What the heck is this bootstrapping all about anyway?

Filed in archive Entrepreneurship on September 25, 2006

Glad you asked. After several months of editing this blog, it occurs to me we could use a fresh explanation of what we're doing here and why.

Simply put, bootstrapping is any one of various processes in which simple systems are used to create more complex ones.

The term is used in numerous contexts in the fields of computing, linguistics, physics, statistics, law and electronics, according to Wikipedia.

It is alleged to have originated with a legend concerning German Baron Karl Friedrich Hieronymus, Freiherr von Münchhausen, who it is said was able to use his own bootstraps to pull himself out of the sea.

However, in business the expression is generally understood to mean creating and growing a business with little or no outside financing often using the revenue of the business itself and it is this meaning that is our primary focus here.

Entrepreneur Greg Gianforte, CEO of the bootstrapped RightNow Technologies in Bozeman, Montana, explains it this way:

Bootstrappers don't write lengthy business plans, chase deep-pocketed investors, or indulge in overly academic market research exercises. Instead, they focus all of their considerable energy, brainpower, determination and skills on creating a business that can actually succeed in the real world.

The alternative to bootstrapping a business is generally securing financing through a bank loan or outside investors including Venture Capital firms.

For a primer on what Venture Capital firms are and how they work, read this overview from howstuffworks.com.

But Gianforte insists that:

If you look at all start-ups, less than one percent get VC funding. Most are launched with less than $20,000. And some - including Dell - were created with less that $1,000. I personally started my first software company - which was acquired for $10 million by McAfee in 1994 - with a couple of friends and about $5,000 in cash. And I started RightNow Technologies - which went public August 4, 2004 and as of this writing has a market cap of $350 million - at my desk in Bozeman, Montana without any external funding whatsoever until the company was well-established with 400 customers.

Books on bootstrapping in the business world include Gianforte's own "Bootstrapping Your Business: Start and Grow a Successful Business with Almost No Money" with Marcus Gibson and Seth Godin's "The Bootstrapper's Bible" available through Amazon or for free download here.