Council Post: Discovering The Benefits Of Bootstrapping

Co-Founder and CEO of Kpler, the leading provider of AI-based transparency solutions in commodity markets.

In 2013 both my co-founder, Jean Maynier, and I were at a crossroads as entrepreneurs. We faced stark choices: continue to prop up a struggling business, pivot or give up. 

For the previous two years, we had knocked on the door of every single venture capital (VC) fund to gain external funding for our then company, eCO2Market. It was a chastening experience as the declines to invest piled up, or worse, our overtures were ignored. During this period, Jean and I did everything we could to just keep the lights on and survive, from external consulting jobs to dipping heavily into personal savings. 

Pivoting was not the obvious choice then, especially as we toiled away in the claustrophobic, windowless storage room we rented as an office. Yet looking back now, it had an unintended but incredibly formative effect on us. It forced us to learn how to bootstrap a company.

To be honest, there was no grand plan to adopt this approach. However, as we pivoted and launched successfully into a new market in 2014, we discovered clear benefits — the biggest of which is the complete freedom bootstrapping gives.

Being self-funded means there’s no defined playbook that investors demand your business strictly follow. Instead, you’re free to operate with autonomy: grow at your own pace, pivot when needed and devote resources to the areas you deem business-critical. 

One guiding principle becomes instantly apparent when bootstrapping: There’s no leeway with your budget — for each dollar you want to spend, you must first earn it from your clients. It’s a simple concept that instills a considerable degree of financial discipline and, most crucially of all, puts a long-term focus on continually delivering a high-quality product or service. Without satisfying your clients, you can’t succeed.

In contrast, a sudden and substantial injection of capital can lead to sprawling budgets and little oversight of where those dollars are spent. This can cause superficial spending aimed at building perception instead of improving products or services. In some cases, new capital is even wasted on purely short-term ways to influence customers or prospects with no strategic purpose. 

The benefit of having to account for every dollar and cent is that the quality of your product or service, as well as customer satisfaction, will always remain your top priority. 

In addition, by maintaining complete control of your company, you have much more agility in making time-pressured decisions. With the onset of the Covid-19 pandemic, all it took was a WhatsApp call with my co-founder Jean, and our company canceled all our office space leases (across nine locations worldwide) and switched to a fully remote working model in just 48 hours. Within this tight time frame, we also had to implement a whole raft of new internal measures to facilitate home working and make it a success over the long run. The ability to make decisions this way enables your business to adapt much quicker to the many unexpected challenges you’ll face.

There are also some unexpected but positive effects of being bootstrapped. It really becomes part of your company’s DNA, and a culture is nurtured in which employees understand that there are not unlimited resources. Instead, they realize that helping the business succeed means profits can be reinvested more quickly than funded companies or, even better, be shared with them. From my experience, it is also an important point of pride for employees that a company is entirely in control of its future and can actually serve as a factor in motivating staff. 

Yet being self-funded is not without its challenges. Investment from prominent VCs can provide instant credibility to a little known startup overnight. A funding round helps create a perception that a company is a much bigger player than reality. A knock-on effect of this backing is that it impacts hiring the best and brightest talent. Especially in the early years of a bootstrapped company, it can be tough to stand out from better-known, VC-backed competitors with prospective employees. Sometimes as a self-funded company, you feel like you have to pitch your company to candidates instead of the traditional interview process. 

However, if a bootstrapped company stays the course, an inflection point can be reached to surmount these issues. Scale is how to achieve this. The blueprint for such success is ongoing profit creation, growth of employees and global footprint. Scaling simply can’t be ignored.

Undoubtedly, bootstrapping is not an option for every entrepreneur due to the financial realities of running a business. It is also true that it is a challenging, less-traveled route, especially at a time when external funding levels (in Europe, per PitchBook data) are at an all-time high. Yet, for any entrepreneur grappling with whether to take external funding or not, always remember that giving away equity for capital means losing your most valuable asset: freedom.


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