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$100 and an idea — the bootstrap chronicles

It seems like anyone with an idea and a few social-local-mobile buzzwords can raise millions of dollars today. Whether you’re Facebook or just one of the aspiring little guys, the frothy venture capital field can look pretty attractive. But we must remember that the Airbnb, Flipboard and Dropbox’s of the world are the exception — not the rule. Most startups waste months and months begging investors for money, often with no result. There is an alternative.

It’s called bootstrapping. Be frugal with your cash, bring in revenue early and grow organically without investment. Until recently, it wasn’t really possible in the tech world unless you were already exceedingly wealthy or could do everything yourself. In the first Dot-Com Era, you needed a server farm and millions of dollars up-front to get anything done. But with the advent of cloud computing and open-source technologies, what once cost millions can be done on a shoestring budget for virtually nothing until you scale. And by then, one would hope you have a revenue model in place to make money off of all that traffic.

Bootstrapping really gained notoriety with the success of Jason Fried’s 37 Signals, which makes popular cloud-based collaboration tools like Basecamp. It’s also exactly the financial approach we’re taking at Fetchnotes — and we’re doing it on an even tighter budget. We started exploring our idea in January 2011, but didn’t really settle on the concept until March. As of the time of this writing, we will have spent a total of $100 of our own money and will be exiting the summer with our core suite of note-taking and organization applications.

 A few hundred dollars and a prayer - the bootstrap chroniclesFirst, allow me to give some background on my company. Fetchnotes (www.fetchnotes.com) is a simple, social notepad that helps keep you organized. We want to be your go-to tool for everything from jotting down ideas to making lists for tasks or even groceries. It’s as easy as sending a text message, but we give you the tools to make it as robust as you want it to be. We empower you to make a system that works for you and do our best to stay out of your way.

I began my entrepreneurial journey validating the concept of an “ideas marketplace.” I wanted to start developing right away and, obviously, start making the millions of dollars that were all but assured. However, the idea validation process (and broader customer development methodology) was part of an “Entrepreneurship Practicum” I was taking at the University of Michigan. I got out of my comfort zone and started to talk to people I thought would use my idea and found out that the market just wasn’t there. This taught me the first lesson of bootstrapping: don’t waste the time or money to develop anything until you have talked to customers and can reasonably say people will pay for what you’re offering (or someone will pay to support it for you, i.e. advertising).

Once I had stumbled upon and validated that there was a much larger, unsolved need in capturing thoughts on-the-go, then I started looking at options for development. I never considered outsourcing it — 1) I don’t have thousands of dollars of disposable income, and 2) for a tech-oriented business, it is imperative that you have a technical co-founder and not just “some developer” or outsourcing firm. You need someone that is fully vested in the success of the company, working for the same sweat equity you are, and who will work until 4AM with you when duty calls. Lesson number 2 of bootstrapping: be stingy with your cash and liberal with your equity to attract the best talent possible and make them a partner rather than an employee. As many people more successful than I have said before, it’s better to own most of a $100 million company than all of a $1 million company.

I partnered with my co-founder Chase Lee and we began recruiting our technical team. We are students at the University of Michigan so we naturally recruited our classmates for what was then still a “project” and not quite yet a company. I highly recommend enlisting students (especially graduate students) during the summer to help accelerate your product development in a tech-centric business. First, there are brilliant developers that haven’t been discovered by larger companies. Second, they’re hungry for the shot to prove themselves, and they have low enough expenses to forego a wage now in order to have a chance at making a ton of money later.

In order to convince good talent to take a risk on you, you need to really sell your vision — both as a great product that they could potentially use and as something that has huge monetary potential. You also have to know what you’re essentially working with — a volunteer (until they see cash in their pocket) — and be willing to accept that. When people are effectively doing something for fun, it’s really hard for them to turn down an amazing job offer to continue to work with you. You can’t have the same expectations as if you are paying someone directly for their time. Hold them accountable and don’t put up with lack of effort or poor work, but remember that they’re taking a chance on you and you’re lucky to have them.

A second cash-saving hiring strategy is to find smart people that have a strong background in what you need but not hold out for people who know a particular programming language or other learnable skill. You’ll get that person at a significant discount because they know they have to prove their worth to you. If I need an iPhone developer, I’d much rather hire a brilliant developer who has never touched iOS software than a good one who does that for a living. I want to forge long-term relationships with my team members, so I care a lot more about their ability to learn than the knowledge they come to the table with.

In every aspect of Fetchnotes, I demand a justification for every expense. I ask over and over, “is there a cheaper way to accomplish this?” An entrepreneur on a shoestring budget must ask this whenever someone says an expense must be made. And me asking that over and over again (combined with some amazing technology my co-founder was able to deploy) has allowed us to drop our server costs to basically nothing.

