In our series Startup 101, we will bring you some of the most important startup terms that you should be aware of before you start working on that ‘killer’ idea. Bootstrapping and lean startup methodology are first two terms every startup founder should be aware of especially if you are looking to build a software startup.
What is bootstrapping and what does bootstrapped startup mean?
Bootstrapping is a way to do something about the problems you have without letting someone else give you permission to do them.
– Tom Preston-Werner
The word bootstrapping comes from “pulling yourself up by your own bootstraps”. In the case of startups, bootstrapping is the case wherein the founder of a startup starts the company without raising any capital from people who aren’t linked to the company. One major advantage of bootstrapping and not raising capital is that you have the sole control over all the decisions related to the company. With no dilution in ownership that all investors are looking for, keeps all decision making in-house and gives you complete control. This might not seem to be an advantage at first but over a period of time when the board has a lot of investors, you ultimately have to cave into the things they believe are right even when they don’t go with the ethos of your startup or what you thought about when you began. On the flip side, one major disadvantage of bootstrapping is that it puts all the burden and the financial risk involved on the founder.
Successful bootstrapping is all about discipline and stamina. Kevin Hale
As of this given moment, the cost of creating a startup is the lowest it has ever been. With all the community support and platforms like AWS, Google Cloud, Microsoft offering free services to startups makes starting up cheap. But, one major thing that any startup founder needs to keep in mind is to be quick to climb the ladder or fade away. The climb up the ladder has a linked burn rate which might go beyond the amount you have or are ready to put in. It is important to become successful at a reasonable rate. The only way to achieve this is to either acquire paying customers quick which rarely happens or cave into the urge of raising capital.
When bootstrapping, you need to find a team that’s willing to work for nothing and spend their off hours with you.
The one most important skill that a startup founder should possess to be able to successfully bootstrap a startup is the management of financial resources available. Over the past, there have been many startups that have utilised their skill in a particular domain by freelancing while working on the startup. What this does is provide you with much-needed capital for the crunch times. So that is one method a startup founder can adopt to keep the bootstrapped process alive. Also, freelancing in a domain which is linked to your startup also allows you to showcase your talent to prospective customers. Nothing goes as far as networking does when you are building a startup. Your network is from where you are going to get your first paying customers and people who will not only use your product but also give you inputs to enhance the quality of the product. This method of raising money through freelancing applies to software startups. In the case of people building on hardware startups, crowdfunding is a method that is sure to help you out.
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One methodology that a startup founder can deploy to make a bootstrapping startup a success is lean startup methodology.
What is the lean startup methodology?
The lean startup methodology is about building your startup in a way that the product is delivered fast to the customer. It is also about taking feedback from the customer and iterate the product to make it as per what the customer wants. The term was coined by Eric Ries in 2011 who has also written a book about the same. The lean startup methodology has been widely adopted by internet startups today wherein a Minimum Viable Product (MVP) is developed and marketed to the prospective customers. Once the customer uses the product, his feedback is taken and using the feedback the product is iterated, to meet the customer needs.
The lean startup method isn’t about cost, it is about speed.
What the lean startup methodology achieves best is giving constant feedback to the developer from the customer. This is a departure from the approach that was being used by most startups wherein they worked on their vision of a product and developed it. This development phase ran into several months and sometimes taking more than a year. Once the product was completely ready, it was marketed to prospective customers. There wasn’t any feedback received from the customer while the product was being developed. Hence, nobody could predict if the product is something that the prospective customer really wants.
If you aren’t embarrased by the first version of the product you have launched too late.
The lean startup methodology can be understood by considering a product as a baby (which many startup founders already do). You release the baby product which will grow up in its due course of time. Once the baby product is released to the customer, the customer interacts with the baby and wants to instil certain values (features) that it lacks because it is still an infant. It can crawl as of now but it will have to learn to walk and run. It can say short words but needs to learn to talk fluently. Now, the developers of the product take this customer feedback into account and instil the values (features) requested by the customer into the product. What this does is that by the time the baby product becomes a full feature product, there are a lot of users who are satisfied to see its growth and the features that it has to offer. One thing to keep in mind if you are looking to adopt the lean startup methodology is to be flexible about the vision you have in mind for the product. While you might have the idea that you have to go from A to B to C, the customer might not want the B at all and wants X as the next feature. As is with every product, the customer is always right. Of course, when you have a vision and are willing to develop B even if the customer hasn’t asked for the feature yet, you can develop and put it in but after providing the customer with the feature that he desires. This on the go validation by the customer dramatically reduces the chances of failure. It also allows you to retract certain features that aren’t working and sort out the bugs with every update. What the product developer needs to be careful about is that the quality of the product shouldn’t be compromised at any stage throughout the process. Even when you release the MVP which is only a single feature, that single feature should be able to do the job 100% and arouse an interest in the consumer to keep using it. Of course, bugs might come along the way but to tackle them efficiently keeping the customer in the loop is important. This can be achieved through Customer Relationship Management (CRM) products.
Waiting for perfect is never as smart as making progress.
Of course, when you have a vision and are willing to develop B even if the customer hasn’t asked for the feature yet, you can develop and put it in but after providing the customer with the feature that he desires. This on the go validation by the customer dramatically reduces the chances of failure. It also allows you to retract certain features that aren’t working and sort out the bugs with every update. What the product developer needs to be careful about is that the quality of the product shouldn’t be compromised at any stage throughout the process. Even when you release the MVP which is only a single feature, that single feature should be able to do the job 100% and arouse an interest in the consumer to keep using it. Of course, bugs might come along the way but to tackle them efficiently keeping the customer in the loop is important. This can be achieved through Customer Relationship Management (CRM) products.
To know more about the lean startup methodology, you can buy the book by Eric Ries from below: