The side-project-turned-company is a common path that bootstrapping founders take to grow their first company and it’s worth revisiting some of the best-practices in this article.
Fact is, you don’t need a lot of money, venture capital funding, or even an original idea to bootstrap yourself into a successful entrepreneur. However, there are things bootstrapped founders need to understand in order to become hugely successful going up against well funded businesses. Before diving into the details, here are 4 pieces of advice I like to share with all prospective bootstrap entrepreneurs I meet:
-Be a well rounded founder. Don’t follow conventional wisdom that says you should be great at one thing and find other co-founders who’re good at other things. You yourself are responsible for the success you can drive. Focus on developing a wide variety of skills from sales to marketing and from basic coding to creating logos.
-You don’t need a business model if you’re going to bootstrap your startup. Business models change about every hour in the startup world and not having one is an advantage you have over those well funded startups who have investors to answer to.
-Your goals should be constantly changing and there is no single goal you should have your eyes on. Being a bootstrapped business means you’re more reactive than proactive. Listen to your customers and your gut instincts. Don’t be stubborn and go with the flow that is presented to you.
-You don’t need to be the next great thing because there are only so many of those. Pick an industry that is mature, something every business needs, and for a lack of a better term, boring. But boring doesn’t mean there isn’t room for innovation. It just means it’s not something everyone is thinking about. And that means an opportunity for you.
And now onto specifics.
Be Better and Smarter at Acquiring Customers
Most bootstrapped startups that fail early are usually victims of poor initial customer development that would have led to faster proofs of concept and product-market fit. This is then followed by attempting traditional direct marketing when there hadn’t been enough time invested in validating product/market fit . As a bootstrapped startup, there are many ways to go about acquiring your first customers, none of which should be through “traditional” channels.
In many cases, the founders had already tried buying ads from Google, Facebook, posting to communities like HN itself or Product Hunt, engaging bloggers for “native advertising”, or other typical “post-launch” marketing activities. However, this is a huge risk as it involves precious resources such as money spent, attention wasted, and time lost. The returns aren’t promising either in all likelihood. And the results you do get provide very little confidence in terms of next steps. The reality is, any of these activities done before finding product/market fit means taking a gamble without knowing the odds. This can often mean spending thousands of dollars (or the equivalent opportunity cost in man-hours) with very little to show for it.
The challenge is that with no clearly identifiable paying (and happy) customer that you can extrapolate as a “market fit”, traditional marketing is too early. Spending $X on a project currently bringing in $X/2 should only be done when the results are predictable. It’s often best to find one (or a few) very passionate customers that validate the demand before trying to scale marketing efforts with money. Just don’t do this:
Work on the Right Things and Not Necessarily the Best Things
As a bootstrapped startup ourselves, we talk to other founders almost on a daily basis. Most of the products we’ve seen obviously had hours and hours of weekend equity spent on the product itself. Almost every one either had a wonderful UI, polished marketing page, or interesting core technical concept. There was no lack of effort put into these projects.
I think it’s natural for founders to spend time on the product itself. After all, without a product, there’s nothing to talk about. Every feature added, every pixel pushed is immediately something from which a (fictional) user could gain value. Put simply, working on the project is working on something that scales and it naturally feels rewarding because the differences are immediate and visible.
However, un-intuitively, more time should be spent on things that don’t scale: Time invested in talking one-on-one with prospects; time finding pilot customers; time validating product/market fit.
While this type of work can sometimes seem unfulfilling, it’s the the most rational approach. If startups are tests of the market, then one should seek to maximize the number of hypotheses one can test. This can mean prototyping, talking to potential customers, and then abandoning any dead-ends early and often. Pruning in search of product/market fit is good. Even for small scale side-projects with humble ambitions at the start it’s often the case that we can quickly determine which of them have commercial potential.
Be as early as you can in making this determination before sinking hours/days/weeks/months into something that might not have wings. Avoid building products in a feedback vacuum.
These are things a well funded startup would likely never do or have a sales team do robotically. As a bootstrapped founder however, you have unparalleled freedom to explore unscalable processes and determine ones that work best for your business.
Narrow Your Focus
It’s no secret that most side-projects and bootstrapped startups come from a founder’s personal observations, experiences, or direct needs. This is often described as “scratching your own itch”.
However, when a project grows to reach wider commercial ambitions, it can start accumulating all sorts of features for imagined reasons. This can make the product end up seeming like a hodgepodge of features rather than a cohesive product. Somewhere along the way, in an effort to grow from side-project to full-time project, the product took on too broad a definition. It lost its own identity in favor of broad commercial appeal. The end result is something generic and very hard to characterize.
Rather, I think it’s best to get super narrow with the product definition. Build something that serves a niche that’s small, but growing.
Having a narrowly defined product means having a well defined audience which in turns means you have a focused message to market. Marketing becomes a lot easier when the message is crisp and on point because it will resonate stronger even if the audience at first is smaller.
Going at it and Playing in the Big Leagues
Lastly, the question of committing full-time comes up a lot, and for good reason. There’s a lot of doubt and uncertainty when it’s time to compete to become the best. That’s natural as anyone starting to think hard about marketing a bootstrapped side project is probably starting to consider the first step in turning a prototype into a product; a project into a company.
One conservative way to think about this is simply salary replacement. If you’re pulling in enough from the side-project to cover your living expenses, this seems like a good indicator.
However, I’d consider another criteria: A company usually considers hiring an employee when the additional headcount will scale up revenue. Since you are technically your own first employee, by that logic, your side-project needs to have an identified engine for growth before making the jump. This is how you know growing your head count from zero to one is viable.
This moment is actually very easy to identify because it should satisfy all of the conditions mentioned: passionate customers validating the market, focused message that markets the product, and product/market fit with a clear opportunity for revenue growth.