they don’t like. It’s a very step-by-step approach where you’re showing them prototypes, getting feedback, building new prototypes, and so forth. Even today, as we scale Lumen5, this interaction cycle does not change, it’s just amplified through rapid A/B testing across 500,000 users. Honing in on a product development process during your early stages will help you scale your startup later.
Maximize the skills of your founding team
Let’s say you have a full non-technical team, but you want to build a technical product. It’s a lot harder to do that without raising capital to hire a CTO. In the early days, to maximize the effect of bootstrapping, you want to maximize the skills of the founding team. Invest your time in areas that maximize the strengths of your co-founding team. If your co-founding team is fully technical, great, you can pour everything you have into building the product without the need to recruit engineers. So that’s something to keep in mind. Right now is a great time to invest in the core skills of your team members to facilitate future scale.
Bootstrapping can be a daunting journey, but it’s a lot of fun. It forces you to focus and it really teaches you to work on what matters. Today more than ever, when resources are scarce, laser focus is paramount to success. I definitely recommend the bootstrapping methodology for anyone holding back from starting their first business because they feel like they don’t have the funding or resources to do it. It’s certainly not easy, but it’s much easier if you find the right co-founders. If you have the right partners, with the right skills, money shouldn’t be the bottleneck because you’ll have all the expertise you need to advance. If you have the right skills on the co-founding team, and you’re collectively able to focus on working through the right things, then you’ll breeze through the early stages of finding product-market fit without the need for a big financing round.
*Bootstrapping refers to building a company without investor funding. Instead, you’re building and scaling the business based on either no money or direct revenue from your customers.