Bootstrapping Strategies for Solo Entrepreneurs
(Solving the Triangular Chicken-or-Egg Problem)
Turning an idea into a product or service with paying customers is a difficult task for any startup, but it's especially hard if you're a solo entrepreneur with nothing more than a big dream. In this blog, we'll walk through some tangible strategies for individuals bootstrapping their startup from concept to customers.
How do you bootstrap your startup with just an idea?
- Avoid entrepreneuring
- For technical founders, build it yourself, no matter how crude.
- For non-technical founders, find a great partner and create a convincing mock-up
- Validate your idea with potential customers before paying for professional developers or seeking investment.
Which came first: the chicken or the egg?
In this classic paradox, the chicken cannot exist without the egg, but where did the egg come from if not from the chicken? I’ve often observed this problem to be analogous to the entrepreneurial journey. It’s what I call the triangular chicken-or-egg problem: Which came first: the product, the team or the money?
You can’t build a product without a team. But you can't hire a team without money. And you can't raise money without a product.
So how do you break this vicious cycle and bootstrap your startup? Let's start by describing what not to do.
Most aspiring entrepreneurs begin by entrepreneuring — this is a mistake! What's entrepreneuring? Here's how I describe it:
Entrepreneuring is what we call the trap that early entrepreneurs fall into: spending your days attending networking events, coffees with “facilitators”, attending conferences, creating business cards, building a pretty Squarespace site, making t-shirts and other superficial actions that don’t actually move the ball forward in building anything of value.
In my early days as an entrepreneur I spent over $15k on legal services and marketing materials before I ever had a product. I setup an LLC and remitted franchise taxes; paid for NDAs and employment contracts; and had lawyers file trademark and patent claims for brands and designs that today we no longer use. For marketing, I built a website, printed business cards, made t-shirts and ordered more than 500 bumper stickers (of which I probably still have 490) in a misguided attempt to sell merchandise to raise capital. Here's a tip: no one wants swag from a company they've never heard of. Of what I spent, I'd estimate that 98% was wasted because it all became moot after we pivoted (twice).
Some or all of these things might be good to do when you have a product, but they're no substitute for the product itself. Stop designing your Squarespace website before your app is built!
Don’t mistake being busy with being productive.
An experienced investor will see through these façades, and potential customers will be disillusioned when you don't deliver as promised. Every entrepreneur knows that there's a careful balance you have to strike between sharing your vision for the future and over-selling your capabilities. You have to inspire people to follow you, but you can't be completely divorced from reality. Entrepreneurs often use the present tense when talking about a product or service that doesn't yet exist. That's fine to talk optimistically—up to a point. But if you find yourself constantly pitching your idea but make little progress towards achieving it, pull back on your external bravado and take a more heads-down approach until you have something worth sharing. Otherwise you risk losing credibility, which is an entrepreneur's most valuable asset.
A final note on entrepreneuring: You must not let yourself be tricked into thinking that entrepreneuring is the same thing as company building. Steer clear of professional entrepreneurs and facilitators peddling startup snake oil; they’ll over-promise, under-deliver and zap your precious time.
Technical vs. Non-technical Founders
Back to our original question: how do you solve the three-sided Product-Team-Money puzzle?
If you’re a technical founder building a tech-centered product, then the answer is probably obvious: start by building the product yourself. Even if it’s crude, ugly and barely works. Nights, weekends, whatever it takes, just get something built and see if you can sell it. That will tell you 1000x more than any conference will. Having a product, no matter how elementary, goes a long way in convincing others to join or invest in you.
The tougher scenario (and also the more common) is for non-technical founders or founders with a limited skillset trying to build a tech-centered product. You don’t have the skills to execute the vision, and you don’t know anyone who does. In this scenario, I highly recommend that you focus on finding a great partner—and I don’t mean just a great software engineer. Find someone you could see as a valuable partner in building the business. If that person happens to be a developer, then great, but the priority is finding a smart, hard-working person of integrity that you can depend on. Here's one of my favorite quotes from Ed Catmull, co-founder of Pixar:
Ideas come from people, therefore people are more important than ideas.
-Ed Catmul, Creativity, Inc.
I generally agree with this wisdom. Your idea will likely evolve as you build, so it’s important to surround yourself with good people.
Besides being someone with whom you can refine your ideas and share the workload, a great partner can be hugely valuable for emotional support. One of my biggest surprises as a new entrepreneur was how lonely it can be. Everyone on the outside thinks it’s so cool that you’re starting your own company, but secretly you feel discouraged and wonder whether it’s all worth it. A great partner can be a much-needed motivator on this emotional rollercoaster you’ve signed up for.
Show. Don't tell.
In tandem with finding a great partner, I also recommend that entrepreneurs work towards creating a mock-up of their product. Drew Houston, founder of Dropbox, famously created a video that demonstrated, in theory, how users would be able to use Dropbox to drag and drop files from their desktop into the cloud. It was fake, but it worked. By helping people to visualize how the software would work, he was able to convince the team at Y Combinator to invest. To be clear, creating a mock-up is not entrepreneuring. The mock-up, while not a functional version of your product, is an early step in creating the real thing. Get comfortable thinking of yourself as a user interface (UI)/user experience(UX) designer because a founder with no product, team or money has to be. In other words: show, don't tell.
