Bootstrapping means starting a business without external help or capital. Such startups fund the development of their company through internal cash flow and are cautious with their expenses. Many successful companies started with bootstrapping, examples include Apple, Microsoft and Dell.
Bootstrapped startups grow by reinvesting its own profits, this financing approach allows owners to maintain control of their business and the value created belongs to them alone.
Working with your own resources only means that super-efficiency is necessary. You become more aware of the costs involved in the day-to-day running of the business and will operate your company on a ‘lean’ business model, become resourceful and develop a versatile skill set.
The founders of a bootstrapped company are their own bosses and are responsible for all crucial decisions in operating and growing the company. This can ensure that the business is moving in the right direction without any investor influence and investors and other external parties might have very short-term priorities that are not always good for the long-term prosperity of the company.
The fact that raising external finance – a task that can be very stressful and time-consuming - is not an issue for bootstrapped companies they can concentrate on the core aspects of the business such as sales and product development, thereby increasing the likelihood of creating a profitable business.
Building the financial foundations of a business on your own is a huge attraction to future investors. Investors, such as banks and ventures companies are much more confident funding businesses that have a solid foundation and the total commitment from their owners. Bootstrapped companies run a 50-50 chance of going under during their first five years but once pass that threshold they are likely to thrive for many years going forward.