As VC firms continue to play it safe and focus on later stage investments, one of the key skillsets startups need to re-discover is the ability to 'bootstrap' the company. Bootstrapping means different things to different people but generally refers to a startup team's capability of selling and marketing it's way from a standing start to revenue-generating products without a major Series A round from a VC firm. This obvious pain of bootstrapping (uncertainty,irregular paychecks,etc.) can often yield a better valuation and more founder equity at a later stage so I think it's well worth it.
In contrast to the dysfunction of the bubble years, bootstrapping also goes a long way toward creating a rugged internal culture of cross-silo collaboration that defines your startup and it's core operating values. For asymmetric marketers, operating culture is the key to winning against larger, better-financed competitors. For more background on the role of operating culture, here's a link to an essay on my corporate website.
Here's 3 best practices I've isolated from a number of startups I've worked with during the post-bubble period that can provide some asymmetric advantage and momentum to your bootstrapping initiative.
Create a 'Projects to Products' Roadmap
One of things most troubling about the bubble period was that marketers often had a blank check to build what they saw as the perfectly conceived 'whole product'in a context where the investors were telling them that 'revenue didn't matter'. With bootstrapped companies it's all about revenue. It takes revenue to self-fund your product development efforts, and that revenue is usually available through selling your team's 'expertise' in the form of profitable consulting, software development or systems integration projects. These projects then throw off the IP that becomes the core of your product roadmap. So it helps to identify those projects that are most relevant to accelerating the accumulation of product-specific IP.
I have a client who did just this developing a next generation identity management platform by serving a very select set of banking customers. This company recently merged with a public company which had spent tens of millions of dollars during the bubble and never really created a market-ready product. My client is now running the public company, the board of that company having seen the power and market discipline of bootstrapped product development.
Develop an Ecosystem Infiltration Action Plan
One of the other problems that cropped up during the bubble period was the proliferation of non-productive, zero revenue-producing 'business development'activities. What bootstrapped startups need is bizdev that focuses on revenue and hard targets of opporunity. And don't get too hung up on my use of the much maligned word 'ecosystem'. For the purposes of the point I want to make here, an ecosystem is simply the installed base of customers,channels and co-evolutionary partners that is the 'target of attachment' for your startup company's project services. It's an important decision to get right---where to attach and where to infiltrate to gain the key opportunity intelligence you need to be self-sustaining. For example, if your space is software, do you go Microsoft, do you go Linux, do you go Sun? Where do you focus your limited resources for the maximum traction and momentum? In other words, build an infiltration action plan.
An infiltration action plan is designed to generate highly qualified lead flow from the target ecosystem and possibly from it's host. Many of the small company acquisitions made by Microsoft are companies that specialize in some niche capability that Microsoft does not have internally. And many of those acquired companies 'bootstrapped' themselves by deeply infiltrating the Microsoft developer ecosystem to find that target of opportunity.
Build a Culture of Special Operations Selling
Special operations warfare is the revolution currently underway in the Rumsfeld military. It's a 'task force' model that aggregates expertise across a number of key functions and deploys it to the front. The concept applies equally to startup selling. You need to make sure that your team is not just relying on the guy with the big rolodex to generate revenue. Revenue ownership is everyone's job. A culture of special ops selling means that you build customer facing teams that seamlessly include engineering, product marketing, executive sponsors and sales team members. This force structure is optimized to interact with today's complex buying teams in the enterprise, government and even in other technology companies you may want to do OEM deals with. Once again, special operations selling produces a virtuous cycle of internal cultural uplift as people participate in successful deal closure and see the model pay off.
There are many ingredients that go into a successful bootstrapped startup. These 3 can help you gain an edge over your better-financed competitor.
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