What Is Bootstrapping? Why A Bootstrapping Business Is The Way To Go

The general concept of Bootstrapping connects to “a self-starting process that is supposed to proceed without external input.” In business, Bootstrapping means financing the growth of the company from the available cash flows produced by a viable business model. Bootstrapping requires the mastery of the key customers driving growth.

Inside the Bootstrapper Bible

A bootstrapper isnʼt a particular demographic or even a certain financial situation. Instead, itʼs a state of mind.

That is how Seth Godin described bootstrapping in his “The Bootstrapper Bible.”

As firms that are venture capital-backed get so much media attention, it’s easy to miss the other 99% of businesses out there which made it and which built a sustainable business model by bootstrapping.

That’s because by definition firms that are looking for venture capital need continuous PR coverage to play the “look cool game” to ease the hand in the pocket of the venture capitalist’s next door.

Thus, it’s easy to forget of the army of entrepreneurs that from day one decides to go the other route and first build a viable business model, then and when they feel the time is right (if it ever is) take outside money to scale the business.

Let’s start with a simple definition of bootstrapping.

What is bootstrapping?

The general concept of Bootstrapping connects to “a self-starting process that is supposed to proceed without external input.” In business, Bootstrapping means financing the growth of the company from the available cash flows produced by a viable business model.

This means using customers as the primary source of cash to grow the business. The bootstrapping process is critical when building up a new company as it enables us to reach product/market fit without relying on external money, which might distract the founders from the customer development journey.

But are all businesses made for bootstrapping?

Not all businesses can bootstrap

It is essential to distinguish between companies that have very high barriers to entry and those that don’t.

Indeed, due to regulations, technological development, or capital requirements, in general, bootstrapping might become hardly feasible.

If you’re building up a whole new technology in a whole new market, no matter how good you are, there will be no customers for years to come. That is because the development of that market requires that technology be mature.

It also requires an ecosystem to develop. Therefore, in these cases, bootstrapping not only is not a good idea, but it’s not viable. In that scenario, you’ll need outside capital and substantial resources to keep going for years before seeing the first customer.

Instead, if you’re launching a business in an existing market, where other business models proved viable, bootstrapping is the way to go.

Thus, you want to first understand the playground you’re in, to identify the best way to go. Steve Blank identifies four main types of markets:

A market type is a way a given group of consumers and producers interact, based on the context determined by the readiness of consumers to understand the product, the complexity of the product; how big is the existing market and how much it can potentially expand in the future.


  • Existing markets: usually well-defined with existing customers and well-known competitors. This is straightforward, and in this kind of market, there isn’t necessarily a dominant player or monopoly. 
  • Re-segmented markets: when a market, for instance, is taken over by one or a few companies (monopoly or duopoly), re-segmentation is the way to go. Thus you enter by addressing a need that other dominating businesses can’t tackle. In this way, you can distinguish your brand (think of the case in which you target a specific niche of that existing market). We discussed several times how DuckDuckGo entered the search engine market quite late, and when Google was already a monopoly by targeting a specific niche, users’ who cared about privacy.
  • Clone markets: this is about copying existing business models to transpose them either in other markets (think of how Baidu built its fortune in China due to the impossibility for Google to take off). Or taking a successful business model in a market and transpose it into an adjacent one. Think of the “uberization” of several industries.
  • New markets: in this scenario, your solution is such a novelty that is very hard to identify a potential customer or competitor.

Now, if you find yourself to be in a new market, or you’re trying to clone an existing business model in a clone market, where regulations might make it capital intensive to enter, bootstrapping is not the way to go.

That’s because the market type and therefore the territory will determine the kind of company that you can build, at least in the short.


And therefore, also the go-to-market strategy you can undertake:

A go-to-market strategy represents how companies market their new products to reach target customers in a scalable and repeatable way. It starts with how new products/services get developed to how these organizations target potential customers (via sales and marketing models) to enable their value proposition to be delivered to create a competitive advantage.

However, assuming you are in an existing market, or a re-segmented market, that is where the opportunity lies for bootstrapping your company. 

