Why bootstrapping just may be your company’s best (if not only) bet

Finacial Post

Two years ago, Jenn Harper couldn’t afford to quit her job to devote herself full time to her makeup company, Cheekbone Beauty, which has developed a line of lip glosses and other makeup products that celebrate Indigenous women.

Instead, the Ojibway-Canadian woman from St. Catharines, Ont., worked full time as a sales rep for a seafood company during the day, came home to feed her family and hang out with her kids, and then worked from about 8 p.m. to midnight every night at her fledgling business to do customer service and order fulfillment.

It was, “exhausting but necessary,” Harper said, since she only had a snowball’s chance in hell of getting an investor. In a saturated market for cosmetics, “there’s no way anyone would have invested in my brand without proving the concept.”

… READ MORE ON HARPER’S STORY

Similarly, Ryan Tucker, chief executive of G2V Optics Inc. based in Edmonton, waited three years to raise the first round of funding for his company, which manufactures high-tech lighting systems that mimic sunlight for the horticulture and the aerospace and research industries.

“We were in the market and getting great feedback,” he said. “But we knew if we continued to grow organically, we were going to miss our opportunity in the vertical farming market to better-funded competitors.”

But Tucker believes the years he and his partner, Mike Taschuk, spent bootstrapping prepared them for the process of getting funding. He points out that finding and wooing the right investors takes a tremendous amount of time and energy.

“When you’re an early to mid-stage business, being able to just focus on the customers, product and delivery, without a lot of external stakeholders is valuable,” he said. “You can be really swift and nimble about making the changes needed.”

What’s more, the time gave the pair a chance to build a viable business, which made it a more compelling investment opportunity, and gave them access to “the highest-quality partners and sources and with the least amount of friction and efforts.”

The pair were able to make it clear “this wasn’t just an idea on a napkin,” Tucker said. “We were able to show a history of really sharp growth.”

The down side of bootstrapping, he said, is that “you’re limited by your own networks and the networks of your advisers.”

Apart from providing the cash G2V needed to scale the business, Tucker said the company’s investors “really understand the business and how to scale it. You don’t get the benefit of those strategic, intelligent investors when you’re bootstrapping.”

Financial Post