JumpStart: IdeaExchange Blog

Many entrepreneurs know firsthand what it takes to bootstrap - to work with limited resources (financial and human) and stretch them as far as possible without relying on external resources. But try as you might, it is unlikely that you can do it all alone. Eventually, you will need to bring in people with skills and knowledge that you don’t have.

You have three options:

1. Continue in bootstrapping mode. Find someone with the expertise you are looking for and convince them to provide their sweat equity on the if-come that the business will grow and succeed.
2. Delay growth until you have the ability to hire the A+ players you need.
3. Outsource. Lawyers, accountants, and marketing specialists are just a few of the highly trained service providers that are available on an outsourced basis when a hire isn’t possible. Reach out to service providers to focus on what is most important: generating revenue.

Unsure where to find the most reliable Service Providers? Here are some suggestions:

1. Ask for recommendations. You are not the first entrepreneur in need of a lawyer well-versed in patent protection. Other entrepreneurs will gladly provide referrals. Once you find a service provider you trust, it can also be helpful to ask who they partner with. Attorneys usually have an accountant they can recommend, and vice versa.
2. Poll a general audience using social networking tools. Online communities such as Twitter and LinkedIn are now vital tools for business discussion. With the number of professionals online rising daily, the internet is a great place to engage a wide variety of individuals. Post the criteria you are looking for on Twitter or in a LinkedIn group, and watch as the suggestions come in!
3. Check online directories. IdeaCrossing.org is a free online resource that has a searchable online database where entrepreneurs can find and connect with service providers. Users can search by keyword, zip code, and business category to find a list of providers that meet their criteria. The Better Business Bureau also has a searchable online database where you can find accredited service providers in your area. These businesses meet the necessary standards of trust and transparency.

Don’t try to handle all aspects of your business on your own. Know where your team’s weaknesses lie, and seek experts to fill those gaps. Find the right people for the job, and move forward with a better business. 

Tiffan is the Vice President of IdeaCrossing, a free online community created by JumpStart, which connects entrepreneurs with the national resources necessary to grow their businesses. Tiffan has worked at several venture-backed startup technology companies and strategic marketing agencies in both Boston and Cleveland. Through her work, she has facilitated the necessary growth of early-stage companies.

We often turn entrepreneurs into heroes — toiling day and night through seemingly insurmountable barriers in order to take a passion, an idea, and a dream to market. And that’s OK, though truth be told I have always believed that in a thriving entrepreneurial economy, entrepreneurs should be seen as commonplace capitalists like everyone else. I mean, I don’t want them to be treated as rare heroes, because that means we don’t have enough of them. I want them to be regular Joes and Joannes who wanna make a ton of money.

But that’s not actually what I’m here to blog about. I’m here to blog about the husbands, wives, and partners of entrepreneurs. Because they…well, they are the heroes, if you ask me. They often are the ones who adjust their and their family’s lives to the fact that Mommy or Daddy Entrepreneur doesn’t yet have a market salary and so everyone’s eating hotdogs again for dinner tonight.

“Hey kids, it’s hotdogs every night for the next three months,
while Mommy/Daddy Entrepreneur pursues
her/his to-date unlucrative dream.”

“Hey kids, no vacation this year because Mommy/Daddy Entrepreneur
had to cut her/his salary in order to make payroll.”

“Hey kids, Mommy/Daddy Entrepreneur is not home
for (hotdog casserole) dinner again because
the new widget Mommy/Daddy bet her/his career on isn’t working
(and by the way we don’t know if it’ll ever work).”

In addition, these unsung heroes (spouses) might work nights and weekends, or work two jobs, in order to pay for the entrepreneur’s desire to pursue their dream and passion. They often defer their own personal dreams so that their spouse can pursue her/his dream. They adapt over time, simply weaving their spouse’s entrepreneurial dream into their own future; they learn to treat the dream as their own despite the fact that they have little control over the outcome. They often do all of this with joy, grace, humor and beauty, and sometimes, to be sure, with frustration and even a sense of despair. While I think many spouses make sacrifices for their husband’s or wife’s career, I think with entrepreneurs it’s even greater: the dream all encompassing, the uncertainty overwhelming, the pay less, and the risk higher.

So, consider this blog my homage to these spouses of entrepreneurs. They are not only the most common and unsung angel investors out there, but — at the risk of being simplistically melodramatic — oftentimes they are a type of hero. 

I think a journalist or writer ought to do a series that celebrates the spouses (or partners) of Northeast Ohio entrepreneurs.

What do you think?

Becca Braun is President of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.

Well, I suppose it’s no surprise, but we’re back to the dot-com bust era when money was tight and terms were harsh. In addition to the anecdotal evidence we’ve gleaned from our own network, I’ve been reading the venture blogs in order to get a good picture of the current environment. Not a pretty picture! The overwhelming majority decree that angels (and angel funds) are “closed for business” and VC funds will stop making new investments in order to keep existing companies solvent. Many VCs anticipate having to make difficult choices in 2009…like who to save and who to (well, you know the word; I don’t want to get too maudlin…)

For anyone seeking outside capital at this time, be prepared to be offered lousy terms. Not only from a valuation perspective, but from a “total package” perspective. Even in good times there are many items added to term sheets that are not fully understood by entrepreneurs. (Remember my post saying that good lawyers are worth every penny?) Along with valuation, you can bet that most of the key terms that affect valuation will be more “investor friendly” than “company friendly” in the coming months. Not only will you see lower overall valuations to begin with, you’ll also see more Participating Preferred Stock, Liquidation Preferences greater than 1x, and Full Ratchet Anti-Dilution Protection. Some may ask if it’s worth taking such ‘expensive’ money vs. bootstrapping. As a founder the best thing you can do is educate yourself on what these terms mean (remember my earlier comment about having a good lawyer?) and go in with your eyes open.