Let’s now dive into what bootstrapping means, what are its commandments, and why it makes sense.

The Bootstrapper’s commandments

In Seth Godin sets the commandments for the bootstrapper.

He highlights the posture of a bootstrapper:

  1. Ship real work.
  2. Do it now. Not later.
  3. Serve clients that are eager to pay for what you do.
  4. Resist the urge to do average stuff for average people.
  5. Build and own an asset that’s difficult to reproduce.
  6. Scale is not its own reward.
  7. Charge a lot and be worth more than you charge.
  8. Create boundaries for yourself about what you do (and don’t do).
  9. Become ever more professional.

Those principles are fundamental to internalize.

Bootstrapping is not easy, as you’re developing the business without outside resources. Thus, you need to be very good at understanding what’s your market, who is your niche, and what the customers in that niche want.

That’s because customers are your investors.

Customers are your investors

In a bootstrapping mode, you don’t have venture capitalists giving you a free ride to get clear about your business. Therefore, customers, purchasing what you make will be your investors.

It is essential to highlight that also, other key partners will act as investors. Your suppliers are also investing in the business if they extend the credit terms.

Your employees are your investors if they work extra hours to get the business off the ground.

Those are all key players that will make your business model viable.

The company’s vision is in your hands

Another thing to understand about bootstrapping is you won’t rely on someone giving you the vision for your business. You’ll need to have a clear vision and mission for where you want to go.

As you’re not taking outside money, you will be in control and in charge of your business, which requires a lot of focus.

Focus as the North Star

I am a bootstrapper. I have initiative and insight and guts, but not much money. I will succeed because my efforts and my focus will defeat bigger and better-funded competitors. I am fearless. I keep my focus on growing the business—not on politics, career advancement, or other wasteful distractions.

This is what Seth Godin says in his “The Bootstrapper Bible.” A bootstrapper can’t lose focus. Money is scarce at the beginning and either she manages to build a profitable business early on, she risks failing.

Speed of execution

My secret weapon is knowing how to cut through bureaucracy. My size makes me faster and more nimble than any company could ever be.

Once again, Seth Godin makes a good point where he mentions that a bootstrapper needs to focus on being faster and more agile, and avoid bureaucracy or politics. Where the founder who took a substantial investment from venture capital might be in the position of having to show how she is putting that money in motion.

The bootstrapper doesn’t have anything to prove except that building a viable business model, for the employees and the customers.

Mastery and Passion

When you build a company, especially in a re-segmented market, you better be passionate and be willing to master that niche. Otherwise, it will be hard to gain a strong position where incumbents have already an established brand.

In short, you want to look at being the best in the world for that vertical, which requires a lot of mastery.

A little to lose but a lot to gain

As you bootstrap your way up. You’ll initially have very little to lose.

That’s because you don’t have an established business model. And where incumbents can’t tweak their business model, as they would risk killing their cash cow – think of the case of Google (now Alphabet) if it were to stop tracking users, it would lose its advertising business which makes up most of its revenues.

You can go all the way in. You can experiment with your business model and make money in unconventional ways.


If you’re bootstrapping your way up, you need to understand you are the most important salesman of the company. Thus, you need to go in understanding your market, your customers, and why your solution makes sense to them.

You need to be able to communicate it. You need to talk to your community regularly and that how you enable to bootstrap.

In it for the long-term

A bootstrapper is in it for the long-term. As we’ve seen, bootstrapping requires mastering and passion. And those don’t go along with short-term thinking.

Bootstrapping is about survival

A lot of this manifesto is about survival. A true bootstrapper worries about survival all the time. Why? Because if you fail, itʼs back to company cubicles, to work you do for someone else until you can get enough scratched together to try again.

Once again, Seth Godin highlights a critical point in “The Bootstrapper Bible,” there is no alternative to the failure of your business. That is why you need to be paranoid about survival.

Start from a proven business model

To be a successful bootstrapper, you don’t have to reinvent the wheel. You can start from a proven business model and copy it. Copying a business model won’t get you far, so you’ll need to add your twist, or improve X times on that existing business model.

