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Bootstrapping – Weapon Of Mass Reconstruction

Posted on Thursday, Feb 12th 2009

I don’t think I’ve had a chance to share this with you yet. I have decided to name Volume 2 of Entrepreneur Journeys, Bootstrapping: Weapon Of Mass reconstruction.

I am editing it as we speak. Here’s a short excerpt from the prologue:

::

There are approximately 5 million small businesses in the United States with fewer than 20 employees. Another 20 million mom and pops endeavor day in and day out without employees. Worldwide, I am not sure what these numbers are, but I know that they are very large.

My profound hope is that in the coming decade, the numbers will double, then triple and quadruple.
For that to happen, entrepreneurs will not only need to be able to start businesses at a much higher rate, but also survive and thrive at a higher rate. This realization led me to ask a number of questions: Why don’t more businesses get off the ground? And why do so many fail?

Through much discussion, writing, and brainstorming on each topic, I have arrived at a core thesis: Not just entrepreneurship, but bootstrapped entrepreneurship is the true weapon of mass reconstruction.

Businesses often fail to take flight because they cannot raise funding. Well, start with the assumption that funding will not be available until the business is substantially further along, if ever, and that bottleneck is removed.

Additionally, most businesses should not look to raise money. They are truly small businesses – in this day and age even a $5 or $25 million business can be considered a small business, and does not really fit the framework of professional venture capital.

That does not, however, mean that these businesses are not worth building. In fact, a $12 million a year company fully owned by the entrepreneur is a wonderful situation. Full control. Loads of cash. And true independence. Heck, even a $300,000 a year business has many of those same attributes, and is plenty worthwhile.

Now, why do so many small businesses fail? Undoubtedly there are many complex reasons, but a primary one is that they run out of cash. They use whatever resources they have imprudently, and end up destitute. Then comes the unappetizing picture: empty offices, lay-offs, shouting matches and finger pointing. Despair, Depression.

So, in this volume, we explore a dozen stories of entrepreneurs who have mastered the art of doing more with less, creating a great many options for themselves in the process. Making clear for the world at large that prosperity and independence are not mutually exclusive. That in fact they go best together.

::

Let’s start discussing the thesis here: Can Bootstrapping be the Weapon Of Mass Reconstruction?

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Samanth
My thoughts exactly. The stimulus package ignores this
concept. If you have a good product or service you
should be able to generate your own capital.

This needs to be discussed world wide.

The micro business sucess also might be discussed.

john lynch Thursday, February 12, 2009 at 11:17 AM PT

Totally agree with this sentiment. I see so many entrepreneurs who have a great idea targeting a small but profitable niche but have been coached by the valley to powerpoint it into a big idea targeting a big market.

Sunil Bhargava Thursday, February 12, 2009 at 12:05 PM PT

I am a big fan of bootstrapping – it both keeps the business lean and mean, and makes sure the owner really and truly is passionate about what they are doing. It is a very difficult way to go, though. But keeping full control of you company will yield great results in the future!

Jon Thursday, February 12, 2009 at 12:32 PM PT

I think there is a state between raising millions and raising nothing.

It is hard to build good businesses without good people and some capital. So raising a small amount of money may be just fine as long as the expectations of the investors are kept real.

Today raising small amounts of money is hard but I believe that it will get a whole lot easier in a few years. Getting good people is always and will always be the bottleneck.

Sunil Bhargava Thursday, February 12, 2009 at 2:47 PM PT

Sunil,

I think this is a very personal choice. I actually (at this point) prefer one of the two extremes: either completely no outside money, total independence, or a high risk, capital intensive play that allows me to take a wild swing at the fences (e.g. changing education fundamentally), flushed with venture capital.

I know that you play somewhere in between, and I respect that choice, and that’s also a perfectly interesting zone to play in.

I just don’t like the headache of outside investors unless they bring in HUGE leverage.

But then, I am not an inexperienced entrepreneur looking for Mentor Capital. For me, today, money is money. I, more or less, have a good handle on the rest.

For those looking for mentor capital, the middle-ground is more interesting.

Sramana Mitra Thursday, February 12, 2009 at 6:46 PM PT

John Lynch – Yes, yes, yes.

Here’s my Forbes article from before the election on the topic: Stimulus Package For Entrepreneurs.

Unfortunately, I don’t think there is anyone on Obama’s economic advisory team who is a spokesperson for the policy aspects of this issue.

Sramana Mitra Thursday, February 12, 2009 at 6:47 PM PT

My comments on this post were not related to Tandem. I was just agreeing that small interesting tech companies can be built today with little capital. And that capital will be much more readily available (even without a stimulus package).

But just to clarify, we at Tandem are not mentor anything. We just work with entrepreneurs as their extended teams and build companies. We have money and a network that makes our lives a little easier and reduces risk.

We will not get involved in anything where we cannot be very active in helping build the company. Our participation makes the burn rates of our companies even lower than those that bootstrap.

