The 7 best ways to bootstrap your tech startup; a list for #entrepreneurs

I often hear entrepreneurs tell me how they don’t have cash to fund their startup dream and that’s why they are not even going to try.

I understand there are many circumstances where you just don’t have enough cash to fund the business for growth, and many situations where the cash is needed to pay the initial expenses, so I am mindful of telling most folks that this is an excuse and that “you really dont want to get started”.

There are though, an increasing number of ways to bootstrap your business and I thought I’d ask many of my friends who have built a good business to tell me how they got started and generalize the means to do it for others.

  1. Customer funded software assignment. Many software companies actually get started this way. A customer with a problem asks for a bespoke / custom piece of software to be written that they can use. A good friend Greg Anderson, actually got started this way. When Cisco systems wanted a configurator for their order systems written, he wrote the version 1 and licensed it to them. They were the first customer and then Comergent was created.
  2. Consulting assignment: Possibly the most frequently used bootstrapping method ever. This is how I got my start early on. A consulting engagement with 2 companies led me to understand the market and need for reverse auction systems. After 2 consulting engagements, we started on building a generic platform for the same.
  3. Freelance your skills, on Contract. Slightly different from consulting, where you spend most of your time with one client and actually build the product and learn it for the first time, the “freelancing” opportunity is more to help you get “cash flow” to keep food on the table while you work on your startup. eLance (UpWork) is where one of my friends got started, doing small gigs and projects, building websites and working on SEO, for other businesses before starting his company.
  4. Factoring receivables. This is more risky, but one of my friends, Ricardo Jenez got started. eTimeCapital did factoring for a long time. The basic idea is to finance your receivables and ensure you get cash early to fund your expansion or growth of your business. It is debt finance, where you expect to get money from customers, over time, but another company or organization (typically a financial institution) tends to loan you the money before you get it. They do charge you an interest for the loan.
  5. Side projects: Many of my friends have a side project, while they have a full time job. This is to bootstrap their business as well. The side project is typically in a different business than their work, and you have to ensure it is declared free of conflicts of interest to your employer, but this is another way to bootstrap.
  6. Crowdfunding campaign: A good friend actually paid for his book completely with a crowd funded project, which they resulted in speaking engagements, paid consulting and now a good steady software SaaS business. The crowd-funding revenue was enough to last him 4 months, which was the time he needed to write the book and in the meanwhile, he also helped get his speaking engagements lined up.
  7. Credit card debt, savings funding etc. This is possibly the most risky, but also most frequently used mechanism I have heard of. Many entrepreneurs I know were in lots of credit-card debt before they built their company and many others have dipped into their “Rainy Day Funds” to start their company as well.

The bottom line is if you are motivated and passionate, you can find a way to get where you want to be. Else you will find many excuses to make capital a key bottleneck to getting started. Choose wisely.

It is all about the “Shoe” in most cases, but how do you figure that out

I have been running quite a bit daily for the last 1.5 years and have finally developed a love for it. Took me a long time, but I am finally enjoying it. Over the last 4 weeks though, I noticed a sharp shooting pain in the shin. Not ankle, neither the knee, which most people warned me about, but my shin.

In fact I had such a difficult time that for 2 days, that, I was sidelined with the inability to even walk for 15 minutes without a break.

I kept asking myself what changed?

Turns out it was my shoe.

For mid-range runners like me, shoes matter. They dont apparently (too much) for professionals, which is why you see so many of the top runners doing a barefoot race and winning, and they do slightly for the amateur runner (or maybe a lot, depending on your constitution).

I tried changing my diet, my stretching, my warm ups, blamed it on the extreme cold (30 degrees F some mornings when I wake up to run). I also blamed the extra gear I had to wear to keep warm.

Then I realized I changed my shoe and the new shoes were a comfortable fit, but not designed for running, but for hiking.

That’s all I had to change.

Went back to buy a new pair of my “favorite” shoes that I had no issues with for 1.5 years and the pain in the shin was gone in 2 days.

I wear my shoes out in 3-4 months, so this was a big deal.

So back to entrepreneurship – Paul G has famously said, startups are all about Growth.

You might have heard many people also say SaaS is all about churn.

So, if you are an entrepreneur, with all the conflicting information available, how do you figure out what the “it is in your business”?

Is it trial and error?

Is it reading enough online and going with an “expert”?

Is it go with your gut?

Is it a bunch of hypothesis and a lot of testing?

Or is it “data driven”?

I think the answer to that varies by the entrepreneur, like with most things.

The faster you figure out that it is the shoe, though, the more enjoyable and less painful it gets.

What I learned from the #Parisattacks about entrepreneurship and reactions vs. responses

I am not going into the details of the Paris attacks so much as to the reaction / response for entrepreneurs. Most people know the details and if you have not bothered to follow the news, you don’t care about it anyway.