You can start by looking at how exiting companies organized their distribution, sales, and marketing, how they positioned themselves, to bootstrap your way up.

Differentiate from the incumbent

An entry strategy is a way an organization can access a market based on its structure. The entry strategy will highly depend on the definition of potential customers in that market and whether those are ready to get value from your potential offering. It alls starts by developing your smallest viable market.

The fact that a company controls a market limits competition. However, usually, that same company won’t be able to satisfy the whole market. If you’re good at listening to those people who are not satisfied with the incumbent, you can build a business on top of that.

Thus, be careful at what opportunities an existing market hides. You might think that as a market is dominated by a large player, a monopolist, fewer chances you have.

However, you’ll find out this is far from reality. The longer a company has been a monopolist, the more it might have imposed unfavorable conditions to its end customers, which might grow unsatisfied over time.

What the bootstrapper has that the big corporations don’t?

As we have seen so far, the bootstrapper starts from an unfavorable position when it comes to money and human capital. However, the bootstrapper also has a few unfair advantages.

It is focused, it is fast in executing, it has nothing to lose, and it can grow its brand equity very quickly, due to an intimate relationship with its customers and the ability to charge higher prices if going for a niche. Coupled with the inability of the large corporation to cover that niche.

A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

Beware, a bootstrapper is not a freelancer, but an entrepreneur

A freelancer sells her talents. While she may have a few employees, basically sheʼs doing a job without a boss, not running a business. 

In “The Bootstrapper Bible,” Seth Godin highlights the critical difference between the bootstrapper, which is by nature an entrepreneur, and a freelancer.

In today’s world, that might be easily confused. But Seth Godin helps us understand the difference:

An entrepreneur is trying to build something bigger than herself. She takes calculated risks and focuses on growth. An entrepreneur is willing to receive little pay, work long hours, and take on great risk in exchange for the freedom to make something big, something that has real market value.

When to play the venture capital game?



In my interview with Ash Maurya, we looked at when it made more to look for money from venture capitalists. And it was clear that the best time for that is scale.

As we’ve seen scale is not a prerogative of the bootstrapper, which is in the first place, building a business for the long haul.

However, if the bootstrapper decides that it makes sense to scale the business further, at that point, when product/market fit has been achieved, money and the competence of a venture capitalist might help.

It is worth mentioning that if you got to that stage, you’re in a desirable place to be. That’s because you managed to pass the hardest obstacle of an entrepreneur’s path (the product/market fit) and now you have the option to keep growing organically, or scale.

In that circumstance, you’ll be able to negotiate the best deal to secure capital and to keep control of your company.

In a few cases, even when product/market fit is achieved, if the competition has picked up quickly, the business might still be in jeopardy, as scale might become a necessary condition to survive.

In that scenario, either you plan for an exit, or you get ready to blitzscale!

Scale requires money, and network

After product/market fit, you proved your business model at the point where money, which before was secondary, it becomes critical.

That’s because scaling becomes a game of dominating a larger and larger share of a market. Let’s be clear, scaling up is in many cases a matter of choice. And as you scale, you might lose or change your initial vision.

Also, scale requires (especially in industries dominated by regulations) a strong network of people that can help pass involve large stakeholders.

Thus, in that scenario, it makes sense to reanalyze the market and see how it has changed. If competition still enables you to keep growing organically, then you have the option to keep bootstrapping your way up.

If market conditions have changed, that is where you want to look at money as a way to defend your position, by scaling or niching down again!

How MailChimp bootstrapped to over $700 million in revenues

How did MailChimp grow from scratch to $700 million in revenues (as of 2019)? 

That would require a whole book. Yet, as a quick intro, MailChimp’s founders had a web design agency focusing on enterprise clients. And by the early 2000s, they had designed an email marketing service for small businesses. 

Therefore, initially, they used the money from the web design agency to fund MailChimp. And only in 2007, they would shut down the web design agency, to focus a hundred percent of their time on MailChimp.

It took them another couple of years to transition MailChimp from an email marketing tool to become what they call an all-in-one Marketing Platform, with a set of other functionalities.