We are just bumbling entrepreneurs that love building companies.

Sunil Bhargava Friday, February 13, 2009 at 12:08 AM PT

Sunil, I think you’re doing something extremely useful, and I wish there were more people like you who are helping entrepreneurs address the low-capital requirement opportunities.

Sramana Mitra Friday, February 13, 2009 at 9:12 AM PT

I am 100% with bootstrapping. This creates an entirely different kind of company culture. Do, innovate, work hard or die. On the other hand, once you start taking free and easy money, the culture is – doing just for the heck for it.

However, I think the title, though catchy, can be different? What exactly is mass creation?

I think it a better one can be Wealth Creation or …

Spandan Friday, February 13, 2009 at 11:08 AM PT

Ever heard of WMD from the George Bush era, Spandan?

Sramana Mitra Friday, February 13, 2009 at 11:21 AM PT

Very much! Actually it is there since 1937, why Bush Era!!

Well, book is yours and of course freedom of thinking is definitely yours:-). Mine is just a suggestion.

Spandan Friday, February 13, 2009 at 7:26 PM PT

Btw, there are serious policy issues (and options) for using Bootstrapping as a WMR. Read this piece I wrote for Forbes before the elections: Stimulus Package for Entrepreneurs.

Sramana Mitra Wednesday, February 18, 2009 at 2:10 PM PT

WMD. So many bad memories. No need to remind us again.

Cliff Friday, February 20, 2009 at 4:25 AM PT

I like the idea of bootstrapping but in areas already hard hit by the down turn, or areas of the country that never really had a boom (such as Vermont) the cost of living is too high for most people to risk starting a business. Most people see family farms going under and large established companies going through layoffs and they become too risk-adverse to strike out on their own.

I wonder if some of the stimulus money going to green businesses may spark growth, but then you’re not really bootstraping, you’re just taking corporate welfare.

Jack Skoda Thursday, February 26, 2009 at 8:04 PM PT

Could not agree with you more. I presented a session to potential entrepreneurs at LaidOffCamp (http://laidoffcamp.pbwiki.com/) where everyone wanted to know about raising VC funds. Luckily a person who used to work at a VC gave them the real story of why it is probably not ideal for most of them in the room. We gave them some alternatives to think about and hopefully it will help some of them start a business.

As an aside, hope you don’t mind that I linked to this article on my blog and in the session notes.

Trishan Arul Friday, March 6, 2009 at 12:54 PM PT

I think, we have far more hyped this concept of startups and businesses, MBA program mes for Entrepreneurs and what not ?

Businesses have been there since ages, people have traded , build products and grown big since stone Age. And there were no professional VC’s then.

In India there are far more bigger businesses (in terms of profit), and they might not have a web portal. They have learn’t it the natural way (bootstrapping).

Take the Baniyas, Marwari’s, gujarathis , they are excellent business people. and in today’s date 90% of them should be college dropouts or not even been to school.

They have learn’t it in practice, its the only educated people , who are trying to put some metrics , formulas or even worse a guide to start or run businesses. Then the VC’s ready to take a share of your sweat business.

I would not argue how and why businesses fail and succeed or write a thesis

At end it would be stick down to what you believe in, think practical and enjoy the journey.

If your set out to make money, probably you will never.

Nihar Monday, March 16, 2009 at 9:46 AM PT

[…] entrepreneur and business woman Sramana Mitra has written about bootstrapping as a weapon for mass reconstruction, but she also discusses tax policy and stimulus issues as well. Infusionsoft’s CEO, Clate […]

Re: President Obama’s Small Business Plan | Infusionsoft Blog Wednesday, March 18, 2009 at 5:10 PM PT

It very much true, one of the major problem for small business is raising / having access to funds at right point of time.

Moreover, when you are small, its rather diffucult to tap vc funds and only option available is mostly debt financing. Debt financing has a ‘cost’ which mean you need to see certain amount of return on day to day basis to service the debt. This would eventually lead to a trap for small startups.

Importantly one of the other cause is that, an educated entreprenuer looks at opportunity cost of running his business and end up taking up an alternative assignment which is more lucrative at that point of time. Due to this reason, you would see most of the succesful entreprenuer has been ‘drop out’

guharajan Tuesday, April 21, 2009 at 8:37 PM PT

Any sized business is worth the effort if the people involved are enjoying themselves.

Cheers to small business,
best,

Chris O.
Referral Key
“Your Trusted Referral Network”

Chris O. Wednesday, April 22, 2009 at 8:44 AM PT

[…] entrepreneur and business woman Sramana Mitra has written about bootstrapping as a weapon for mass reconstruction, but she also discusses tax policy and stimulus issues as well. Infusionsoft’s CEO, Clate […]

Re: President Obama's Small Business Plan - Big Ideas Blog Tuesday, November 20, 2012 at 11:31 AM PT