Today I read a post from Techcrunch (been too long since I did that) that contained a letter from Bill Gurley of Benchmark Capital (VC Company). In this letter, Bill instructs his portfolio companies on what’s happening in the market and what a privately held company should be doing amidst this “US financial Crisis.” It’s a great read that was very informative about what’s going on.
Of course, at the end of the article I thought to myself that this is the perfect time for bootstrapper start up companies to thrive.
Bill suggested that these VC funded startups conserve capital and look for opportunities. Every VC funded startup can and should be looking at their burn rate and “months of cash.” As a bootstrapped startup, you’ve already lowered your burn rate to a barely survivable level of expense. You already know how to do more with less. Many of the VC funded companies won’t know how to scale down and scaling down will usually mean they’ll be offering less services. If you were able to compete on some level with these major VC backed startups, then the advantage just turned your way.
Let me give you an example. I’m currently working on a group of websites related to TV. The major TV related websites are ones like BuddyTV and TVGuide. I can’t even imagine the burn rates these websites have with all of the staff they use to develop their content. I don’t know the specifics of their financials, but I’d be very surprised if they were profitable.
Instead, my small network of TV websites is already profitable, because I’ve gone out and built it with almost no cash outlay. Do I have to cut any of the staff that I’m paying? No. Do I have to get a smaller office space? No, I work from home. etc etc etc. Sure, I might see a dip in my various revenue streams, but I’m certain that I could withstand the dip in revenues much easier than these other TV websites.
This may not be true for all bootstrappers, but I’ve been absolutely insane in how I’ve bootstrapped. I’ve tried to take out almost every financial risk except for my time spent. Does that mean that I might not have a $2 billion pay day like Youtube? Maybe not, but I’m doing something I really enjoy and making some pretty good money at the same time.
How big can I grow it? Time will tell, but for now I’ve found a nice niche and a lot of growth available. Especially now that my major competitors will be cutting back on their ability to cover everything. Some will be able to focus and do well. However, as a bootstrapped startup, I’ve already got my focus and I’m hammering away on that niche.
That’s Advantage bootstrapper in my book.