Bootstrapping comes from the phrase “pull yourself up by your bootstraps.” While the term is also used with reference to computing and statistics, today’s post covers what bootstrapping means in a startup environment.
To bootstrap a startup means to build and grow it using very little in the way of money — personal finances and cash flows. (Fun side note: at the point that you start making money, you might refer to your business as being “customer-funded.”)
Bootstrapping is often antithetical to taking a fundraising path, though there’s theoretically no reason a company couldn’t bootstrap and then go raise VC money.
Note that it’s hard to bootstrap consumer packaged goods businesses because producing the inventory necessary to fulfill order takes a lot of cash. The bigger and more desirable the order (think: Target, Whole Foods National, or whatever you might count as your dream account), the more cash you will need.
While we bootstrapped Norm’s Farms Farms, we also knew that doing so limited our growth. That was okay with us as we wanted to grow slowly and methodically. Our slow and steady growth and loyal customer base eventually led to an acquisition. If we’d wanted faster growth or a larger acquisition, we should have looked at exploring startup financing, a topic I cover here.
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