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05/07/2002

Bootstrappers?

I recommend an excellent, if slightly contradictory, article in today’s Wall Street Journal. I couldn’t agree more with the premise of the piece: that as a result of today’s economy, more entrepreneurs are practicing classic bootstrapping, through such practices as conserving cash, focusing on profitable activities, and beginning their own businesses while still employed for others. But then the article shows that each "bootstrapper" is looking to raise anywhere from $500,000 to $5 million in startup financing. Hmm. What’s wrong with this picture? I admire these individuals for mitigating risk by beginning their companies a piece at a time, starting discrete activities prior to jumping completely on board. That’s smart. But I wonder why they need such a large early investment. Yes, too many companies fail for lack of finance. But too many also fail because they spend too much time looking for too much money rather than focusing on their profitable activities. Again, I refer folks back to the bible for bootstrappers, Amar Bhide’s The Origin and Evolution of New Businesses, in which he shows how the vast majority of startups, even high-growth high-tech success stories, start with less than a thousand bucks.

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