Startup Advice: Bootstrapping It...

A good friend of mine is working on a (very) early-stage startup, and since I am something of a recovering serial entrepreneur, he’s been coming to me for occasional advice and morale support.

He’s been shopping for a development shop to build out the technology behind his web-based business, and he’s suffering from some serious sticker shock. My advice? Bootstrap it. Below are some excerpts from my response to his query, with a few edits to obfuscate proprietary information.
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…I firmly believe that [bootstrapping] is the right way to start a small company– I don’t believe in big up-front development projects, as they almost always fail (and cost a fortune.) Also, you spend all this money before gathering community feedback, which means that even in the rare cases where the development project is wildly successful, it’s almost always followed by an even larger project to integrate changes that would have been way cheaper/easier to do initially. It’s just not a path to success.

You’re trying to boil the ocean on a budget more appropriate for making a pot of coffee… you’re going to kill yourselves trying to make it happen. Seek lower-hanging fruit: develop a blog and start building up a small readership. Post articles, links, etc. Do a podcast… even better, do a video podcast. It’s a great way to build a loyal “fan” base…

…Once you’ve got some readers, start building up a discussion forum– this will be the humble beginnings of a community– nurture it. Also, mine it– the best most active posters can become your biggest (free) employees. Talk to them, nurture your relationship with them, make them feel important…

…Once you have this rolling, you will have a small amount of ad revenue coming in… pour that money (with a little of your own) into developing the lowest hanging fruit features. After a year, you can start thinking about doing things like [your core technology] but it’s self funding– you’re only adding maybe half out of pocket. This not only reduces your expenditure, but it dramatically reduces risk.

The problem I see is that you’ve not done step 1 because you can’t see a way to do step 10… but doing step 1 (and then 2, and then 3) is how you translate a dream into a real business… step 10 will come with time, but will likely bear little resemblance to what step 10 looks like to you today. Be OK with that– don’t get married to your business plan, let it flow from the opportunities that present themselves as you put yourself out there. You can’t be successful in this space without being highly flexible. You need to be willing to build what your users want, not what you want to build. :)

Right now, your outlay is [a specific amount per] month plus your time. Make it a goal to, within 3 months, get it to a point where the site is generating that amount so that you’re not spending a dime. Focus on short-term, achievable goals– I’m not recommending that you lose site of the longer term strategy, but don’t let it paralyze you from movement…

…This is the kind of thing you should strive for– if you can build a small, sustainable business with solid ad-based (google ads, etc.) revenues and a loyal readership (say 5-10K unique viewers per day) you’ll have no problem building the massive, complex site you’re envisioning… however, trying to build it now is too ambitious for where you are, and would very likely wind up being a very expensive mistake.

That way, when you eventually DO spend a bunch of money building an elaborate system with [your core technology] you’ll actually be able to [execute], since you can show real eyeballs. “If I build it they will come” is a very dangerous way to do a startup company.

…Again, the key is to not let the finish line distract you from the first few steps in the race…

…You need to be taking small steps every day that visibly move the needle. Planning is great, but building is better.
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In summary…

<ul><li>“Ready, Fire, Aim” is the right strategy for a startup with limited resources… but in order to make it work, you need to find ways to reduce the cost of ammo.
</li><li>Start small, and build momentum. This is how snowballs work, and it’s a great way to build a robust business that will stand the test of time (and economic downturns.)
</li><li>Don’t get married to your idea– I’ve seen a lot of small companies fail to seize opportunities because they had tunnel vision.
</li><li>Investors are very willing to take on TECHNOLOGY risk (i.e. can you build the better mousetrap?) However, they are not nearly as willing to take market risk (i.e. will the dogs eat the dogfood?) Prove the market exists as cheaply as you can, and it will make it WAY easier to nail down the funding to build your castle in the sky.
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