This post, though, is about reacting and responding, with an example of what I think entrepreneurs go through at certain times during their journey.

There will be certain times in your entrepreneurial journey when you have to respond quickly – a large customer does not renew, or a big sales opportunity does not close, or an investment round falls through, find out a competitor who won a large deal by beating you, etc.

There are typically 3 path’s you can take.

  1. Be calm, continue down the path and stay the course.
  2. React to it either in a very defensive way or in a very negative way with communication that similar.
  3. Acknowledge the situation first, asses the new landscape and respond with facts and the outline of a plan.

My preferred model used to be to keep calm and carry on.

I am not sure that’s appropriate anymore based on what I am hearing, observing and reading from various reactions and response to the #ParisAttacks.

I believe this is just an observation and I don’t have a fully formed discipline yet.

On one hand I see several people being “calm” and providing the same facts as they did before, with a “stay the course”, the “plan is the right one all along” – specifically the President of the United States and few others.

On the other hand I see many others react in a very defensive way with a range of emotions from “ban asylum seekers” to “register immigrants” and “bomb the militants” and other extremes.

I used to and still admire people that are very calm in the face of extreme pressure, but I am not sure that in the face of a rather big change in the landscape that you can calm everyone else who is upset, angry, sad or emotionally spent. The calmness seems to anger them or upset them even more.

Similarly on the other side, I tended to loathe people who would react and make incendiary, knee-jerk comments, as well, thinking of them as juvenile or unsophisticated. That’s not right as well, because they are tapping into emotions that most people do face and they need an outlet. As my daughter said the other day – Its okay to cry, since I feel better.

I do think now that the best option is first to acknowledge the issue, then break it down into piece parts, understand what the new landscape, outline the changes or lack of changes if any and  address the new environment with changes to the plan.

Here’s thing I learnt, and my takeaway as an entrepreneur.

Even there are no real big changes to your plan, acknowledging the new changes, with some cosmetic and superficial changes, immediately has a lot of value.

As an entrepreneur you might still not change your plan to go after other customers if you lose one, and focus on winning other accounts instead and choose not to lay-off any of your good talent.

Not saying and communicating anything at all would be horrible.

Acknowledging, it and not making any changes, because your plan was good all along, may be the right approach, but it is not going to be perceived well.

Best is to make some smaller, but noticeable changes, with a promise of deliberate, thoughtful response given more time.

I think that’s the best course of action, than a tame “no change” response.

How should B2B companies think about integration with legacy systems that an enterprise already has?

Yesterday I had the chance to talk to an entrepreneur and CEO  of a startup, in the CRM B2B space, who was building a sales productivity application for lead generation.

Over the last few years they have built the product, acquired 1400+ paying customers, and raised over $10 Million in funding.

The current product can be used as a SaaS application, standalone, and many customers continue to do so, but increasingly many sales teams are asking for an integration with Salesforce, their primary Sales Force Automation application.

The CEO reached out to me to ask for my opinion on other products in the market and the possibility to Go to market with them if the integration was completed.

In this particular case, the startup’s product was being used by the individual sales representative for personal productivity and to save time, the Salesforce CRM system was being used by the managers and Sales executives to track deals, team productivity and pipeline.

So, while there was an incentive to integrate, it would benefit company’s customers, and help their users be more productive, the likelihood of them really being displaced by another solution did not dramatically change because of this integration.

The CRM system was / is still the “system of record”, and that was not likely to be changed, but the startup’s product would live and die by individual sales representative’s ability to get value from it – a more tenuous position. The cost of integration was non-trivial as well.

I think most entrepreneurs in B2B face the challenges of “legacy” or “systems of transaction and record” in the enterprise – be it old, behind the firewall systems, or newer cloud based applications as well.

The main value(s) smaller SaaS companies see from integration are:

  1. Become a part of the process and system for a large company, ensuring annual commitments and increase the “switching” costs.
  2. Ability to increase their market opportunity by going to the installed base of customers of the legacy software solution to sell their product and showcase scenarios where it can enhance productivity for the customer.
  3. Speed time to market adoption by looking at Go to Market (GTM) opportunities with the legacy vendor so the installed base can be co-marketed to easily without friction.

Of these the, prioritization for the startup tends to be 3, then 1 and then 2.

For the customers, it usually tends to be 2, 1 and then 3.

For the legacy vendor the prioritization is not so clear.

If they are growing they dont see the GTM with the smaller vendor valuable at all.

If they are not growing, then having another product integrated into their existing install at a customers, furthers their “cost of switching” and ensures they will continue to be a customer, which is beneficial.