Lynn-Ann Gries is the Chief Investment Officer of JumpStart. She previously worked in the investment banking departments at both McDonald Investments and Smith Barney (now part of Citigroup), and in the sales and trading area at Morgan Stanley. She received her MBA from New York University’s Stern School of Business and her BA in Economics from Smith College. She currently serves on the board of the Fund for the Future of Shaker Heights, the Great Lakes Science Center and Summer on the Cuyahoga (SOTC).

Wiktionary defines bootstrapping the following way:

Bootstrapping: to pull oneself up by one’s bootstraps

1. (idiomatic) To begin an enterprise or recover from a setback without any outside help; to succeed only on one’s own effort or abilities.

We can’t get a loan, so we’ll just have to pull ourselves up by our bootstraps.

Much has been written about the art of bootstrapping a young enterprise and a simple search on Google will give you plenty to read on the subject. What I thought would be topical would be to look at it specifically from the perspective of those contemplating starting a business, as many wh­o read this may already be engaged in running their business this way and already be in a bootstrapping mode. For more on this subject and how to tell when to take outside money once this is working and your enterprise is further along, I thought that this article in VentureBeat by Javier Rojas did a really good job of setting the stage.

Why is this topical? We’ve heard and read a great deal in terms of the difficulty in engaging VCs in today’s economic climate, as they try and hold on to their own cash for existing portfolio companies and thus have fewer dollars (and time) to do new deals. But before we even think about this stage, I want to go to an even earlier stage of business formation – at the very, very beginning.

Let’s say that you’re working for someone (not yourself just yet) and that you’ve made the decision – at least mentally – that you’re ready to take the plunge and become an entrepreneur. So then the question becomes – what next? Some answers are obvious – write a business plan; get some of your personal “stakeholders” on board with your vision (could be a friend, a significant other, a relative, etc.). In my own instance, I was so convinced that I had a good idea that I became almost entirely focused on the funding aspects so that I could actually leave my job and get started. Since I was pretty confident that I would NOT be a good candidate for VC funding (no prior track record, first time entrepreneur, no working prototype, etc.), I needed a plan that got us started and allowed us to get underway, for at least 6-9 months, without outside funding. I did not consider asking friends and family for money, for a whole variety of reasons, which I won’t get into here.

Here’s how I prepared to get started (the total elapsed time from idea to starting was approximately 5 months):

• Cleared all credit card debt. This was imperative as I knew I needed to travel extensively to sell my product (the first photo editor for the PC – but that’s for another post).
• Set up a line of credit, using the equity in my house. My wife and I were in decent shape as far as our value versus what we owed on our home, so this provided a source of funds for living expenses, since I was not drawing a salary. I wanted to submit the loan application prior to leaving my job so it would have a greater chance of being approved. It eventually was.
• “Hunkered down” on all unnecessary expenses and redid my household budget. No vacations. Going out to eat a whole lot less. No new car. In short, cut down on all unnecessary, discretionary expenses. You get the picture. As part of this, we prepared our extended family for what was coming and what to expect from us (like at holiday times).
• Did as much as I could to get friends to help me in writing the plan. We did research, wrote drafts, began exploring technical aspects – in short, anything that could be done directly or with friends at night or during the weekend before I left my job and my income.
• Once we started the business, we spent very little that wasn’t absolutely necessary, beyond product development. For example, I worked out of my house until it became unmanageable and we found that we simply had to spend $350 a month on office rent to continue.

Aside from these five ideas on getting started, one last thing I would recommend in today’s environment: if your product is web-based and you are not a programmer but the one with the idea – get a friend who has the skills to help. If you don’t have such a kind-hearted friend, start networking and find someone and “sell” them on your idea. Do this with the thinking that they would be part of the “founding team,” with more equity if they can devote time during the nights and weekends prior to starting.

By doing these things, and more, we were able to secure customers within 90 days, since our product was so far along (remember, we did the work prior to leaving our jobs), and this led to a product we shipped within 6 months after starting. This yielded real customers, real revenues and profit within the first year. Now, these were modest revenues and none of the founders took a salary, which set the profit threshold lower but gave us huge bragging rights with investors. We prepared ourselves to live without salaries and thus it wasn’t as stressful as you would imagine. Just after the first year, we had offers to buy our business as well as an offer from an Angel investor to provide a $200,000 equity investment. Good choices from humble beginnings. We chose the investor over the buyer and decided to continue on, with our exit happening a year later, through a sale to a public company.

If you’re thinking of starting a business, I encourage you to chase your dream – but do it with the idea of funding yourself at least for the first year in business – by bootstrapping!

John Dearborn is the Chief Development Officer of JumpStart and brings experience as an entrepreneur, founder and CEO at companies across the US and Europe over the last 25 years to the pursuit of economic transformation in Northeast Ohio.