Startup geek around town

Portland Web Innovators – Bootstrapping & Business Models

Dateline: Wednesday, February 4, 2009 – conference tables at Cubespace in Portland, Oregon for the Portland Web Innovators Meeting

The early evening meeting of the Portland Web Innovators group was attended by about thirty people with a mix of developers, designers and business folks.  The conversation centered around money.  Having it, not having it, making it and spending it.   Carolynn Duncan (@hundreddollar) lead a talk that took the group through the paces on bootstrapping a company.  Here is my rendition of her talk slightly condensed and sprinkled with colorful commentary from yours truly.

Carolynn began the conversation with a slide that says “Bootstrapping is good. Having a revenue model is better.” This set the tone for ensuing discussion.  Carolynn’s opening volley was to set the stage for what bootstrapping really is.  For many of us that are familiar with the “golden days” where VCs just through out cash to any idea, we have a warped perception of bootstrap.   Back in the day we would outline all of our wishes and wants to make sure we could pay salaries, get comfy offices and attend trade shows.  We would then double that amount and go look for funds in the amount of millions of dollars.   Carolynn reeled us in and helped us to think in terms of reality and today’s economy.  She defined bootstrapping a business as determining the bare minimum amount of cash needed to get a solution to a point where the revenue model out paced the expenses.  What a novel concept.  Spend as little as possible and make as much as you can.  Although this is inherent to our every day lives, for some reason the tech start up world forgot about this basic business tenant and it’s about time the tech community was told straight up to change their ways.

As Carolynn continued she explained that the equation for bootstrapping your idea was rather simple.  You need to determine the core ingredients necessary to get from point a to point b in your project.  For every item on your list you should determine if you must pay cash for that item or if you can get creative to minimize your expenses.  She offered suggestions of using less than perfect hardware for certain tasks, bartering or trading for needed services or leveraging external services where you can create a win/win situation without the exchange of cash.  She warned the audience of a failure of many companies; not exchanging value for value received.  She explained how even the most ambitious company has a limit to what they can endure when it comes to helping out your business.  Be cautious of what you are asking of your network and your suppliers and make sure that you know where to draw the line and cough up some of your hard earned money to keep the circle of life spinning.

Carolynn then displayed a simple ratio graph where she explained that a half ass product would require less than prudent sales tactics that would then result in a negative income stream which would eventually result in poverty and unhappyness.  On the flip side, she said that with some planning and an idea of what you are selling and knowing why they want to buy it (remind you of any previous blog posts?) then you can flip around the equation.  She demonstrated that a strategic product offering based upon a customer need could result in the pursuit of a working revenue model & customer acquistion strategy.  The end result of this type of planning and smart approach to development could lead to a much improved income stream resulting in the minimization of poverty in your household.    Simple concepts, yet another data point behind my continual harping in my blog that you should know your customer and determine what problem you solve BEFORE you write any code.

As Carolynn began to wind down the talk she posed one rather forward question.  The question was “Why build something if you don’t know how you are going to make money from it?”  You could hear the slight groans from the audience as our Portland based freedom fighters wrestled with this concept.  Now to be fair, there are times when people build things without the intention to ever make any money from it.  They are building things for the greater good and to enable them to contribute to the world at large.  But today’s talk was about money and making money, so in context of the meeting – her question was tremendously relevant and to the point. Carolynn also offered some great lists of what not to do when determining your business model.  Again the simple was supreme.  Don’t creat a new model.  Don’t be free.  Don’t seek double revenue models.  Don’t have special rates for friends and family. She also went on to discuss what does work and offeres 23 ways to think about revenue models. In her presentation she then gives us her insight on what she has seen work with 43 ways to get customers.  To see all of Carolynn’s tips and tricks you can visit her blog at www.bigpaperblog.com or follow Carolyn on twitter @hundreddollar

Thanks Carolyn for sharing you knowledge with the Portland Web Innovators and I hope that your advice will be put to good use by the brilliant minds in the audience who are almost all working on side projects or startups.  I loved your goal of seeing 10 new MILLION dollar businesses in Portland within in the next year.  I know for one I’ll be following your advice to make sure that MioWorks.com makes it into that short list.