If you are a first time startup founder, or have done a few projects but are still working either full-time or freelancing part-time, you are likely to struggle to find investment for your startup idea. For this reason, you will probably to need to bootstrap your idea. This has been my experience, and with what I know now I would have done things differently.
How it all started
Since graduating in June 2009 I’ve had the great opportunity to experience both working as a contract developer and jumping in the deep end of creating startups and all that comes both. In fact, I’ve kind of been juggling paid work and startups for around two years now. I want to share some of the experiences I’ve had with the various ways I’ve chosen to handle “surviving” whilst trying to get a startup off the ground.
I finished university having worked on a dissertation that felt very much like a startup (a story for another post), and I was definitely ready to jump in at the deep end and do whatever I needed to do in order to work on a startup and make it succeed. So that’s what I did. In order to be able to keep working on the startup, I had to try a few different things:
The first way: on the side
I spent the first 8 months after university working 3 days a week as a web developer and spending most of my other 4 days working on my first real startup. This worked well to a certain extent - the startup was built and launched within 2-3 months, and it got a certain amount of traction throughout that period.
Bootstrapping your startup on the side can be a massive challenge, but there are a number of often overlooked advantages to this method. Read my thoughts.
The second way: work in waves
After 8 months of working on the startup “on the side” and building up a certain amount of funds, my contract work dried up and rather than finding more I decided to use the funds as runway and give the startup a real push by working on it full-time. I see this as a feasible way to bootstrap a startup, and whilst this could be done multiple times whereby you work to build up funds and then have a boost of productivity, I see a number of issues with this way too.
Having tried working in waves, I would not recommend it as a long term strategy. Read my thoughts.
A third way: ramen profitability
There is only so long you can go on working in waves or working on the side. With OnePage, I had tried both of those methods, and I kept the product completely free. I was aiming for the “grow big fast” approach, and I had tried to get onto a few startup accelerator programs and spoken to a few investors without success. I didn’t have enough traction or a good enough track record.
I realised that the only way to be able to work full-time on a startup was to build a product which generated revenue early. I had the option to try and generate revenue from OnePage, or to apply what I’d learned to a new product. I had a small idea in my mind, and I decided I liked the idea of a blank canvas. With Buffer, I was completely focused on hitting “ramen profitability”. I sensed that if I could get there, it would change everything.
"Ramen profitable" is a term which is used a lot in the startup scene, and one you should get acquainted with if you haven’t already. I think Paul Graham does a good job of describing it, and he may have even invented the phrase:
At YC we use the phrase “ramen profitable” to describe the situation where you’re making just enough to pay your living expenses. Once you cross into ramen profitable, everything changes. You may still need investment to make it big, but you don’t need it this month.
We reached ramen profitability a couple of months ago and I can’t emphasise enough the impact it can have. I gradually dropped the number of days of contract development work I was doing as the revenue grew, and now I get to spend all my days on Buffer. We certainly have many new challenges ahead of us, but it is a very nice place to be.
How I would start, if I could go back
I now believe that anyone can reach ramen profitability, as long as there is real focus on the goal. Once you are focused on generating revenue, it is a good idea to consider how the type of idea you choose can affect how easy it is to bootstrap and reach ramen profitability. If I was just starting out now with the knowledge I now have, I would completely focus on reaching ramen profitability, and I would work on the side on a “tool” with paid plans rather than a “social” idea. This is the approach I took with Buffer and it worked surprisingly well.
I feel it is also a much more doable first step than aiming for the million dollar idea from the outset. Avoiding those world-changing thoughts can make you very productive. As Jason Cohen described very succinctly:
Prevailing wisdom is that “small is risky.” It’s just the opposite. When you just need to be Ramen-profitable, you can do so even in a recession.
Are you trying to get a startup off the ground? Are you bootstrapping? I’d love to hear how you are approaching your startup or how you plan to.
Photo by NoHoDamon