Start-up Entrepreneurs' Blog

Bootstrapped Start-Up Lessons from Self-funded Entrepreneurs

June 9, 2011

This week I attended the inaugural MicroConf, the conference for self-funded and single founder software companies and I’d like to share will everyone some of the highlights and key points about bootstrapping a start-up company.

Speakers gave their stories from the very beginning to how they got to where they are today. It was not your typical conference with speakers engaging in the art of shameless self-promotion and patting themselves on the back for having great business skills and foresight.  This conference was about their pitfalls and lessons learned.

Who are the bootstrap entrepreneurs …

Every start-up and entrepreneur went through similar growing pains.  Many of the founders had started several start-ups before they discovered the one that brought them success. Overwhelmingly, the entrepreneurs had held jobs and became disillusioned and frustrated with being employees. Many first became consultants and then realized that while this was better, it still wasn’t enough and proceeded to develop a product. Most started companies with products in the same area as their jobs.  Some tried but were unable to raise funding from venture capitalists.

The entrepreneurs created over and over again. Each iteration gave them more insight. In essence, each was a small experiment. Slowly the entrepreneurs built a comprehensive understanding of their customer and how to market their product.

But those failures and  small experiments that didn’t result in a wild success led to an unexpected challenge for the entrepreneurs – a mental hurdle to overcome the failure, to re-train themselves to be more confident, to think big again, and to trust their instincts and intuition again.

Entrepreneurs love to create something. After the creation phase, came the dreaded marketing phase – which is always a tough point for many software techies. Until the entrepreneur recognized the need to reframe and embrace the challenge away from developing the product to marketing the product, not much happened with the start-up. And this reframing process was often kicked off by the entrepreneur’s wife.

What suggestions do they have for future bootstrappers …

There’s no replacement for actual personal interaction with customers. You need to talk with your customers in order to figure out what their problems are.  People will tell you what they want if you just ask. People do want to talk to you when you are trying to solve their problems. It can be as simple as talking to people who sign up for a free trial or for a newsletter.

Once your product is in the hands of the customers, get to know your top 5 or 6 customers and establish a relationship with them. Prioritize their fixes and desired features. You not only want to know why the bought the product and how they use it, but you want to hear their complaints and grips.

Stop talking like an expert to your customers and start talking like someone who understands the customer and talks in their language. It’s not about product features, it’s about the benefits and more importantly, framing those benefits in a way to appeal to the emotional side of the customer.  Customer want to know you truly understand their concerns and you have empathy with them.

Some users are happy and some aren’t. In the earliest day of a company, focus on the satisfied customers. These people love your product and you want to find more of these types of customers. You need to find out why they use the product. Too often, start-ups focus too heavily on the unsatisfied customers, those people who want you to add more features or fix features. Focus on those who are positive. These are your early adopters and can become the evangelists for your product. It’s another way of saying, stop trying to please everyone.

Getting a good product to market fit doesn’t always imply changing the product. Sometimes repositioning the product is what is needed. Emphasize the benefits that your most satisfied customers get from the product. This will set customers’ expectations to your strengths and attract more customers like those that are already satisfied.

Revenue is often dominated by customers purchasing the most expensive plan or option, who are spending other people’s money.

One time revenue isn’t nearly as good a strategy as recurring revenue. During the 2008 downtown, the start-ups offering one time fees experienced an 80% of more drop in their revenue.

There’s a simple way to improve conversions from the traditional, limited time, free trials.  When offering a free 30 days trial and looking to convert the customers, 50% of the customers dropped out at the end of the trial. Changing the scheme to a 60 day money back guarantee, where the customers pay first and can obtain a refund if unsatisfied, will dramatically improves sales.

The size of the companies on your client list doesn’t matter as much as they size of the checks they are writing.

Product-ize the business as much as possible, sell the same creation to many. Avoid customizing the product for customers, it distracts you from developing the product that can be sold ‘as is’ to many people.

What advice did they have on running an efficient company ….

When you’re a small company, automate as much as possible. Most entrepreneurs started by doing something manually and then automated what they were doing.

Hire others or outsource routine and mundane tasks. The entrepreneur should focus on doing tasks that add value to the company. You can easily hire someone to do your website design, but you can’t get someone else to talk to your customers.

What I’ve learned over the years is entrepreneurs tend to have similar personalities. Rob Walling (www.softwarebyrob.com) was the co-organizer of the conference and he had “create” tattooed on his wrist to remind him of what an entrepreneur should be doing each and every day. When I worked for IBM and was not happy in my job, I went out and bought a Mickey Mouse watch and wore it every day as a reminder that I should be having fun and do what I enjoy. Entrepreneurs are always looking to connect with others just like them so that they can learn and the MicrConf is a good place to start.

Filed under: From Concept to Start-Up

Tags: bootstrapped start-up, bootstrapping, MicroConf, Ron Walling, self-funded start-up, small software start-up, software entrepreneurs