Many other criteria also are considered – if they think of the startups product as ancillary, or enhancing their product, they might actually prioritize it similar to how their customers do.

If, however the legacy vendor thinks of the product built by the startup as core, they might try to build or acquire the startup.

The key part is acknowledgement by the startup and partner that it is not always an obvious answer and in many cases the statement “Lets do what’s right for the customer” – is not well received by the party that perceives the outcome “less than optimal”.

If you were a smaller startup, integration is critical only if the user / customer demands it and your deal depends on it. I would go so far as to say don’t expect the legacy vendor to embrace you right away.

In fact, expect them to notice you, have internal discussions to “build it in-house” or “acquire” you before they decide to partner or “Go to Market” with you.

You can never go wrong if you start the answer to any question with the words…

“…Here is what I know from my customers -”

Every Thursday I spend 2 hours (4 -5 sessions of 30 min each) with new entrepreneurs to understand their market, product or give them some feedback, or help them with Go-To-Market, funding frameworks, etc.

During these sessions, I tend to hopefully ask a lot of questions and usually point them to a blog post for a framework I have already created that can help them think about the problem.

Which is the main reason I write blog posts – to help as many people with the questions they might have based on 2-3 instances of the same question that I get from other entrepreneurs.

Most entrepreneurs answer questions in 3-5 different ways, depending on their experience, background and how thoughtful they are.

The first, tend to be wanting to answer every question with a predetermined answer.  Regardless of the question asked, they will give me a standard response.

The next level tend to understand the nuance and maybe will try to “personalize” the standard answer to the question.

The best ones will begin with “Here is what I know from my customers …” and work backwards from there.

Regardless of the question.

I have found in my experience, that these entrepreneurs are the most experienced, most relevant and very fact based, with some anecdotes.

The vast majority of the rest who don’t base their answers on customer experiences, tend to be defensive, not very metrics or data driven, and rather dismissive.

Even questions about fund raising are customer first.

“Here is what we know from our customers. We are growing at 10% monthly. New customers are signing up but are finding issues in their ability to create templates is making it less productive immediately out of the box. To make it faster, we need to add template modules, which is an engineering effort.

Also our existing customers are opening 7% support requests monthly. So, we need 1 person in engineering and 1 in customer service. We’d like to grow at 20% monthly. So, we need a marketing person who understands SEO and SEM since most of our customers have learned about us via Search.

So with our existing team plus 3 additions for a 18 month period, to support and get to XXX customers, we need $750K in funding”.

Great answer.

Questions about hiring begin with customers as well.

“We are finding that customers are expecting the template module needs to be responsive, since most of our customers use mobile to start a campaign. Then they move to the web for sharing and administration. We also have 30 requests for new campaigns per week from each and every customer.

We will need someone that scales to 40K requests per minute, because our current customer and campaign metrics are trending in this direction. With our current architecture we chose Angular.JS since it was something we knew but also helps our customers by helping build the responsive design faster.

We need to hire someone that has scaled to this level, has an understanding of template management and with some experience with building B2B apps – which is what we are looking for in our JD”.

3 critical questions technology professionals have before moving back to India to a startup #SmartMove

Yesterday, Accel partners had an event in Seattle as a follow up to their events in San Francisco and the Bay area. This was a part education and part recruitment event for Indian technology professionals who want to move back to India to work at a startup.

As the Indian startup ecosystem matures, there is a critical need for talent, and what better place to seek it than the startup and technology hubs in the US, where there are a ton of Indians? The SF bay area, Seattle, New York are places where many young Indian technology folks have this ever secret (or not so secret) desire to move back to India.

The challenges, for these professionals, have always been 2 fold so far – a) seeking great quality of work – challenging, innovative and cutting-edge and b) getting fairly compensated for the same.

Or so I thought.

Turns out, the new millennial generation has other questions in mind. These recent entrants coming from India in the last 5-10 years and in their 30’s have very different questions they want to address than the ones the folks in their 40’s and 50’s had.

Which is not surprising, given that they have a more recent perspective on the things happening in India and have likely left for the states in the last few years, after the startup boom has taken over much of the new hiring in India.

Many of them have 3 interesting perspectives which I found out from my discussions with the 30+ people who attended the session yesterday. Some of them are things they learned from their friends, some they read on Facebook and Twitter and the rest they see during their annual visit to India to meet friends and family.

First, they believe that the “startup” boom is largely not real and there is one Flipkart (most of them think they will lose to Amazon in the long term or get bought by them).

Second they believe that the startups themselves are mostly copycats of US technology companies, with very little differentiation and innovation.

Finally they believe that the boom time for startups will be followed by a bust and at that time, in India, getting a job at a larger company, will be much harder.

These, while fair impressions from afar, they speak to how little the perception has changed among the Indian community for startups from India.

