Bootstrapping Your Business: Start and Grow a Successful Company With Almost No Money

Rags-to-riches entrepreneurs don't usually brag about crashing on a friend's couch and eating cheap food. But John Vechey, 28, proudly recalls the early penny-pinching days of his Seattle gaming company, PopCap Games, which he co-founded with partners Brian Fiete, 29, and Jason Kapalka, 36, in 2000. After leaving their steady jobs at gaming companies, the trio pooled $100 to purchase business cards, used their own computers and convinced a friend who owned an ISP to give them server space for free. Working first from Fiete's condo, then from Vechey's apartment, they started with a simple business model--to make games and license them to websites.

In doing research for his book, Bootstrapping Your Business: Start and Grow a Successful Company With Almost No Money, Greg Gianforte found that less than 1 percent of startups raise money. A bootstrapper himself, Gianforte started RightNow Technologies in Bozeman, Montana, in 1997, went public in 2004 and had 2006 revenue of more than $110 million. He says having an open mind and experimenting are key. "Once you have scale and mass, you do things differently," Gianforte says. "In the early startup phase, you can throw things up against the wall and see what sticks."

That's what Amy James did. After selling her first company in 2000, the former teacher negotiated the right to retain a database of state learning standards that she had spent two years typing into a Microsoft Access file. In 2001, James decided to take advantage of that year's No Child Left Behind Act and put her database to work. "I made a flier saying I could align curriculum with learning standards and faxed it to publishers," she says. "Scholastic called immediately. Then LeapFrog. Then others."

For the cost of office supplies--about $100--James was in business, launching SixThings from her New York City apartment. She made $30,000 her first year, consulting with publishers, reviewing educational programs and curricula, and writing reports analyzing how these measured up to state and federal learning and testing requirements. James ramped up significantly in her second year, hiring two curriculum development employees and one computer programmer. In addition to analysis, the company now sells electronic databases of learning and testing requirements and licenses software that provides compliance reporting along state and federal guidelines.

But James was struggling to pay her rent and knew something had to give. Her mother was a retired teacher back in her hometown near Oklahoma City, and James could tap her mom's friends as workers. So she moved into the same apartment complex as her mother.

"It just made sense," says James, 40. "My mom's friends were starting to retire. My dad was a principal. They were all on state benefits and had a great work ethic." With her mother as her first Oklahoma employee and her father as a sounding board, she began to rebuild her business.

James used open source software and worked from home for the first three years of business, finally moving into a 6,000-square-foot Oklahoma City office space in 2004. She furnished that space, including the refrigerator, she says proudly, for a mere $1,900 by visiting vacated offices and offering cash for the abandoned furniture. She continues to pinch pennies, even after bringing in sales of more than $2.1 million last year. Of her 20 full-time and 43 part-time employees, the vast majority are her parents' retired friends. She has also re-established an office in New York City.


Think Big, Spend Small
Of course, one of the secrets to bootstrapping is choosing a business where you can do the work yourself. Ajay Goel, 29, was living with his parents in 2000 when he created the first version of JangoMail as a side project for a client who needed a web-based e-mail marketing solution. Because he had a computer and no overhead, Goel was able to fine-tune the product, then take it to market.
JangoMail, with its web-based e-mail broadcasting and marketing system that allows companies to create, send and track e-mail campaigns, projects sales of $5 million for 2007. While the four-person company works virtually, Goel invested in 900 square feet of office space in Dayton, Ohio, to give the company a home base and employees a place to work when they come to town.
More at:http://www.entrepreneur.com/magazine/entrepreneur/2007/july/180354.html