In September 2009 MailChimp went freemium. Its user base went in one year to 450,000 users. Ever since MailChimp has grown into a successful company.

Later on, MailChimp would use freemium as a growth strategy. However, MailChimp didn’t start as a freemium. When they launched the company back in 2001, they didn’t even have a free trial.

The freemium is usually a growth and branding strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through either marketing or sales funnel. The free users not converting in customers help spread the brand.

They didn’t have a clue of what the freemium was.

They only started to consider the freemium when they realized that each paying customer was able to sustain at least nine unpaying customers.

As remarked by MailChimp:

We’d never consider freemium until our “1” was big enough. Enough to pay for 70+ employees, their health benefits, stash some cash for the future, etc.

They leveraged the data they had to decide what sort of pricing made more sense to them.

As highlighted on by  co-founder and CEO of MailChimp, Ben Chestnut:

Ever since inception, I’ve been fascinated with the art and science of pricing. I’ve tinkered with pay-as-you-go and monthly plans for $9, $9.99, $25, $49, $99.99 and so on. We’ve changed our pricing models at least a half-dozen times throughout the years, and along the way we tracked profitability, changes in order volume, how many people downgraded when we reduced prices, how many refunds were given, etc. We’re sitting on tons of pricing data. When we launched our freemium plan in 2009, you betcha we used that data to see what would happen if we cannibalized our $15 plan. If we had started with freemium at ground zero, the story would’ve been different.

From there the company kept building a loyal user base with its free plans and by having already a solid paying customer base, it could also afford to add features to its marketing platform and make its SaaS product sticky. 

In the meantime, the freemium offering enabled MailChimp to grow its user base quickly (the year after the launch MailChimp user base grew by 5x, it’s paying customers by 150%, and its profits by 650%). 

Over the years MailChimp would focus on expanding the capabilities of MailChimp to have it become more and more a marketing platform.

As a quick recap: 

  • MailChimp founders used the resources from their web design agency to develop a scalable product. Email software for small businesses.
  • It took them a few years before the founders could shut down the web design agency and focus a hundred percent on MailChimp.
  • The company focused for almost a decade to build a sustainable customer base, able to potentially cover the cost of a forever free plan.
  • By 2009, MailChimp launched its forever free plan, and it quickly expanded its user base, paying customers, and profits.
  • The next decade would be spent in developing more and more features to make MailChimp more of an all-in-one marketing platform, rather than just an email software company. 

Airbnb: the most exemplar bootstrapping case study

Back in 2008, venture capitalist Paul Graham wrote a piece entitled “Why To Start A Startup In A Bad Economy,”

Why To Start A Startup In A Bad Economy,

He remarked on a few key points on why resourceful people should start a company during also a time of recession or a bad economy. 

About a month after I wrote that essay, we funded a company called Airbed and Breakfast. And one of the reasons they started to grow during the winter was that, during the recession, hosts needed the money to pay their rent.

paul-graham-tweetSource Paul Graham Twitter

Airbnb at the time was tapping into the existing travel market, however, it was proposing a whole new way of doing it. That didn’t stop them to start the business. And together with Paul Graham, they figured a simple objective, ramen profitability

Serial entrepreneur and venture capitalist Paul Graham popularized the term “Ramen Profitability.” As he pointed out “Ramen profitable means a startup makes just enough to pay the founders’ living expenses.”

As Paul Graham pointed out in a piece “The Airbnbs:”

Ramen profitability is not, obviously, the end goal of any startup, but it’s the most important threshold on the way, because this is the point where you’re airborne. This is the point where you no longer need investors’ permission to continue existing. For the Airbnbs, ramen profitability was $4000 a month: $3500 for rent, and $500 for food. They taped this goal to the mirror in the bathroom of their apartment.

As Airbnb was trying to open a new market within the existing travel industry, they started from a subset of that market. From the search volume, they knew that New York City was the hottest place for enabling the initial traction of Airbnb and that is where they focused. 

Airbnb’s co-founders both went to New York, with professional cameras and started meeting hosts and taking pictures of the places, which helped them make the platform more appealing to future guests. 