Perceptions aside, the main 3 questions I have gotten from younger entrepreneurs since I have moved back are the following:

  1. Which startup should I join? Most of them almost exclusively want to (not judging here) join a “stable startup” – which in itself is an oxymoron, BTW. Parse, through that statement, and the reality is they want a “stable” job at a smaller company than Wipro or Infosys, get paid very well and have a good upside, compared to working at a larger multi-national like Microsoft or Amazon in India. When you ask them what their interests are beyond making money and working on “cool tech”, you will end up getting specific areas of technology, such as drones, block chain, etc.
  2. Is the culture at the startup like an American / global company or still hierarchical like you will find in a large Indian company? Parse through that question, and what they are really asking is will I have the ability to influence decisions and make an impact on the direction and strategy or just be another employee at another startup. Another part of the same question, asked differently is “Will my experience here in the US be respected or will I be told, that’s great, but it does not work here in India”?
  3. What can I expect in terms of pay and benefits? There’s nothing to parse here. They want similar or “identical” pay to what they make here, with the benefits of being at home with family. Yesterday, Dinesh and Narayan from Accel gave them indications that they can expect from 40% – 60% of their pay they are making here in the US as their salary in Bangalore. Their benchmark was dependent on not salaries, but the “value” the employee would bring to the startup founders in India.

If you are an entrepreneur in India, at a later stage of your company and are looking to tap into talent from the US, especially it the areas of product management, engineering or marketing, I’d say these are the top 3 questions you will get – Why should I join your startup (vs. Flipkart, Myntra, Snapdeal etc.)? Will I have an impact in the direction an culture? Will you pay me well and will I have a great upside?

Which is not at all surprising, given that’s the same questions you’d get from Indian employees as well.

Except the employee from India, will likely have expectations of “bonus”, “perks” and a whole host of other benefits, which the US employees will take for granted, I suspect.

The employees from India, though, from my experience order the questions differently.

The first question is of the pay and benefits, the second of stability and the third of “location” – Koramangala vs. Indiranagar or Gurgaon vs. Greater Kailash or Andheri vs. Navi Mumbai is a big deal to them.

66 days to customer development

It has been proven by research that it takes 66 days to form a new habit (pdf version). That’s a long time. For entrepreneurs who are trying to do the first stage of customer development, the formation of the habit to keep talking to customers, hearing “no”, and breaking past the initial resistance to go back to product development instead of customer development is high.

Last week I had a chance to meet with 13 companies that were part of the new cohort at 9MileLabs, an accelerator program in Seattle, where I am an advisor.

The companies were meeting their mentors for a mixer and had a chance for the first time and each company had 1 minute to present what they did.

What I have observed is that thanks to the numerous demo days from accelerator programs and many “pitch sessions”, the overall quality of presentations has improved dramatically over the last 3-5 years.

Just listening and observing coached entrepreneurs is a great experience for those who are not part of any program, which gives them pointers on how they can refine their own pitch.

Over the course of the next few months, each of the startups will get a chance to pitch multiple times and refine their presentations, but I doubt the will really practice 66 times or do it 66 days in a row – not that it is possibly needed.

The thing that I think is the most interesting is the #1 question most of them had was

“How can we show positive traction with customer success when we are at the accelerator”?

The best way to do that I feel is a framework to make identifying, managing and acquiring customers a habit as much as coming in to work at the accelerator.

If that takes 66 days to do, then the best time to start is now, day 1.

If you have a ritual each morning, (similar to brushing your teeth on a personal basis), then I would start with the #1 research driven methodology to Growth Hacking for startups – review your metrics dashboard.

Then form a habit to break down your complex customer acquisition process into a simpler step first. If your sales process is multiple steps and you have to get customers over multiple weeks / months, I’d just start with the “fill the funnel for 66 days” first.

In my own example, it was closer 90 days, not 66 to blog daily.

Initially the bar was pretty high – I wanted to write at least 500 words, with one framework and build one tool that folks could use. It took me close to 45 minutes per post.

Now, 9 months later and after missing only < 5 days, it has become a habit. If I don’t exercise or write a blog post, it gnaws on me enough to feel guilty, that it has become a ritual.

The key is also to breakdown the habit of customer development into top of the funnel activities, moving along the funnel activities and closing activities.

Instead of doing them all together, I would focus on 1 week increments of moving a set of activities for repetition during that week to make the habit easier. Just focus on building the pipeline initially then nurturing, etc.

It would make more sense to do otherwise, but what I found is that becomes a “complex” habit and hard to repeat daily.

Similar to trying to lose weight, I would focus on one habit – eating less. Or more specifically eating less sugar first, and then working your way into other more complex habits.

The personal blog of Mukund Mohan


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