Bootstrapping is back. And it’s not just for start ups..

Be inspired to keep frugal to by some of the most resilient entrepreneurs

Bootstrapping is back. I have attended two conferences recently where the idea was centre stage and have heard it being discussed on my favourite business podcasts, so something must be in the air. In these continually strange economic times, perhaps it's unsurprising that founders and investors are returning to this cost constrained concept. 

At its most simple, bootstrapping means building a business from scratch with little or no external capital. As someone who has spent a vast amount of time in her career slogging through the process of raising money, it has appeal. Instead of relying on investors or loans, bootstrapping entrepreneurs use personal savings, credit cards, and revenue generated by their business to fund growth. This approach is simple in many ways because you retain complete control over the company and you do not have to worry about potentially pesky investors. 

There are lots of interesting examples of bootstrapped companies. The email marketing platform Mailchimp was founded in 2001 by Ben Chestnut and Dan Kurzius, who funded the company with their own savings. They focused on building a product that customers loved and reinvested the revenue generated by the business back into its growth. They rejected multiple acquisition offers and today Mailchimp has over 12 million users, generates over $700 million in annual revenue and is valued at £4bn.

Less well known is the Polish giant, Inpost, whose extraordinary founder Rafal Broska I met recently. His story is a testament to the power of persistent bootstrapping. While still at university, he spotted a golden opportunity in the postal and courier industry which was dominated by state-run entities. So, with savings of just a few thousand dollars and from a rented apartment that doubled as an office, Brzoska founded Integer.pl Group. He started delivering letters and worked all the jobs himself from van driving to finance to marketing.

 He soon realized that there was a need for more efficient package delivery services and invented innovative parcel lockers. These self-service kiosks allowed customers to send and collect parcels at their convenience. As e-commerce boomed, so did InPost. In 2021, he finally got outside funding when he went public with enormous success. Rafal told me how he had constantly chosen to keep total control and was obsessive about every euro he was spending.

Fast forward to 2023 and stories of founders choosing the Rafal route seem rarer. We are more used to reading about huge fundraising rounds in new companies, some of which spectacularly blow out.  

Last month, Mistral AI, the latest headline grabbing AI startup raised £105m -  in a seemingly total rejection of all bootstrapping philosophies. It is one of the largest seed rounds ever raised by a European company.So are bootstrapped stories increasingly a thing of the past?

I hope not. It doesn’t feel ideal for investors or companies to have to make such big bets purely because of escalating infrastructure demands. Matt Friedman, an investor based in the US has addressed this problem by buying compute resources that all his portfolio companies share. This strikes me as smart. Founders should demand more of this sort of creativity from investors.

And before you think all of this is only relevant for start ups, It’s not just in these small businesses that bootstrapping can be a valuable idea. It is useful even in a large company and even if the original founder is long gone. The creativity that comes from constraints can be very powerful. We are using it as a guiding principle in a company I work with at the moment. We are trying to prioritise free software, social marketing and shared services where possible. Justifying any expenses from new hires to larger capital investment to free office food is proving effective especially at a time when the business is facing tough economic headwinds.

There are, of course, significant trade offs. It’s hard to grow a company at warp speed without the power of investment and the networks of support that can come with it. You may sacrifice ground to your competitors by doing so. The bootstrapper also wears many hats – sometimes the entire haberdashery. This can lead to phenomenal stress and difficulties in scaling as you hire more people. 

In writing this, I now realise I am an old business romantic. I love stories of the long sighted, hard grafting entrepreneurs who plough on through thick and thin without much help. Given the tough current climate for raising any sort of capital, it might not be a choice you have  right now and you have to  bootstrap with bravery. If so, I hope you can take some comfort from the fact that you are in very inspiring company.