Bootstrap Yourself

While we’re on the topic of Mark Cuban posts, there was something else I wanted to comment on from that same post.  As he often does, he included a “classic” Mark Cuban post at the bottom of his current post.  In this case it was a post from earlier this year entitled The Best Equity is Sweat Equity:

There are only two reasonable sources of capital for startup entrepreneurs, your own pocket and your customers pockets. I personally would never even take money from a family member. Could you imagine the eternal grief and guilt from your mom, dad, uncle or aunt because you blew your nephews college money or the money for grandmas last vacation… I cant.

You shouldn’t have to take money from anyone. Businesses don’t have to start big. The best ones start small enough to suit the circumstances of their founders. I started MicroSolutions by getting an advance from my first customer of $500. The business didn’t grow quickly in the first couple years. We didn’t grow past 4 people in the first couple years, and we all worked dirt cheap.

So what’s wrong with that? It’s OK to start slow. It’s ok to grow slow. As much as you want to think that all things would change if you only had more cash available, they probably won’t.

The reality is that for most businesses, they don’t need more cash, they need more brains.

When I gave my talk at Skidmore a few weeks back, one of the things that seemed to really pique their interest was that we bootstrapped our company, even turning down various funding options at times in favor of doing things like not paying ourselves. All because we wanted to keep our stock and our control. Essentially, we wanted to keep our dream. To keep our company our company.

From my experiences, business schools don’t teach bootstrapping, they teach funding.  There’s nothing wrong with that per-se (knowing about all of the funding options out there is a good thing), but it paints the picture that to start a great company you need a ton of money.   That’s just not true.  Some businesses require a lot of startup capital, a ton of funding, and a ton of manpower.  But many do not.

Almost any service business can be started for $1,000 or less, whether it’s photography, web design, or something more unique like a campus food delivery service or a company that turns people’s photo albums into digital pictures.  With the web, the options have expanded infinitely.  Once the money starts to roll in and you learn how to be a profitable business, you can leverage that knowledge and experience to push the boundaries of your industry.  It’s not the only way to go about things, but it’s certainly a path that many, many successful entrepreneurs have taken.

I wish they’d teach that at business school.

OK, that’s enough Cuban for a while.  I’m not trying to turn this into the official Mark Cuban commentary blog…