If you’re building a mobile or desktop app, then you’re in luck. It’s never been easier to prototype an app concept. You’ve got tons of options for static mock-ups, including UI/UX design tools (like Adobe XD, Figma, InVision and Sketch) as well as low-code and no-code tools for functioning prototypes (like Webflow, Appian and Mendix). I’ve seen some pretty sophisticated apps built from nothing more than Typeform, Gmail and Google Sheets. Many of these tools allow you to animate your designs, complete with interactive elements like clicks and scrolls, and offer screen recording features for creating sharable demonstration videos. Several of these tools are also free to get started and designed for non-technical people, so you have no excuse not to start.
Once you've built a prototype or a believable simulation of your product, then you have partially solved one leg of your Product-Team-Money problem. The question then becomes, which leg do you target next? You primarily have four potential strategies:
- Option 1: Money (Find Investors)
- Option 2: Team (Hire Employees)
- Option 3: Finish the Product (Find Development Partners)
- Option 4: Validate the Idea First (Talk to Customers)
Of all these options, I recommend that entrepreneurs prioritize outreach to potential customers first (Option 4). I'll explain this reasoning below, but let's first look at the other three scenarios:
Option 1: Money (Find Investors)
You could take your mock-ups or prototype to potential investors, and you may get lucky; however, most investors these days want to see not only a functioning product, but also customers and actual revenue. (A lot has changed since Drew Houston raised money on his Dropbox illusion. These days accelerators like Y Combinator expect applicants to have a functioning product and preferably customers. Gone are the days of closing a seed round with nothing more than an idea on a napkin). So, unless you have a strong reputation for success or some other ace up your sleeve, I wouldn't spend a whole lot of time courting investors just yet.
Option 2: Team (Hire Employees)
This option is fraught with challenges as my co-founder points out in this entertaining blog post. With the exception of unpaid co-founders, in my experience Team is usually the last leg of the triangular chicken-or-egg problem to get solved. This is simply because you need money to hire people. A lot of entrepreneurs try to cheat this reality by offering, in place of money, a combination of the following:
Let me explain why these are not enough to build a team.
First, very few developers are willing to work for equity. Why? Because 90% of startups fail and equity doesn't put food on the table. Developers, as a group, also tend to be risk-averse. It took Uffizzi almost 18 months to generate our first revenue. No one would have worked that long without a paycheck, nor should they. You may believe with all your heart that your idea will succeed, but it's asking a lot of someone with a spouse and children to go without a salary.
Second, titles are even more worthless than startup equity. It might be appealing to some people to be CTO or Lead Developer of a 3-person company that no one has ever heard of, but this novelty will quickly wear off. Good people—i.e. the people that you want—are able to easily see through this tactic.
Finally, there is the startup's purpose. Of the three commonly offered substitutes for money, it's my experience that purpose is the most powerful. Waking up every morning truly believing in your company's mission is an incredibly strong motivator, and something that big companies often lose as they scale. No one wants to feel like a cog in corporate wheel. However, just like equity, a startup's purpose is not going to pay the bills. Large companies, despite their sometimes soul-sucking culture, have established track records, steady paychecks, predictable hours, professional development programs and medical and retirement benefits that your startup likely cannot promise. At the end of the day, few people will choose equity, titles and purpose over a sure thing. A bird in the hand is worth two in the bush.
Option 3: Finish the Product (Find Development Partners)
The third option is to try to solve your Product problem completely by lining up development partners that can help you turn your mock-up or prototype into a fully functioning product. Many entrepreneurs start their businesses with personal savings and/or money from friends and family. If you are fortunate enough to be in this situation, I would still discourage you, however, from spending it so soon on building your app. Let me elaborate.
Building an app through a professional development shop is very expensive. At a minimum you can expect to pay about $12k per month for a decent developer ($75/hr for 160 hours per month). Expect to spend about 2.5 months developing a basic app, so you're looking at at least $30k for a bare-bones application. More sophisticated apps will require more than one developer and cost upwards of $250k or more. Even for entrepreneurs who have bootstrapped $100k or more, spending, say, 30-60% of that capital on building your MVP means you've put all your eggs in this basket. You likely won't have enough runway to pivot if necessary.
Entrepreneurs on tighter budgets often turn toward more affordable options like a freelance developer on platforms like Fiverr or Upwork. An entrepreneur can further stretch his or her limited budget by targeting lower-cost, offshore freelancers in places like Eastern Europe, India or Central and South America. However, this is not without its own set of risks. Here are a few I've experienced:
- Not knowing what skillsets to hire for
- Language barriers
- Time zone differences
- Inexperienced developers
- Substandard product
However, the biggest risk to contracting with developers at this stage—whether via freelancer websites or professional development agencies—is that you potentially waste valuable time and money building the wrong thing. I know what you're thinking right now: “That doesn't apply to me because I'm not gonna build the wrong thing”. Yeah, that's what I thought too, and then I built the wrong thing—twice. I cannot stress this risk enough:
According to CBInsights, the #1 reason that startups fail is that there is no market demand for their product or service.
