Ways to bootstrap a startup: 'working in waves'

December 5, 2010starting up

I’ve spent the last year and a half after graduating from the University of Warwick juggling working on startups and working as a contract web developer. I’d like to share some of my reflections on how to bootstrap a startup from zero funds. This time I’d like to talk about what I’m going to describe as “working in waves”.

Waves?

When you think about launching a startup, it is easy to think about all the reasons why you can’t do it now. Of course, many say that what makes an entrepreneur is having these fears and doing it anyway. One of these may well be funds. You think you need a certain amount before you can start.

One way to have enough funds is to work full-time (or intensely) for a certain period of time, and then work full-time (most likely more than full-time!) on your startup idea. I call this method “working in waves”.

Why work in waves?

Working in waves may be an attractive idea because it allows you to focus fully on your idea for a significant period of time based on how much you decide to save. You can work out your expected burn rate before you jump into the wave, so you know when you’re going to run out of funds. This gives you a significant amount of pressure to deliver during the wave. Full focus combined with pressure to deliver must mean you’ll succeed, right?

If you’re lucky, it takes just one wave

The ideal scenario is that you save up a certain amount of funds and then you get to work on your startup, and everything goes to plan. You start generating revenue to reach ramen profitability or you get investment before your funds run out.

I don’t know about you, but after some experience of startups I’ve learned to make as few assumptions as possible and to test assumptions rigorously. Therefore, I think that it is very unlikely that you will “make it” in just one wave. I’ve been there and failed. Steve Blank often talks about this:

Unless you were incredibly lucky most of your assumptions are wrong. What happens next is painful, predictable, avoidable, yet built into to every startup business plan.

The problem with working in waves

The key issue with working in waves is that when you’re building a startup, in my experience, it inevitably takes longer than you expect and that means that you run out of time.

Running out of funds or even just heading towards running out of funds is very disruptive for a startup. It affects your productivity, your judgement and your motivation. You know that soon you’ll have to find some work in order to save up again for another wave. It also means that you are moving forward with improving your product at a slower pace, and this can affect how your users view your commitment. I therefore wonder whether “working in waves” is perhaps one of the less good ways to bootstrap a startup.

Other ways to fund your startup

Having experienced “working in waves” and also experienced the “on the side” method of funding a startup which I will talk about some other time, I have been pondering whether there are any other methods. This has lead me to think increasingly about ramen profitability, and what a difference it would make to the mindset whilst working on a startup. With the survival aspect taken care of, I assume it would make a huge difference. I hope to be lucky enough to share with you just how much of a difference that makes sometime.

Photo credit: Bill Gracey