To launch your new business idea, you must be prepared to ‘bootstrap’ your company using your own money.
When starting a company, unless you are a seasoned entrepreneur with a stellar track record of success, you will need to establish a track record to attract outside funding from Angel investors or venture capitalists. That means that there needs to be a ‘bootstrapping’ phase where you use your own money, typically followed by raising money from friends and family. Getting growth capital from sales is the best option, and debt can also be an option for some companies or individuals.
I was an entrepreneur at a very early age. I ran a 50/50 lottery on my junior high school bus. I did eventually get competition after a couple of weeks, so the product wasn’t highly differentiated. I came from a working-class family. I’ve worked hard my whole life. I wanted to go to engineering school. I worked my way through engineering school.
I worked in the technology industry as an engineer, and then as a technical salesperson for many years. I got an MBA. I worked through the process. Many young entrepreneurs who are starting businesses in their teens and early 20s, and they’re not trust fund babies, they have to find a way to bootstrap initially. Maybe they can do it off their credit cards. Maybe they can get their parents or friends to invest.
That very early stage is typically bootstrapping, using your own money or relying on friends and family. You have to get the business idea at least proven to a certain point before outside investors that don’t know you will be willing to put money in. They will have to get to know you to a reasonable level. These are typically angel investors that would do a seed round of investment.
This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.