I am living proof of how easy it is to fall into this trap. The first two instantiations of Uffizzi (CrowdCrunch and Idyl Technologies) were products that, in hindsight, were cool ideas that nobody was willing to pay for. It's really easy to convince yourself otherwise when you're in the trenches drunk on your own ambitious ideas. Most entrepreneurs are optimists, so we're used to pushing back against other people's pessimism. However, sometimes you have to admit that your baby is ugly. I know first-hand how hard that is, but it's better than running head first into a brick wall. Do yourself a favor and validate your idea before paying someone to build it. Which brings us to my recommended strategy: Option 4…
Option 4: Validate your Idea First (Talk to Customers)
You will notice that Option 4 sidesteps the triangular chicken-or-egg problem altogether. That is, it does not focus on the product, team or money. Instead, this customer-focused option recommends validating your idea before going any further.
So, how do you validate your idea without having the full product? In business, the only thing more valuable than having a bunch of money is having a bunch of happy customers. Happy customers will excitedly tell their friends about great products and eagerly buy new products and services you offer. Even the wealthiest companies will eventually go out of business if they cannot continue to attract new customers (and revenue). That's why the key to solving the Product-Team-Money puzzle is to prove that a sizable market is eagerly awaiting your product. A common misconception is that you need a product first to do this; in many cases, however, your prototype or mock-up will do just fine. What follows are some techniques for demonstrating product-market-fit without a fully baked product.
I like to advocate a “sell it, then build it” approach which is fast, inexpensive and less risky than approaching either investors or development partners first. Here I'm using the phrase “sell it” loosely. You don't actually have to collect money to validate your idea. A good indicator for potential market demand is sign-ups or people who explicitly indicate to you that they would potentially be willing to buy such a product (To be sure, some people who say they would use your product might renege when asked to pull out their wallets and pay for it. However, at this stage, you're just looking for signals that you're on the right track). Try posting your screen recoding on sites like IndieHackers.com or create ads on platforms like Twitter, Facebook and LinkedIn. When the customer clicks on your ad, direct them to fill out a survey to collect valuable information about why they want this product and how much they'd be willing to pay for it. These low-risk engagements can help you refine your product or even allow you to see opportunities that you were blind to before.
An even better approach is to offer your product or services, albeit without a fancy app. In fact, many products and services do not require a technical solution at all. Apps make the exchange of products or services more efficient, but an app is often not required. If your business falls into this category, begin by offering your product or service manually. Collect customer orders in-person, by phone or by email, then track your orders in a spreadsheet. Send your customers invoices by mail or request payment through consumer apps like Venmo. Of course, this approach is not scalable beyond a few dozen users, but the point here is to prove demand. If you find yourself stretched to your limits trying to service all your requests, that's a good indicator that it's time to build an app to automate the delivery process. At that point, you're well suited to seek investment (Option 1). If you have trouble attracting customers, then you can adjust your offering or pivot your product entirely—something that is very difficult to do once you've invested in building a fully function app. The takeaway here is to start small and iterate. Build. Measure. Learn. Repeat.
If you can prove that people want the product or service that you're proposing, then the money, team and product will take care of themselves.
Investors are looking for signals that your product or service is commercially viable and that they could see a healthy return on their investment. For an investor you need to demonstrate that:
- People want your solution
- The market is sufficiently large
- The unit economics make sense
Validating your idea with customers will demonstrate market demand. From there you can infer market size. Assuming your business model makes economic sense, you should not have problems raising money.
Once you have money, then the chicken-or-egg problem is effectively broken. With the capital you raised, you can hire your development partners to finish your product, but with the added benefit of having refined your product or service through market research. Finally, once you have demonstrated demand, raised money, and created your MVP it now makes sense to hire smart people to expand your business. You'll find that having a working product does wonders in attracting serious candidates to your cause.
I’ve lost count of how many entrepreneurs that I’ve come across that blame their lack of success on not having a developer who will build their idea for free or for their worthless equity. I’ve got a message for them:
The tools exist. Stop telling people about your idea. Show them.
Whatever you do, avoid falling into the trap of entrepreneuring. It will keep you busy but it won't make you productive. For technical founders, resist the urge to make your app perfect and beautiful. Functionality is your primary goal at this early stage. For non-technical founders, focus on finding a great partner that you can depend on and with whom you can refine your ideas. They will be invaluable support on this emotional rollercoaster. If you can manage to find a great partner and hack together a prototype (functional or not), then you’re miles ahead of your average entrepreneur. You’ll see how one success can lead to another, and eventually you will have a team, product and money and have solved your triangular chicken-or-egg problem. I can’t guarantee that your business idea will succeed, but you’ve got a much stronger chance than someone swapping business cards with a professional entrepreneur.