Bootstrap a Startup the Smart Way.
The Problem With All The VC Money.
A problem, you say? The money going around VC funds these days is truly insane. But for the hungry startup, those rounds of VC funding can be a double-edged sword. The high valuations can create unattainable expectations that can derail your business before it even gets started.
Here are some quick tips from people that have built successful tech companies in the past few years that ‘bootstrapped it’. This means that they didn’t even go through rounds of VC funding, or even applied for old-fashioned business loans. These guys did it the old-fashioned way: they didn’t spend money they didn’t have, and as a result they didn’t have mountains of debt (or sky high VC expectations) to deal with.
Step 1: Don’t Spend Money You Don’t Have To.
With a start up, you’ll need a little bit of money. Maybe it’s as little as $200 in savings, or a few thousand that your team has saved up over time. When it comes to things like office space, websites, and the usual expenses, don’t spend money until it makes an appreciable difference in sales.
An example? Website hosting companies will offer ridiculously low prices for new customers, and they even include free domain names. So, wait until a shopping holiday (i.e. Black Friday, Labor Day) to buy web hosting discounted.
For offices, you can usually set up a company phone number with an answering service that will answer the phone just like a full-time receptionist. This service will cost you $100/month, as opposed to the $2,000-$3,000 that a full-time receptionist will.
Until you really need an office, you don’t need one. With Skype and IM services (like all your smartphones!) you can communicate instantaneously with your team. Office space is a huge expense, and you really shouldn’t go for it until you have steady cash flow.
Step 2: Move out of Silicon Valley
This is not possible for many tech companies, but the high cost of living and competition for engineers means that your company may have to spend way more for its employees so that they don’t go to Google, Apple or one of the other tech companies with more cash than the U.S. government.
These established tech companies are driving up prices on everything in Silicon Valley, creating an uneven playing field for their eventual-competitors.
With instant communication, you can have a team of engineers working out of nearly-every corner of the world. And these engineers will be much, much cheaper than the ones in Silicon Valley.
Step 3: Guerilla Marketing
Instead of jumping right into billboard advertising or some other expensive form of customer acquisition, spend the early days of testing your products as a form of market research. You may have an idea of who your main customers are, but it doesn’t hurt to try it out with different groups (urban vs rural), and age ranges. There may be hidden markets for your products that you don’t know about yet.
Using free organic advertising like viral marketing or word of mouth is the best way to grow in the beginning and also discover your true markets. When the time comes to spend the big dollars on media buys, you’ll have a much more focused idea of who you want to advertise to.
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