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6 Rules for Bootstrapping Your Tech Startup

Enterprise Software, Digital Marketing, E-Commerce, News

In 2021, the online marketing platform Mailchimp was sold to Intuit for $12 billion, in what was the biggest ever exit by a bootstrapped tech company. 

Back in 2001, when the platform went operational, its creators were mainly preoccupied with running a web design company. It was only when some of their clients started asking for their help with email campaigns that co-founder Ben Chestnut dusted off some old marketing software he’d shelved a while back. Though their main income stemmed from web design, the billings from the marketing tool began to stack up, eventually motivating a permanent shift to what became known as Mailchimp. 

This is a textbook example of bootstrapping – that is to say, launching and running a company using your own finances and/or revenues generated by the company, rather than relying on outside capital from angel investors and VC firms. The company in question may evolve from a prior business, as in Mailchimp’s case. Or, an entrepreneur might gather savings and do odd jobs on the side to create a bootstrapped company from scratch. See GoPro founder Nick Woodman, who got his world-beating company off the ground partly by selling homemade jewellery from a VW van.

So what are the golden rules to keep in mind if your aim is to launch a tech company without courting investment from the off? Let’s run through some of the essentials.


1. Make sure it’s a concept you’re passionate about

Without investors looking over your shoulder, you’ll only have yourself to answer to. This means you have to be self-motivated enough to keep at it, and deal with inevitable challenges without succumbing to any temptation to slack off. That’s why it can be crucial to create a business you’re truly passionate about (and will happily devote long hours to), rather than pragmatically pivoting towards a sector or concept which you feel may be more lucrative, but which won’t inspire a gut-level determination to succeed. 

Indeed, Mailchimp’s founders pivoted the other way, going from web design for big corporate clients (which made them feel ‘miserable’) to developing email marketing tools for smaller businesses (which they ‘really loved’, even though it initially brought in less money).


2. Pick the right co-founder(s)

If you’re looking to form a company with others, compatibility on a personal level is of course important. But equally, you’ll want to prioritise those who’ll bring complementary skills and different perspectives to the table. You may be an expert coder, say, but lack marketing know-how. A co-founder with a wealth of marketing expertise can therefore be invaluable as you seek to get your company on people’s radars. Or, to take another scenario, you may be a first-time founder with a bright idea but no practical experience in business. In the absence of having an angel investor as a mentor, it can make all the difference if your co-founder is a serial entrepreneur. 


3. Be as frugal as humanly possible

Without investment windfalls filling your company coffers, you’ll likely need to keep costs to an absolute minimum, at least to start with. This may mean eschewing the temptation to go big and fancy when it comes to both hardware and software. 

Refurbed computer equipment may make more financial sense than the latest models. And using email and basic cloud storage rather than subscribing to the latest communications tools and other enterprise SaaS solutions may make all the difference to your monthly running costs. Outsourcing may well be off the cards till your startup begins generating real revenues, so you should be prepared to wear a lot of hats while making your dream a reality. 


4. Put money where it matters

While being frugal and thrifty is essential for any fledgling company which doesn’t have the luxury of investor backing, there are some outlays you shouldn’t stint on. Staking out your territory online is essential, and that may mean investing in paid search and other marketing strategies. You should also be prepared to invest in the best web domain for your business. 

As tech bootstrapper Rodrigo Santibanez has written, ‘Don’t think you can buy [your web domain] later once you have more traction. It turns out that once you get traction, the price increases exponentially. Buy the domain outright from the beginning, and start building brand equity around it from day one.’ 


5. Know when to make your move

Caution is understandable when you’re a bootstrapper. After all, you’re out there on your own, shouldering financial risk without the backing of investment bigwigs. If you’re launching within tech – say, a new software platform or app – then there may be a temptation to tinker and tinker, rather than bite the bullet and go live. Joey Rubinstein, who bootstrapped his LA-based tech business Casting Frontier, has warned about this phenomenon, saying: ‘Many upstarts fall into the trap of what I call continuous beta. They keep piling on features to their application before release and never actually get to the point of launch.’


6. Embrace your freedom

As mentioned above, one of the disadvantages of bootstrapping is the lack of a professional support apparatus. There aren’t any angels or VC veterans you can call up for advice, or use as sounding boards. But there is a positive flipside to this: namely, complete autonomy. 

You have the complete freedom to steer your ship in the direction you choose, so don’t waste this opportunity to follow your gut instincts and plant your own flag in your chosen sector. Mailchimp’s Ben Chestnut has spoken about how early potential investors wanted him and his co-founders to diversify from their core interest (email marketing for small businesses) and create other enterprise software tools. Being bootstrappers, they were free to focus on their niche, and turn it into a multi-billion dollar success story.