MBA2584 Is Bootstrapping Dead? The Truth About Funding Your Business

0:28Is bootstrapping dead? Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I give you practical business lessons three days a week, Monday, Wednesday, Friday, to help you start, grow, and scale your business. In today's episode, we're answering a big question. Is bootstrapping dead? Spoiler alert, it's not. Bootstrapping isn't just a funding choice. It's a philosophy. It's about building a business that's self-reliant, profitable, and resilient. We're going to break down why bootstrapping might just be the smartest move you'll ever make. I'm speaking out of experience. Full transparency, I've been building businesses for the last 20 years, and every single one I built was bootstrapped.

1:08And in that process, I was able to build two seven-figure businesses. One is this one, the$100 MBA, but the other was a software company as well called Webinar Ninja that got acquired recently by a big company called ProProfs. That acquisition was life-changing for me, and I want to give back and be able to share with you every time I record an episode what I learned in the last 20 years building my own businesses bootstrapped. If you're not familiar with bootstrapping, bootstrapping basically means you're not using any outside funding. You're building a business that uses its own profits to grow.

1:38The beauty of bootstrapping is that it forces you to create a real business, and that drives home point number one. Bootstrapping forces profitability. You can't spend money you don't have. When you bootstrap, every dollar counts. You're not burning through someone else's cash. You're building with your own money. This forces you to focus on making money, not just spending it. Secondly, you focus on profitability from day one with bootstrapping. Businesses that rely on venture capital funding often prioritize growth at all costs. I've seen this from my own personal friends that have startups that are venture-backed.

2:17Investors want to see growth at all costs because growth means the value of the company is increasing. But it's growth at all costs, meaning even if you're losing money, you're not profitable. You might be thinking, how is this even possible? Like, how can you run a business that's not profitable? Happens all the time. Uber was not profitable for over a decade before just recently. And what happens to the founders is that their shares of the company get diluted over and over and over because they run out of cash, they raise more rounds, they raise more cash, they inject more money, and it's like a leaky bucket until it's finally plugged up and they're profitable.

2:50And by that time, the founders of the company don't really own the big portion of the pie. They actually have a sliver. Bootstrap businesses, on the other hand, must generate profits to survive. This is kind of like a secret blessing because it forces you to build good habits and build a solid business. Here's the bottom line. Revenue is vanity. Profit is sanity. And thirdly, you build something sustainable when you bootstrap. Without the crunch of outside funding, you're forced to create systems and processes that make your business sustainable long-term. With my software company, Webinar Ninja, we bootstrapped it and built it from the ground up.

3:28We started small. We focused on pre-sales. We reinvested our revenue to grow. That discipline not only made us profitable, but also gave us the freedom to scale on our own terms. We made our own decisions and moved the way we wanted to move with the company and its future. Now, everything I just talked about so far is important. But what I'm about to share with you right now is the only thing that matters in business, and that's ownership is everything. Felix Dennis, the author of How to Get Rich, FamilySea said, ownership is everything. Here's why that's so powerful. Number one, you get to keep the rewards, the spoils, right?

4:03When you bootstrap, you own 100 % of your company, or at least you and your founders own 100 % of that business. That means every dollar of profit goes back into your pocket and your business. You may want to allocate some profit into the business or some as a dividend, not to investors looking for their cut. Number two, you control the vision. You're in the driver's seat with no investors to answer to. You get to call the shots. You can pivot. You can experiment. You can stay the course of what you're doing and you can do it all without anyone breathing down your neck. Number three, you build true wealth when you have full ownership.

4:42Venture capital might look successful on paper, on headlines, in social media, but wealth is built through ownership. Remember that the most wealthy people in the world own a lot, right? They own lots of stock in a company. They own big parts of the business. if not the whole business. Felix Zennis, who I mentioned before, built his publishing empire. He was a magazine publisher and was worth over half a billion dollars by holding onto as much equity as possible in all his companies. It's a lesson that every entrepreneur should take to heart because when you own your business, the business itself has value as you build it, as you grow it, as you have cashflow coming in, as you add assets to it.

