Following one’s passion can be an interesting endeavor and following one’s entrepreneurial passion of any type can be a super exhilarating experience as long as one keeps in mind that passion is a double sided coin. Passion can often lead to dogma and a superly skewed view of the realities of life. It is in this area where I am appreciative to my Lord and Creator for being innately wired as a left-brained analytic type. For me, most decisions in life have to be driven by data. Don’t get me wrong, I believe in faith and prayer. I would just rather have a set of numbers and/or set(s) of data over which I am praying in order to make a decision. It is in this area that I have become a most avid fan of a sole form of Money Machine start-up financing – Bootstrapping.
Now let’s begin by describing what Bootstrapping is not
Bootstrapping ≠ Self Funding
Many would be Money Machine founders with a glimmer of tech start-up bliss glowing in their eyes one day finally build up enough gumption to dive into what is for many the great unknown, also known as entrepreneurship. It is amazing at how many individuals often say, “You know, one day I want do that business thing and BE MY OWN BOSS.” Really? When one creates a Money Machine and it has customers is this individual really her/his own boss? Sounds like the topic of a future post within the “Musings….” Let’s just say that this is definitely not the case and for now please simply trust this fact prior to additional proof being provided. So the budding Money Machine founder finds the courage to move forward and the first thing on her mind is “I am going to need X number of months worth of salary so that I can continue my current standard of living. For this I will need to
- Cash in a portion or all of my 401K and retirement so that I can have some start-up seed funding
- I have a certain amount of equity in the house or property, I’ll just get a home equity loan, ie a “second mortgage”, to provide the necessary seed capital for the start-up
- The family will need to cut back while we (more like I) follow our (more like my) entrepreneurial dreams and launch the business operation
While this is great stuff and the entrepreneurial juices are now flowing at an all time high, over in the corner observing all of this is a significant other, sometimes known as a spouse, who is saying to herself/himself
“I’m all about you following your passions and dreams and your desire to be an entrepreneur and founder of a Money Machine and all but just don’t get so caught up that you forget the fact that the baby needs some diapers and momma has to have her nails done this coming Friday and btw, the nail stylists recently increased their prices.” This same analogy could be used for daddy and his golf playing, deer hunting, fly fishing hobbies. It is all the same set of circumstances.
To be quite candid, self funding a Money Machine can be a key ingredient in creating the greatest of turmoil within any set of family dynamics. In many ways the pressure to succeed and to provide a return on the initial investment is far greater than the pressure that is often exerted by lending institutions and investment firms. Let’s dare not mention the first cousin to this form of sourcing start-up funding – borrowing money from any form of a relative. This act can cause Thanksgiving, Christmas, Fourth of July holidays, reunions, funerals and any other form of family gatherings to take on a entirely different vibe and atmosphere. It is definitely a form of family get together that the Money Machine founder should seek to avoid creating. 8^)
Well if all of this is true, what is the aspiring entrepreneur left to do? At this time it may be advantageous to quote a luminary in tech community space – Mr Tim Oreilly, founder of Oreilly Media, roughly a $100 million company, from a 2010 Inc Magazine news article (which is worth reading in its entirety)
“But Tim was following his inner talents. O’Reilly never raised outside capital; he funded his projects through profits. ‘There is a wonderful rigor in free-market economics,’ he wrote in an early company manual. ‘When you have to prove the value of your ideas by persuading other people to pay for them, it clears out an awful lot of woolly thinking’“
This brings us to a place where we need to narrowly define the term Bootstrapping. Essentially,
Bootstrapping – the art of funding a Money Machine through the creation of revenue derived from customers
nothing more, nothing less. Creating a product or service that provides another individual or entity so much value that they are willing to exchange real currency for the aforementioned product or service is the GREATEST form of entrepreneurial validation.
With this being said, the question that now arises is whether or not there is any science that elaborates on the intricacies of Bootstrapping. There are hundreds of books on Silicon Valley type business methodologies, venture capitalism, angel investment, crowd and seed funding mechanisms but where would one find similar content on such a narrowly defined posture of Bootstapping? Glad you asked.
This will be the core of our conversation in the next edition of the “Musings of a Money Machine Hacker.” Until next time…
PS For more insight into the terms “Money Machine” and “Hacker” please take a few moments to peruse the content of this previous post. It may help clear up a tad-bit of mental muddiness.