[vc_row padding_top=”0px” padding_bottom=”0px”][vc_column fade_animation_offset=”45px” width=”1/1″][text_output]Outside investment isn’t the only path to startup success. Many of Iowa’s best known startup success stories began by bootstrapping.
ISA Mentor-in-Residence Cammie Greif and the other co-founders of TaxACT started out in February 1998 on the second floor of an old mortuary with coffins in the basement (rent was cheap!). Their business ran on a shoestring budget, but they released a product by November of the same year. In preparation for tax season, all of the founders chipped in their own money to create a budget for Cammie’s aggressive guerilla marketing campaign. This led to a profit after their first year and by the end of their second year, they were able to start paying themselves a small salary.
Bootstrapping kept Cammie and her company scrappy and hungry. Their limited funds forced them to have a very disciplined decision making process.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“I’m certain that the disciplined approach we had for decision making was due to our bootstrapping days, and it was key to our success. I’m not saying it is best for everyone, but I know it was one of the best moves we made.”
Cammie Greif[/blockquote][text_output]Without outside investment, TaxACT grew more slowly, but this allowed them to make the tough decision to offer free efiling as part of their pricing mix. Cammie says that if they had grown faster, they might not have been willing to take such a risk. The revenue loss might have been too high. However, taking the risk disrupted the entire tax industry and catapulted TaxACT’s market share.
Taking this chance set the groundwork for a nine figure acquisition for TaxACT.
Fellow ISA Mentor-in-Residence Tej Dhawan agrees.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“Bootstrapping is the past, still present, and likely strong future of entrepreneurship.”
Tej Dhawan[/blockquote][text_output]When Tej started Advanced Technologies Group, Inc. with a business partner in the 1990’s, outside investment wasn’t really an option, and popular guidebooks of the time guided entrepreneurs toward bootstrapping.
Without the security offered by investor money, Advanced Technologies Group was forced to make payroll on their own accord. This drove the company to remain hardworking and focused on success – survival depended on it.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“Growth came because we were in control of our risks, our moves, our strategy, and ultimately our profit.”
Tej Dhawan[/blockquote][text_output]This controlled growth and focus made Advanced Technologies Group the leading software for the Department of Corrections.
Bootstrapping remains a viable way to start a business – especially in Iowa. In 2012, Josh Krakauer founded Sculpt, a local social media management shop that grew to a multi-faceted creative agency in Iowa City with 10+ employees. Sculpt’s clients include HyVee Newton, Iowa Brag, BlendCard, David’s Famous, and MetaCommunications.
As a service provider, Josh prioritized building a team that could deliver high quality products to his customers as their path to growth.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“It was important from the beginning to find ways to grow thoughtfully without someone else telling us how to grow and make our decisions about what success looks like. You don’t get that opportunity if you have to answer to people you owe money to.”
Josh Krakauer[/blockquote][text_output]Finding out what success looks like involves testing ideas and failing a lot. Bootstrapping provides a lot less pressure to answer to someone for how those tests work. Bootstrapping places all the risk on the founders, making it more likely that they’ll go without a paycheck, but it also leaves all the accountability and rewards with the founders. The gamble is that the paycheck on exit is much higher as a compensation for bootstrapping.
For Josh, outside capital would have made things simpler in the short term, but there were too many unknowns to keep it sustainable. He says that adding money in would have been disastrous in the long term.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“I think investor money is often misused to validate an idea when a more truthful, soul searching, ‘customer discovery because you have to’ approach will yield real answers that are unlikely to be brushed under the rug.”
Tej Dhawan[/blockquote][text_output]While bootstrapping is a very company – and situation – specific decision, these founders all recommend it to other entrepreneurs because:
- It forces companies to be disciplined.
- Bootstrapping keeps companies hungry for success.
- It keeps more of the company in the founders’ hands.
- It allows founders to spend critical time growing their business. Seeking funding takes a major amount of time.
What bootstrapping can fail to bring (besides outside money) is big, next level vision. Josh encourages startups to aim high, no matter what level of funding they have.
[/text_output][blockquote cite=”” id=”” class=”” style=””]“Don’t let the fact that you don’t have someone giving you cash prevent you from reaching higher. You need to find outside resources like mentors, consultants, and coaches to help you set higher targets and make yourself greater. Otherwise, it’s unlikely that you will accomplish your goals.”
Josh Krakauer[/blockquote][/vc_column][/vc_row]