In our case, we always wanted to be a software company, selling off-the-shelf software to thousands of customers at a low price. But that kind of company takes a while to get going--it takes years to write code and build a large customer base. ...
Bootstrapped companies start on somebody's credit card. And in their early months and years, they do whatever it takes to break even, even if it means they have to take a few diversions along the way. ...
When you bootstrap, things move very slowly and in sync. Your revenue grows only about as fast as you can hire skilled workers. The degree to which customers are aware of your business never outstrips the quality of the goods or services you are able to provide to them. ...
One of the benefits of this model is that it's pretty cheap. According to the company history published on the website of Ben and Jerry's, the partners started with a $12,000 investment, in 1978. ...
Compare our humble way of doing business with the approach of big-bang, high-burn-rate companies that raise money almost as quickly as anyone on their staffs can spend it. They are in a terrible rush. If they are in a new field with no competitors, they feel as if they are in a land grab and that they have to get big superfast. Every minute matters. And there are lots of fun ways to spend money to try to speed things up. Having trouble hiring quickly? Offer BMWs as starting bonuses.
But in the rush to win a land grab, one thing that usually gets left behind is a company's culture. ... Ben and Jerry's exists because of the socially conscious values of its founders. Fog Creek Software exists because we believe in treating programmers well and developing friendly software using highly reliable engineering practices.
If you raise capital and go for the big bang ... all sorts of growing pains will ensue. For example:
1. Let's say revenue grows faster than the rate at which you can hire. The result: poor customer service. ...
2. What if you hire employees faster than you can reasonably expect the quality of your product to improve? The result: New hires don't have a chance to learn the company culture and the founder's values from experienced hands, so the quality of work they do and the quality of service they provide are inferior. The fastest you should hire employees is the rate at which they can learn to do their jobs.
3. And if PR grows faster than the quality of your product? Because you haven't worked out the kinks, a lot of people who are interested in your business become tire kickers rather than paying customers. Many of these customers will be permanently convinced that your product is simple and inadequate, even if you improve it drastically later on. I've taken to calling this the Marimba Phenomenon. ...
It's even worse to get publicity before there's a product people can buy, because then, when the product really comes out, the news outlets don't want to do the story again. I call this the Segway Phenomenon...
Let your reputation spread by word of mouth. Save your marketing dollars for when your company is mature and in a position to blow people away.