The benefits of bootstrapping your business
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I’ve had the most fun of my life starting a technology company, seeing it grow, watching the development of new employees, winning bigger and bigger clients, seeing the world and making new lifelong friends. Although the current rage is to raise money when you have an idea, a Mac, a cat and a dream, one of the draws of entrepreneurship is that you can be your own boss.
At cleverbridge, we were fortunate to be able to bootstrap the company from startup to profitability in two years. There are a variety of contributing factors to this:
- No founder salaries for two years
- Liquidated savings to pay others and buy equipment
- Contacts in a growing industry
- A team of trusted eCommerce friends
We grew to over $40 million in revenue and 280 employees on three continents after 10 years. That’s not a small company by any means, so don’t mistake “didn’t take venture money” with “can’t grow fast.”
As an angel investor, I can now compare and contrast the differences between having external investors and not having them. The difference, in one word, is “control.” That includes control in:
- Company direction — Even if you have great board members with industry experience, you might have a vision that you can’t execute on because your board members have an alternate view. They may want you to focus on a reliable business model when you can see the new business model threat coming from behind. One example here is Borders, which out-sourced their e-commerce operations to Amazon. This gave Amazon tons of insight into the competitor’s business to eventually send Borders to the history books.
- Oversight — The amount of time required to interact with and satisfy investors in probably on the order of 10%. You have to prepare quarterly or even monthly board presentations, respond to the investor’s neighbor’s friend who had a bad experience with your product, and answer employee questions about what the investors are thinking and looking for are. And those are just some of the responsibilities that come with the investment.
- End game — Investors have one goal and it’s not philanthropic. They want a return on their investment. They have an expectation on an outcome within a certain timeframe. You may have the energy and stamina to continue on through an economic downturn, but your investors may want their money out at all costs.
This isn’t to say that investors don’t add value, which they certainly can, but there’s a lot that comes with an investment. I counsel entrepreneurs to go as long as they possibly can without funding because the business will be more mature and the entrepreneur in a better position to negotiate terms. Take cleverbridge client and former Chicago-based company Malwarebytes as an example. Rather than raise money early on, Malwarebytes grew without much recognition and was an “overnight” success story when they raised $30 million last year. I’ve known CEO Marcin Kleczynski since he was 17 and working from his parent’s home. Sure he had many struggles along the way, but he fought through them and was able to choose when he raised money.
Every day that I wake up, I don’t feel that I have to report in to someone else. I just have to answer to myself, my partners and my employees because I am my own boss.
About the Author
Craig heads up the Digital Media and Technology Team at Hyde Park Angels, where he is an active angel investor. He is also the co-founder Chicago, Cologne, Germany and Tokyo, Japan based e-commerce company cleverbridge. Craig worked closely with his co-founders to bootstrap and grow cleverbridge since 2005, achieving revenues in excess of $40 million per year with over 270 employees. Before cleverbridge, Craig worked at companies in the financial services, e-commerce, banking and publishing industries, starting with his first job as the webmaster at the Chicago Tribune, where he led the technical efforts to launch the newspaper online in 1996. Craig is active in the Chicago entrepreneurial scene holding regular office hours at 1871, launching the Everest Program at Catapult Chicago and speaking at local events.
About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over hundreds of jobs in the Midwest since 2006.