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Bootstrapping is a term used to describe a scenario where an entrepreneur launches a business with minimal capital and no outside funding. When someone tries to start and build a business with their own money or the new company’s operating profits, they are said to be bootstrapping.
When an entrepreneur bootstraps a company, he or she begins with few or no startup funds. The opposite of bootstrapping is when a businessperson raises funds from venture capitalists or angel investors prior to their company’s launch. To succeed without outside investments, bootstrapped businesses rely on personal funds, quick inventory turnover, sweat equity, a good cash runway and streamlined operations. A company relying on bootstrapping, for example, may run a kickstarter campaign or pre-orders for its product and then use those funds garnered by the pre-orders to actually build and deliver their product.
When compared to a company using venture capital or angel investments, bootstrapping your business can be advantageous, because it gives the entrepreneur complete control over all the decisions related to their company. There are hundreds of bootstrapping success stories out there. From large, well-known companies to smaller businesses, bootstrapping can lead to great success. Let’s take a look at three bootstrapping success stories and how the entrepreneurs made their companies succeed all on their own:
1. Markus Persson and Mojang
It’s likely you’ve never heard of the company Mojang, but we know you’ve definitely heard of the best selling video game of all-time that Markus Persson and his company, Mojang, created a little over a decade ago: Minecraft.
When Persson first published Minecraft under the Mojang brand, he opted to sell it directly through Minecraft’s website, rather than seeking outside investors, so that Mojang could collect all of the profits. Within a year, Minecraft had sold so many copies that Persson was able to quit his day job and devote all of his time to Mojang’s budding business.
Eventually, other employees joined the company to help expand Minecraft’s base, and as it expanded, it grew to encompass new consoles, and thus, more households around the world. Soon, Minecraft merchandise — such as clothing and toys like LEGO emblazoned with Minecraft characters — flooded the market, and Mojang grew from a tiny game company to a giant.
Persson and his company turned down many offers from possible investors — most notably from Napster’s co-founder, Sean Parker — and refused to accept outside funding to help continue to grow Mojang. However, the lightning-fast growth of Mojang eventually took its toll on Persson, and in 2014, he sent out a tweet that simply said, “Anyone want to buy my share of Mojang so I can move on with my life?”
And as we know, someone took him up on that offer. In September of 2014, just three months after Perrson’s tweet, Microsoft bought Mojang from Persson for $2.5 billion.
2. Sara Blakely and Spanx
The year was 1998, and Sara Blakely was a salesperson, going door-to-door selling fax machines. One morning, as she was getting ready for another long day of sales, she cut the feet off of a pair of control-top pantyhose and threw them on under her pants. It was then that the idea for Spanx hit her. The shaping and toning afforded to her by the control-top pantyhose was perfect, and it made her realize that hosiery was thin enough to make shapewear from.
At the time, Blakely was just 27-years-old, with only $5,000 in her savings account. She invested every cent of her savings to create her Spanx products and even went so far as to write her own patent in an effort to save money.
She introduced her Spanx products to a number of different retailers, including Saks Fifth Avenue, Neiman Marcus and Bloomingdale’s, and convinced them to carry her line of shapewear.
To this day, Blakely is still the sole proprietor of Spanx, which has never once accepted venture capital or angel investors. Though she has never disclosed the sales numbers of her privately-owned company, it’s estimated that her net worth is around the $1 billion mark.
3. Nick Woodman and GoPro
After two failed startups, Nick Woodman needed some time away to clear his head. And so, he went on a surfing trip to Australia and Indonesia. It was during this trip that inspiration struck, and what would eventually become a multi-billion-dollar idea, was born.
As he watched other surfers hit the waves, he took notice of one unfortunate trend. Surfers were wrapping their waterproof cameras around their wrists in order to document their adventures, but the tethers kept breaking and the cameras would be lost, or the surfers would have to swim around to find them again.
Using his own personal savings, as well as a loan of $35,000 from his mother — as well as moving back in with his parents to save money — Nick launched Woodman Labs, which would go on to be called GoPro.
When cameras switched from analog to digital, Nick recognized that the landscape for his design was changing. And so, he went back to the drawing board and conceived of various ways in which athletes could mount the GoPro cameras so that they could be used for any number of sports or activities. Woodman bootstrapped his entire operation for a decade until the tech group, Foxconn, offered to invest $200 million into GoPro.
So, as you can see, anyone can bootstrap their startups without venture capital or angel investors. It just takes hard work, determination, a bootstrap mentality — and yes, sometimes, a little luck.