This gave them a perspective into their initial niche, and three weeks since the start of the Y Combinator acceleration program they managed to become ramen profitable. Below the email from Brian Chesky to Paul Graham of the rate of bootstrapped growth of Airbnb:



Source: Paul Graham Twitter

This phase of initial traction through bootstrapping to reach ramen profitability was critical also to prove the viability of the business to investors to access further capital for growth

Key takeaways

  • Bootstrapping is about building and growing a business by having customers as key investors in the business. In short, your business is so fine-tuned around customers that it can grow organically and with high margins, thus financed by them.
  • The bootstrapper is an entrepreneur at all effects. She/he doesn’t think of a freelancer but ad an entrepreneur able to build a scalable business. A bootstrapper cal starts as a solopreneur but if the business becomes scalable to bootstrapper will evolve the business model.
  • Bootstrapping often starts by identifying profitable niches, or microniches and add value from there. 

Suggested resource

The Bootstrapper Bible by Seth Godin is an ebook that explains how to bootstrap a business.

Business resources:

Connected Agile Frameworks


AIOps is the application of artificial intelligence to IT operations. It has become particularly useful for modern IT management in hybridized, distributed, and dynamic environments. AIOps has become a key operational component of modern digital-based organizations, built around software and algorithms.

Agile Methodology

Agile started as a lightweight development method compared to heavyweight software development, which is the core paradigm of the previous decades of software development. By 2001 the Manifesto for Agile Software Development was born as a set of principles that defined the new paradigm for software development as a continuous iteration. This would also influence the way of doing business.

Agile Project Management

Agile project management (APM) is a strategy that breaks large projects into smaller, more manageable tasks. In the APM methodology, each project is completed in small sections – often referred to as iterations. Each iteration is completed according to its project life cycle, beginning with the initial design and progressing to testing and then quality assurance.

Agile Modeling

Agile Modeling (AM) is a methodology for modeling and documenting software-based systems. Agile Modeling is critical to the rapid and continuous delivery of software. It is a collection of values, principles, and practices that guide effective, lightweight software modeling.

Agile Business Analysis

Agile Business Analysis (AgileBA) is certification in the form of guidance and training for business analysts seeking to work in agile environments. To support this shift, AgileBA also helps the business analyst relate Agile projects to a wider organizational mission or strategy. To ensure that analysts have the necessary skills and expertise, AgileBA certification was developed.

Business Model Innovation

Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.

Continuous Innovation

That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.

Design Sprint

A design sprint is a proven five-day process where critical business questions are answered through speedy design and prototyping, focusing on the end-user. A design sprint starts with a weekly challenge that should finish with a prototype, test at the end, and therefore a lesson learned to be iterated.

Design Thinking

Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.


DevOps refers to a series of practices performed to perform automated software development processes. It is a conjugation of the term “development” and “operations” to emphasize how functions integrate across IT teams. DevOps strategies promote seamless building, testing, and deployment of products. It aims to bridge a gap between development and operations teams to streamline the development altogether.

Dual Track Agile

Product discovery is a critical part of agile methodologies, as its aim is to ensure that products customers love are built. Product discovery involves learning through a raft of methods, including design thinking, lean start-up, and A/B testing to name a few. Dual Track Agile is an agile methodology containing two separate tracks: the “discovery” track and the “delivery” track.

Feature-Driven Development

Feature-Driven Development is a pragmatic software process that is client and architecture-centric. Feature-Driven Development (FDD) is an agile software development model that organizes workflow according to which features need to be developed next.

eXtreme Programming

eXtreme Programming was developed in the late 1990s by Ken Beck, Ron Jeffries, and Ward Cunningham. During this time, the trio was working on the Chrysler Comprehensive Compensation System (C3) to help manage the company payroll system. eXtreme Programming (XP) is a software development methodology. It is designed to improve software quality and the ability of software to adapt to changing customer needs.

Lean vs. Agile

The Agile methodology has been primarily thought of for software development (and other business disciplines have also adopted it). Lean thinking is a process improvement technique where teams prioritize the value streams to improve it continuously. Both methodologies look at the customer as the key driver to improvement and waste reduction. Both methodologies look at improvement as something continuous.

