According to CB Insights, the cost of launching a startup has decreased by 1000% in 10 years.
To put that into perspective, it used to cost entrepreneurs approximately $5 million to launch a startup; today, it costs less than $5000 thanks to open-source software and cloud-based tools. Today, if you need a project management tool, a server, or an analytics dashboard, you (thankfully) don’t need to build it yourself.
Using existing, self-generated, and acquired resources to take an idea or company from one point to another without investors or banks is what we refer to as bootstrapping. Over 90% of entrepreneurs today are bootstrapped.
In fact, according to research findings by Fundable, fewer than 1% of startups get funded. Yes, less than 0.05% of startups get at least one round of VC investment while 0.91% are angel funded.
Translation: expect no one to pay for your trial and error. When you start a new venture, you’re looking for the right solution to an identified problem, and only after testing and learning will you find out if there’s a fit. The founder pool is becoming extremely competitive, which means investors are leaning toward teams that have found their way out of the maze and are ready to build something big.
Initially, you have no option but to get lost, get your hands dirty, and prove the viability of your idea. I have many bootstrapping strategies I’d like to share with you to build your startup — here are three of those strategies:
1. Take Advantage of Existing Tools
Numbers don’t lie. CB Insights associate cloud-based tools and open-source software to the steep decline in startup initiation and development costs. For instance, instead of hiring a freelancer to design your logo, Logojoy does it for as little as $20 (hiring a professional designer can cost over $500).
Other tools and platforms for hosting, analytics, finance and accounting, social media management, and more can help you minimize your expenses by at least 60% in comparison to what it would cost you to hire a person or team for each service. At StartupCircle.co, we partnered with over 100 of the best tools in the market to offer discounted products for our member entrepreneurs. Join EntrePerks for discounted and free products to help you minimize initial and operating expenses.
2. Pre-Sell Your Upcoming Solution
Did you know Bill Gates sold Altair on software that didn’t exist? When the company he pitched showed a lot of interest in buying it, he built it in response to their demand, sold it, and used some of the funds to start Microsoft.
With as little as a prototype or first-round designs, don’t hesitate to pre-sell your product if there’s interest. This will not only help you secure funds for reinvestment, but it’s also a way to prove the need for your solution. If people really need it, they won’t mind pre-paying for it. This same model is used by Crowdfunding sites.
3. Start Something You Can Build Yourself
The best-case startup scenario is when you can contribute to the development of your core product without seeking outside help. In this case, you’ll be able to take the idea to advanced levels without hiring team members, which tends to be one of the costliest expenses in a startup.
In other words, if you’re a non-technical founder looking to build a business to business financial tech platform, you’ll have a hard time pursuing your venture without hiring talented programmers. In fact, the venture capital firm First Round Capital found that for enterprise solutions, technical founders outperform non-technical teams by 230%.
Pick your battles and build something you can own!
About the Author
Abdo Riani is the founder of StartupCircle.co and AspireIT. His ventures focus on providing entrepreneurs with the resources to turn ideas into viable and scalable startups. Get in touch with him at AbdoRiani.com.