5:24And then one day when you want to sell this business and exit it like I did with my software company, you get to take home all the money. And for many people, it changes their life forever. So here's the bottom line. You don't need a billion-dollar valuation to be wealthy. You just need ownership of a profitable business. So why is bootstrapping not dead? Contrary to what you might see on social media, bootstrapping is alive and well. And here's why. Most businesses are bootstrapped. According to the National Venture Capital Association, less than 1 % of businesses receive venture funding. Less than 1%.

5:59The vast majority of successful companies are bootstrapped. Secondly, it's the path to freedom. Bootstrapping gives you financial and creative freedom. You're not tied down to investors or their timeline or their vision. You're building something that's truly yours. And that's really the joy of entrepreneurship. You get to build something that's yours, your baby, your creation, your expression. Thirdly, and this is really underrated, it builds resilience. Without outside funding, you learn how to be resourceful. That resilience makes your business so much stronger and more adaptable to any changes that you might see come along the way.

6:37So as you know, we're all about action here at the$100 MBA show. So let's talk about how to bootstrap smartly. Number one, I want you to start small and be focused. Don't try to do everything at once. Start with one problem or service that solves a specific problem. Take a moment to write down what is one problem or pain point your customers have that you can solve really well. Just one. Number two, you can pre-sell your idea. Validate your concept by getting customers to pay for it before it's built. This happens all the time. There's a whole business called Kickstarter around this where you can pre-sell your products.

7:11This not only proves that there's demand for your business or your solution, but also provides the cash you need to get started. That's what I did with Webinar Ninja. Number three, reinvest in growth. Instead of taking profits early, reinvest your revenue into marketing, product development, and scaling your business. Make some hires. Number four, leverage free and low-cost tools. There's plenty of tools out there like artificial intelligence, like AI, chat GPT. Use affordable tools that you have around you and platforms to keep your overhead low while you grow. As you start growing and making a profit, you can then invest in paid solutions, expensive solutions.

7:50but in the beginning, there's a lot of affordable solutions to get you started when you don't need a lot just to get going. So let me give you a real life example from my own business to show you what I just taught you. When we sold Lovener Ninja, we pre-sold it, like I mentioned. That landing page that I put together to pre-sell it was free landing page software. And I sold it using a payment processor that just took a cut. Stripe just took a cut from us every time we made a sale. And it wasn't that expensive, about 3 % of every sale. It allowed me to charge credit cards and be able to secure some cash.

8:19I took that pre-sale cash and hired one really talented developer. I got them on Upwork.com. They were a freelancer and they built the first beta version of the software that I released to customers a few months later. I used a low-cost hosting solution to host my servers for my software. And in fact, I just contacted Amazon AWS, which is the server solution I used, and told them, I'm a startup. I'm just getting started. I'm trying to validate my idea. And they gave me$15 ,000 in credits. Okay, there are options out there if you're willing to reach out and ask people. So I was able to start my business with very little, pre-sold my product, got some free credits from Amazon.

8:55I then got feedback from my customers, iterated, improved on the product, sold it again, sold it again, sold it again, improve, improve, improve. You get the point. Got my profits, made some hires, reinvested again. So let's wrap this up. Is bootstrapping dead? Absolutely not. It's one of the smartest, most empowering ways to build a business that's truly yours. Bootstrapping forces profitability and sustainability. As we learned, ownership is everything. So keeping control of your business is how you build true wealth. And most businesses succeed without venture capital. And remember, your business should work for you, not the other way around.

9:34Thanks for tuning into the$100 MBA show. If you've gotten value from the show and you want to give back, you want to say thank you, the best way you could do that is to hit that subscribe button and follow us. Whether you're listening on Spotify or Apple Podcasts or any podcast app, hit that follow or subscribe button or you're watching on YouTube, hit subscribe. Give us a thumbs up. It means a ton to me and it really helps motivate our whole team to continue to give you valuable business content. Thank you so much for listening and watching and I'll check you in the next lesson.