Bootstrapping: how to do business when you haven’t got two coins to rub together
27 of July of 2015
At Ferrovial we work continually with entrepreneurs in order to create links between them and the organisation, and thereby speed up the innovation process. If we ask any of these about their main challenges or the problems that they face, the reply is always unanimous: “without a doubt one of the most difficult ones is getting hold of capital”, they tell us. The worry about getting financing can be seen as a characteristic they all share.
What is curious is that in many cases these start-ups provide digital services and in fact do not need all that much investment to show that their solutions can work. Their main concern ought to be getting their product out on the market as quickly as possible and validating their business model. In other words, putting the focus on their clients and on generating value for them, and not on their investors.
It is as such that I am going to dedicate this post to talking about one of the most unpopular forms of financing: bootstrapping, or, to put it another way, “how to do business when you haven’t got two coins to rub together”.
Bootstrapping is a term that refers to “starting something up or achieving something with minimal financial resources”. I know, it sounds tough. And that’s why I’m going to try to show that, however hard it sounds, there are also some hidden advantages to this type of financing:
- To start with, having limited capital, your survival will depend on billing. In the words of Ken Morse, who was director of the Center for MIT Entrepreneurship for more than 13 years:
“Cash flow is more important than your mother”.
- And the sooner you get your product onto the market, the sooner you will get client feedback and learn what parts of your value-generating proposal have real value for them, and which ones do not. Perhaps without even knowing it, you will put “Lean Start-up”methodology into practice. You will get used to shortening development cycles, measuring your progress and getting feedback from your clients.
- Being short on capital will force you to make more efficient use of whatever capital you do have, and will help you to keep focussed on what is really important. You will not waste time on pretty little PowerPoint presentations with logos designed to look like hockey sticks, but instead concentrate on your product and on being able to attract more and better clients.
- Financial restraints normally go hand in hand with staff limitations, which force us to clearly define the market we want to focus on, in order to cover it well. One of the most common mistakes entrepreneurs make is to try to satisfy a broad market without testing its validity with a “beachhead”, market-based approach.
We at Ferrovial believe that this is the best way to finance start-ups, and there is no greater value for investors than that of the clients. Ferrovial is a great believer in the potential of incorporating disruptive solutions developed by entrepreneurs (far more agile when it comes to innovating than a great corporation) into business. It is our aim to be the first client for all those entrepreneurs looking to validate their solution or business model at Ferrovial facilities, being able to demonstrate the value of their proposal for the company.
There are no comments yet