Bootstrapping 101: Alternative Ways to fund a Startup without an Angel or VC
Tuesday, November 13, 2012
Presentations:
NOTE: Due to the Presidential election on November 6, we are meeting on the second Tuesday this month.
Entrepreneurs often think that the only way to grow their business is to raise capital from VCs or angel investors. While outside capital can fuel growth, it also carries a considerable cost in terms of time expended, loss of equity and loss of control. These costs can be, and often are, avoided by knowledgeable entrepreneurs.
Surveys indicate that, of the 543,000 new businesses created in the U.S during the year 2011, only 29,626 (that is, only 5%) received VC or angel investor funding at the seed or early stage startup phase.
And for many companies, lack of VC or angel investment did not impede growth. In August 2012, Inc. Magazine published its list of the 500 Fastest Growing Private Companies in the U.S., and 77% of the founders of those companies set up using only their own personal savings, with two thirds needing less than $100,000 to get started. And while 34% stated that access to external capital has been essential for growth, 42% have not utilized external funding in developing their business. Seventy four percent have financed their growth over the past three years largely through cash flow from operations.
So, how do you do it? In a word – Bootstrapping. That is - using your own resources and effectively managing your cash flow to internally generate the funds that you need to operate your startup business.
On October 2nd ENET will devote the evening to “Bootstrapping 101” to discuss a series of topics that will include:
- Buying used, using eBay and craigslist and controlling your costs,
- Hiring part-time, interns and volunteer help,
- Using equity effectively and outsourcing for expertise,
- Using barter, free resources, and building and using your network,
- Testing small and adapting quick,
- Keeping the day job or consulting to fund the business,
- Leveraging relationships including advances from customers and partners.
Apple, Google and HP all began in garages with free rent and we will hear from three experienced CEOs who have also built their business by bootstrapping without VC or angel investment until they achieved important milestones and were well on their away. In some cases, they went all the way through to a successful acquisition exit without external funding.
Panel
With over 20 years of both bootstrapping and VC-backed company experience, Karl is passionate about supporting entrepreneurs. Karl co-founded 170 Systems, an enterprise software company in 1990, and saw it through two decades of growth and profitability, culminating in a successful acquisition. Karl led the company as CEO as it bootstrapped to become a profitable, worldwide market leader with a Fortune 1000 customer base using the company’s software products and services in over 90 countries – all before taking VC funding which fueled further growth. After joining MassChallenge in its inaugural year as a judge and mentor to many teams, Karl is now focused full-time on making the mentorship experience the best it can be for both the emerging companies and the participating community. Karl is also a mentor with programs such as TechStars and the MIT Venture Mentoring Service. Karl received his bachelor’s degree in electrical engineering and computer science from MIT, and lives with his wife and two sons in the Boston area.
Barry is an accomplished software CEO with over 25 years of industry experience in the USA and Europe, running private and public companies ranging in scale from early startup phase to 1,000+ employees. He loves to build companies around industry-changing paradigm-shifts in technology. Barry joined IONA Technologies (NASDAQ:IONA) in the very early days and ultimately as CEO led Ireland's most successful software company through its strongest period of growth, all completely bootstrapped. Later, as Chairman and CEO of StreamBase Systems, Barry took an MIT project and built it into the market pioneer and leader in Complex Event Processing . In addition to great deal of consulting work over the years he has served on the boards of many startup companies in Boston, Ireland and South Africa. He has a Degree in Engineering from New College Oxford University, and an Honorary Doctorate in Business Administration (DBA) from the IMCA.
Completely bootstrapped, Sitting Around serves families in 48 states, as well as in Canada, Australia, Hong Kong and the U.K. Boston-based, its website has a user base toover 7,000 families on the site and 1,500 registered sitters. The mother of a young child herself, Erica knows all too well the challenges parents today face, especially when it comes to finding great babysitters. Ever the entrepreneur, Erica launched her first business at age 7, a moderately successful jewelry stand that employed all her friends (and sold exclusively to said friends' parents). Prior to founding Sitting Around, Erica worked as a management consultant advising Fortune 500 companies on eCommerce and business strategy. Erica holds a B.A. in English from Harvard College.