This goes for non-technical expenses too. If a product or service doesn’t directly add many multiples to our valuation then I refuse to spend a dime on it. That said, the great thing about today’s Internet tools is that everything has a free plan of some sort. I research the heck out of my options and find a way to stay under the caps so I never have to pay.

My favorite freemium tools are Podio, which is free for under 10 users (we have 9!), and Hootsuite, which is free for 4 attached accounts. These tools add enormous amounts of value to my life for team collaboration and social media marketing, and I’ll definitely end up paying for them once we have revenue so I can get more usage. But for now, I want to keep the cash in the company. I only pay for what is absolutely essential to the operation of the business.

Tied in with free enterprise tools is my heavy reliance on free marketing channels like social media (you can check us out on Facebook at www.faceboook.com/fetchnotes or follow us on Twitter at @fetchnotes) and public relations. We leveraged another great service called LaunchRock to create a splash page with instant virality. They make it extremely easy to make a basic site for your startup, gather emails from potential customers and encourage them to share your link by offering them earlier access if they refer friends.

While Facebook marketing has been trickier, Twitter has been extremely successful at creating pre-launch buzz. In a relatively quick and painless way, any outgoing person can build a small base of followers and start engaging with the early adopters of your industry (who will later hopefully evangelize your product). Tweet about your day-to-day operations, about team events, industry trends and most importantly follow people who you think would be interested in using your product. Fetchnotes actually got its first write-up from this group, which you can see here: http://huwmart.in/post/6040836953/utomation-and-curation

This brings me to my second favorite free marketing channel: PR. Getting press from major outlets early on is really hard. But getting written up by individuals with a blog is much easier. It all comes down to awareness and networking. Identify the movers and shakers in your industry and figure out a way to make them know about you in a non-sales-y way. If you have a compelling enough product and can get in front of people, the rest flows naturally.

Press isn’t all about product reviews, either. It’s about getting your brand (and home page link!) an engaged audience however you can. One very effective way to do that is by blogging. I write frequently about my experience as a first-time entrepreneur both for the Fetchnotes blog, fetchworthy notes (blog.fetchnotes.com), and The New Student Union (newstudentunion.wordpress.com). I had one article that drove over 100 sign-ups alone because it trended into the top 20 on a popular news site for developers and tech entrepreneurs. Chase writes about a range of topics, from our technical architecture to GTD “lifehacks” he uses that are highly relevant to the early adopters in our space (often subscribers to the “Get Things Done”) system. Write something people — preferably your ideal customer types — care about, and write it often. All you need is one hit that gets enough traction to build a following.

When people link to the posts (and when I cross-post them in other places), it also really helps your search engine optimization, meaning more people will find you through organic Google searches. That’s why I guest blog whenever I get the chance. I’ve written guest posts for LaunchRock and Startup America that both drove a ton of sign-ups and traffic, but more importantly they opened the door for prominent journalists to find me. This article is the byproduct of Shoestring Venture giving me that same opportunity, and I hope it pays off just as well!

For a free PR tool, check out Help A Reporter Out. HARO is a free email newsletter full of queries by journalists and bloggers who are looking for sources on anything from “couples without health insurance” to “entrepreneurs who are looking for funding.” The outlets can also be pretty big too, giving you a chance to be a source for and develop a relationship with important journalists in your space.

The bottom-line when it comes to PR is network early, write often and look for creative opportunities to get your brand in front of the world. The nice thing about PR is that it’s not advertising. Readers don’t feel like they’re being “sold to” like on other marketing channels. I’m a lot more likely to check out an app I saw mentioned in an article than I am to click on a banner ad.

Bootstrapping is a difficult thing to do. It worked for our team because of our respective places in life. You have to be comfortable with not seeing a paycheck from your venture for the next 6-12 months. But in the end, you know that you are creating a business that is sustainable independent of outside investment keeping it alive. Am I saying we’ll never look at raising money? No, of course not. But I do believe in getting as far as you possibly can on your own dime. Shoot for growth capital if you need it, but try your best to avoid I-need-this-money-so-I-don’t-go-bankrupt investments. I’d rather give the equity to my team for taking a risk on us early on than raise a ton of money so we can hire developers anyway.

Starting a business has been an incredible experience. It’s an exercise of just about every skill set one could ever use in their life. It’s also a real test of your self-discipline and motivation to take an idea, see it through to being a product and then turn it into a profitable business. The people that can accomplish all that will be wildly successful.

 A few hundred dollars and a prayer - the bootstrap chronicles

Alex Schiff

Alex Schiff is the CEO and co-founder of Fetchnotes.

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One Response to “$100 and an idea — the bootstrap chronicles”

  1. Andra says:

    Great article with a lot of good ideas. Your common sense approach to Fetchnotes and business will certainly take you far! Good Luck.

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