Let’s talk about bootstrapping
In this series we’ve been exploring the words and novel jargon used to discuss design and startups. To the non-designer, these terms are confusing because they often consist of strange word combinations used in new contexts. Here at IF Conference, we’d like to help make things a little clearer. Today, we’ll discuss another word associated with startups - bootstrapping. We know what a founder is and we know that founders create new products or services.
But what does it mean when someone says that they are bootstrapping their company? Is bootstrapping some strange rodeo sport that involves cowboys twirling boots in the air like they just don't care? And, what does waving boots around have to do with starting a new company? Well, starting a venture may sometimes feel like a rodeo but that’s not what bootstrapping means in this context.
In the lean startup world bootstrapping describes a situation in which an entrepreneur starts a company with little capital, relying on money other than outside investments. This is in contrast to starting a company by first raising capital through angel investors or venture capital firms (terms we'll cover in a future blog post). Bootstrapping could mean borrowing from personal savings, friends or family. But bootstrapping isn't limited to the startup state. It's a valid way for business owners to treat valuable resources at any stage of their business' growth.
Essentially bootstrapping is:
a way to establish and build a company using personal funds or operating revenues
an effective and inexpensive ways to ensure a business' positive cash flow
using personal savings, sweat equity, lean operations, quick inventory turnover and a cash runway
a way to reduce borrowed funds and interest costs
how the entrepreneur can maintain control over all decisions
Bootstrapping comes from the term "pulling yourself up by your own bootstraps." English is full of crazy idioms!