Moderator
Rob has been an attorney for over 30 years specialized in business, tax, stock and options, employment, contracts, financings and intellectual property. Rob began his legal career as an associate at major New York law firms Dewey Ballantine and later Weil Gotshal & Manges, before returning home to Boston in 1985 where he has since been a partner in small and medium sized firms before joining his present firm in 2004. Robrepresents entrepreneurs, start-ups and small companies, independent contractors and employees and executives. His main practice areas are: Business formation, allocation of equity and angel and VC finance; Commercial contracts, licensing, alliances; Executive employment, stock, options and severance; Trademarks, copyrights, trade secrets; M&A. Rob is a frequent speaker on business law topics and author of numerous articles published in Boston Business Journal, Mass High Tech and other publications. Rob has been on the ENET Board since 2002 and Chairman since 2009 and is also aBoard member of the 128 Innovation Capital Group. He holds degrees from Boston University, B.A., summa cum laude, Northwestern University (Chicago), J.D., Law Review, and New York University, LL.M. in Taxation.
eMinute from November 2012
Sunrise Method
Technology: Patented search method for unknown, non-digital Chinese characters.
This method allows anyone with no knowledge of Chinese to find a character, learn it's meaning, pronunciation, stroke order and constituent parts as well as learn related characters with similar components or other aspects by being able to identify any combination of its strokes or radicals.
App Idea: 12 games of various skill levels and aspects of Chinese character recognition and usage.
The App will have a "waterfall" pricing structure, that is, all games have:
- a free ad-supported version with ads on the top banner and between games/rounds, but 1-player only
- $0.99 removes banner ads (shows ads between games), but 1-player only
- $1.99 removes all ads and allows 2-player mode, but only local high scores
- $2.99/mo subscription allows multi-player mode, city/country/world high scores, tournaments, etc.
Market: All learners of Chinese characters:
- native Chinese speakers (ages 4-12) still acquiring characters
- non-native learners (ages 4-18) whose parents want to give them a head-start
- non-native learners (ages 21-30) who want to teach English in China/Taiwan/HK/Singapore
- non-native learners (ages 25-55) who want to do business in China/Taiwan/HK/Singapore
Biz Model: Revenue will be generated from various sources:
- ads on the free versions
- $0.99 and $1.99 from most users
- $2.99/mo from the dedicated users
- most of the revenue will come from a technology that converts points earned from the games into cash that is deposited into students' college fund (grad school fund) and a small percent is kept for us
We need: funds or talent to develop following:
- iOS, Android, Facebook and browser-based versions
- development of more games (and languages) within the app
- improved UX / UI\enter more markets via existing schools and education/search product offerings\education curriculum to prove new learning method
- marketing to show how our search method is quicker/easier than writing or OCR
Budget: May cost $100,000 - 200,000
Exit strategy: Sell or license to Google, Apple, Rosetta Stone, other search/game/education players like Zynga.
Price:
Our regular, first-Tuesday-of-the-month events are free to members and $20. to non-members. Venues and pricing for special events, such as the July Boston Harbor Cruise, are posted separately
Time and Location(s):
5:15 PM Pre-meeting Self-pay Dinner Bertucci's Restaurant 475 Winter St., (exit 27B off Route 128), Waltham, MA ("pay-as-you-go")
7:00 - 10:00PM Meeting Presentation Note: Meeting at the Foley Hoag Emerging Enterprise Center, 1000 Winter Street, Suite 4000 (north entrance), Waltham, MA Directions to the EEC at Foley Hoag
The doors to the north entrance of 1000 Winter Street are locked at 7:30 pm. For admittance after 7:30, please use your cell phone to call the number that will be posted at the door. Thank you.
Reservations:
No reservations are needed for the dinner.
To expedite sign-in for the meeting, we ask that everyone -- members as well as non-members -- pre-register for the meeting online. Pre-registration is available until midnight the day before the meeting. If you cannot pre-register, you are welcome to register at the door.
