The pros and cons of bootstrapping in business

The expression ‘pulling yourself up by your bootstraps’ evolved to mean ‘attempting to do something without outside help’. In business, ‘bootstrapping’ is the practice of building a business without outside capital investment.

Financed at the owner’s expense through internal sources, such as savings, credit cards, mortgages and loans, the bootstrapping business model may be the best option for those with a lack of experience in formulating business plans or attracting investment.

Securing external funding can be challenging and stressful. Some startup founders don’t want to spend time searching for an investor – or share their income with one. The ‘bootstrapper’ gets to focus on the key aspects of the business, from product development to sales.

Limited finance also gives rise to more innovative solutions in business development and the bootstrapper reserves the right to all ideas and assets accumulated during the development of the business. Ultimately, this makes a business riper for investment once it’s off the ground. In the meantime, the business founder has complete freedom in decision-making, independent of investors’ opinions.

Like with all business types, the bootstrapping models most likely to succeed are those providing a product or service that solves a problem. Email marketing platform Mailchimp is a prime example of successful bootstrapping. Self-funded and owned, it was founded in 2001 and grew into a business with annual revenue of €700 million before being acquired by Inuit in 2021 for approximately €12 billion.

Another bootstrapping example, Tough Mudder, was established with an initial investment of around €10,000 from each of its founders. Today, it’s one of the most renowned obstacle racing companies in the industry with more than two million event participants to date.

On the flip side, the right investors can make useful mentors, providing invaluable insights at the start of the business. Without an invested mentor, it’s prudent to secure an independent one and also develop a network that can provide support, from sharing useful contacts to second opinions.

Bootstrap business Astral Tech, an end-to-end digital service platform for energy and water retailers, was founded by CEO Jeremy Thomas. As a 100% shareholder, he builds his network at industry events. This year, he attended GITEX (Gulf Information Technology Exhibition), an annual expo in Dubai bringing together tech professionals, where he talked about the benefits of bootstrapping.

“[Astral Tech] grew from nothing. Now, we’ve got about 20 [staff] and global brands like Shell, EDF Energy, and we’ve been able to bootstrap into the US as well as the UK,” says Jeremy. “The main advantage is that you end up owning all of it. You also keep your options open. So, if you want to take on investment later, you can. If you do that, you’ll get better value than if you took investment earlier.”

Providing utility retailers with tech solutions such as Content Management Systems (CMS), Astral Tech is continually evolving its products and, with that philosophy, it was able to sell its products sooner rather than later.

“The key was really selling that product early,” explains Jeremy, “so not waiting for perfection, but finding a customer who was prepared to go on a journey of our continued improvement.”

Fortunately for Astral Tech, with clients such as Shell Global as early adopters of their products, this bootstrap startup has big-brand endorsement and revenue coming in. As Jeremy says, in the B2B world, customers are your investors.

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