Let’s discuss bootstrapping as a way to develop your early stage Australian startup without getting external funding from venture capitalists. Not everyone has to raise the money. When I started my business, within a year we reached the break-even point, where I was self-sustainable and I wanted to hire another person.
At that point I thought well I have a little bit of money however not enough to make me comfortable hiring some person and promising them a steady salary or something, so I said maybe we need to raise money. I’ve actually talked to some venture capitalists at that point, however after all that, I decided to ask my good friend to invest a little bit of his own money to give us some cushion, so it’s not as scary to hire someone and promise them salary.
A year later, we were two people and we’re back to black again, in fact you can even call it slightly profitable. We had a little bit of money so we could hire another person and then like I was at the crossroads. My thinking was we can either go hire a sales guy who will help us increase our sales then we make a little bit more money, or we hire another developer than another developer etc.
We can go look for funding and you know we expand more rapidly and my actual train of thought was okay, I will start thinking about it next week, and right then I get an email from an investor, who says “let’s talk about funding” and it’s well maybe that’s a sign.
So that’s what we actually did and by mid the next year, we had raised money. Right now, we are again back to black and profitable. We now have 20 people on our team and we’re actually looking to expand a bit more and this time without raising any money.
This brings me directly to the first reason not to seek money right away. Because no one will give it to you. If you don’t have any credibility in the business world, you cannot raise any money unless there is some pure luck. This is even more difficult if you don’t have a product and even more difficult, if you don’t have any initial traction.
Honestly, as an early stage Australian startup, I don’t think it’s worth the time to waste on seeking funding. You are better off spending that time working on your product. Fundraising actually takes a lot of time and you are better off spending it on your product.
For me, just working on the details of the deal took me 3-4 months of my time, to finish it off and even though it wasn’t like a full-time occupation, it is actually hard to do anything else. So, once you have the product and then you have is the traction it’s actually way way easier to raise the money.
We actually didn’t even look for the money when we when we got an offer and if our case is not like credible enough the same happen. You know investors will start to come to you, and it’s not like you have to beg them for money.
Let’s switch gears a little bit. So, not having the money can help you. If you don’t have the money, you will be forced to think about your product right from the start. About the business side of your product, right from the start. If you don’t have the money, you will not buy TV ads or any other thing that will cost a lot of money.
You will be forced to think about creative ways to market your product. Activities that will help you market your product for free, and find users for free. Quite often these are actually more effective than you know, things that you could buy for money.
If you don’t have the money, you will not spend it on the lease for your office or your fancy new Tesla. You will not throw big product launch parties. You will learn to treasure every cent and this will help you once you have the money. If you think about why you become an entrepreneur, it’s often that being my own boss is quite high on that list of reasons why.
Even though investors are not like your bosses per se, it’s not a secret that all the money comes with some things that actually feel like it; some requirements with some terms and conditions.
Even if you take the money, you should be aware that you should think about your investors and interests. For example, in our case, and in most cases they are looking for that mythical you know billion dollar company and we are not a billion-dollar company.
I know that they know that, and for most of them that’s the showstopper however. I don’t know that our early stage Australian startup will ever be a 50 million dollar company, which is not interesting to those who are looking for a billion-dollar company.
For me that’s okay and this is what I want to build. I don’t want to ruin a good thing by trying to make it something that it’s not.
There is no risk recipes that you can just use you know add water and be successful without investor money. I can give you some ideas so the first things I think that many people do when they decide to start a start-up is I will quit my job, and I will run my startup and do some freelancing on the side. This is actually way more difficult to do this than to stay at your 9-5 job.
In my personal case I was the part of an awesome early stage Australian startup, so I didn’t care. If you are not a technical founder become one or you know find the co-founders who is their technical. I was lucky enough that I’m developer myself and I didn’t have to do it at the first step.
I wasn’t actually unlucky when I wanted to find I later on a co-founder who was also technical and I’ve actually failed at that and that was the reason why I had to find some money to you know to hire someone. You may have crazy ideas about hiring an SEO agency or someone to do your content marketing. You can actually do it yourself, you should do it yourself. You can make your own coffee and you can fix your own printer, it’s not that hard.
One of the best things you can do is to help your customers find you. You will be forced to do that however you can actually be more creative than just asking them to do that. What we did in the first year, we asked our customers to give us $2,000 to advertise, so we gave them a 75% discount, which was an awesome deal for them, however it gave us invaluable cash in the beginning of our journey.
Obviously you can always resort to you know maxing out your credit cards or doing something like that so if you are a developer I in the current climate I think you can afford the risk of you know getting some personal debt because if you fail you will just go and get a job like that in 20 seconds.
Will you be able to repay and also if you’re if you have you know wealthy friends or relatives you can ask them to invest in you however this is very important that you have to be sure that they they understand what they are getting into.
All in all, I think it’s important to remember that investment money is a tool and every tool is the best when it’s used at the right time and for the right purpose, good luck with growing and bootstrapping your early stage Australian startup.
An Australian guest blogger and writer, Emma Taylor lives in Melbourne with her two cats, where she frequents live theatre and wine bars. She also sometimes tweets.
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