What is Bootstrapping?
Bootstrapping is the process where an entrepreneur starts a business using existing personal resources like personal equipment, office space, or personal savings or with minimal external resources. It’s a way of deploying resources to their maximum utilization and reducing costs for business. Bootstrap financing is one of the best and most inexpensive ways by which an entrepreneur can raise capital without sharing equity or borrowing huge sums of money from external sources. Bootstrapping utilizes all the unused potential of a business by simply managing the finances better. The entrepreneur reinvests the revenue of the business for growth and expansion. An entrepreneur is said to be bootstrapping when he builds a startup from his personal sources of funds or from re-investing the revenue of his startup. It is the beginning of a startup journey, where all the primary investment in a business is made by its founders without approaching any investor.
Although bootstrapping might fail to fulfill all financial needs of a business and may cost the same as the external sources of finance, bootstrapping delivers two very important factors, which can be also referred to as the USP of bootstrapping:
- It rests the complete control in the hand of the owner which allows better space for creativity.
- Absence of external finance or minimal external finance reduces the burden of the business.
However, in the modern startup war of valuation, dilution, and funding bootstrapping is losing its relevance and is now not even considered as an option.
Table of Content
- Sources of Bootstrapping
- Strategies of Bootstrapping
- Advantages of Bootstrapping
- Disadvantages of Bootstrapping