Lean Startup

A startup company is a high-tech business that tries to build a scalable business model in tech-driven industries. A startup company usually follows a lean methodology, where continuous innovation, driven by built-in viral loops is the rule. Thus, driving growth and building network effects as a consequence of this strategy.


Kanban is a lean manufacturing framework first developed by Toyota in the late 1940s. The Kanban framework is a means of visualizing work as it moves through identifying potential bottlenecks. It does that through a process called just-in-time (JIT) manufacturing to optimize engineering processes, speed up manufacturing products, and improve the go-to-market strategy.

Rapid Application Development

RAD was first introduced by author and consultant James Martin in 1991. Martin recognized and then took advantage of the endless malleability of software in designing development models. Rapid Application Development (RAD) is a methodology focusing on delivering rapidly through continuous feedback and frequent iterations.

Scaled Agile

Scaled Agile Lean Development (ScALeD) helps businesses discover a balanced approach to agile transition and scaling questions. The ScALed approach helps businesses successfully respond to change. Inspired by a combination of lean and agile values, ScALed is practitioner-based and can be completed through various agile frameworks and practices.

Spotify Model

The Spotify Model is an autonomous approach to scaling agile, focusing on culture communication, accountability, and quality. The Spotify model was first recognized in 2012 after Henrik Kniberg, and Anders Ivarsson released a white paper detailing how streaming company Spotify approached agility. Therefore, the Spotify model represents an evolution of agile.

Test-Driven Development

As the name suggests, TDD is a test-driven technique for delivering high-quality software rapidly and sustainably. It is an iterative approach based on the idea that a failing test should be written before any code for a feature or function is written. Test-Driven Development (TDD) is an approach to software development that relies on very short development cycles.


Timeboxing is a simple yet powerful time-management technique for improving productivity. Timeboxing describes the process of proactively scheduling a block of time to spend on a task in the future. It was first described by author James Martin in a book about agile software development.


Scrum is a methodology co-created by Ken Schwaber and Jeff Sutherland for effective team collaboration on complex products. Scrum was primarily thought for software development projects to deliver new software capability every 2-4 weeks. It is a sub-group of agile also used in project management to improve startups’ productivity.

Scrum Anti-Patterns

Scrum anti-patterns describe any attractive, easy-to-implement solution that ultimately makes a problem worse. Therefore, these are the practice not to follow to prevent issues from emerging. Some classic examples of scrum anti-patterns comprise absent product owners, pre-assigned tickets (making individuals work in isolation), and discounting retrospectives (where review meetings are not useful to really make improvements).

Scrum At Scale

Scrum at Scale (Scrum@Scale) is a framework that Scrum teams use to address complex problems and deliver high-value products. Scrum at Scale was created through a joint venture between the Scrum Alliance and Scrum Inc. The joint venture was overseen by Jeff Sutherland, a co-creator of Scrum and one of the principal authors of the Agile Manifesto.

Read Also: Business Models Guide, Sumo Logic Business Model, Snowflake

InnovationAgile MethodologyLean StartupBusiness Model InnovationProject Management.

What does bootstrapping mean in business?

The general concept of Bootstrapping connects to “a self-starting process that is supposed to proceed without external input.” In business, Bootstrapping means financing the growth of the company from the available cash flows produced by a viable business model. Bootstrapping requires the mastery of the key customers driving growth.

Why do some entrepreneurs use bootstrapping?

Bootstrapping is a great way to grow a business organically as it gets financed by the customers. Indeed, bootstrapping is about fine-tuning a business based on its key customers. And as a business grows without outside funding and investments, founders can keep control over the equity, strategy, and vision of the organization.

What is the difference between debt and equity financing?

In debt financing, the company contracts a loan that needs to be repaid with interests. Creditors have the right to claim their credits. With equity financing, investors endow a company with capital. The company doesn’t have to repay the money received. However, equity holders own a piece of the company and earn when dividends are issued, or the equity gains value.

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