Tag: Bootstrapping

THINK: You Only Have 1 Peso

I started out my day with 50 pesos in my pocket.

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By 5pm, I had 1 peso.

I had food waiting for me at home. True, I didn’t have any more expenses for the day, but I still needed to hop on the MRT to get home. Good thing, I had a stored value card to get me there.

On the journey home, I was drunk with excitement. I felt liberated without the resources that would usually shield me from hardship. I was ready for any obstacle because I literally had nothing to lose.

The only thing on my mind was to get home to food and shelter, and I knew I’d get there someway, somehow. 

While this romanticized anecdote is a product of my own recklessness and negligence, I savor that 1 Peso Moment. It reminds me of the rewards that come from making do with less. In this instance, I was pushed to the limit because I was down to my last peso and I was provoked to push back because I had to survive. In contrast, an excess of resources could do the complete opposite.

In the startup scene, they say that when a company acquires funding it actually increases the company’s likelihood of running out of funds. I see the concept play out in my own life.

When I’ve got a couple of thousand pesos. The money exits from my pocket without attachment. I can barely remember where it goes when I have more of it. Money, in this case, has less of an impact because it’s dispensable. Since I don’t value the money properly, I don’t foresee any consequences until I’m down to my last peso.

If I were to apply the principles of startup methodology into my own life, as I transition from life in a developed country to life in a developing country, I would say that bootstrapping is the way to go. I’ve heard so many stories about how funded startups fail because they get investors too quickly or how founders lose control of their businesses by giving up majority of their shares. The list seems to go on and on, but aside from the many reasons, I’d like to put emphasis on this Juan Great Thought:

If you’ve only got 1 Peso in your pocket, you stay hungry.

When you don’t have any money for a basic human need like food, you will work at any cost to fulfill that need.  That need to live is what will ferociously drive you to great measures, and that determination opens the doors for great rewards.

I’d like to work with that hunger to survive day in and day out. In days of doubt and despair, I will always remember that moment when I had just 1 peso.

 

No Money? No Experience? No Problem!

No Money? No Experience? No Problem!

Peter Cauton

After she graduated with her degree in Psychology in 2010, we hired Ofelia Linchangco in STORM to do HR analysis and consulting. What was pretty evident from the get-go was that she loved design-related work. She would always volunteer to do design work for STORM’s marketing materials and would tinker with the website design. While she would do good work with her HR-related responsibilities, her design work would always elicit oohs and ahs from everyone in the workplace. It was plain to see what her passion was.

A year and a half later, she resigned. Planning her leap, she read a lot of books and did a ton of research. Then, using the remnants of her last pay (around P8000.00), she put up a design studio, Rocket Concepts.

Nowadays, she is doing very well and always seems so…happy-busy. She works with contractors to keep up with the work demand.  She is earning a very comfortable paycheck as her own boss. She is pursuing a passion.

Let’s recount. P8000.00 capital. No experience. No formal design education. Just a year’s experience in the workplace.  She made it work.

You can, too. 

Around a month ago in Starbucks Masinag, Estelle Osorio narrated to me how she and partner Ulysses Cruz took a leap, used a mere P20,000.00 in capital, and founded BizWhiz, a startup focused on business training.

2 years after, Biz Whiz is arranging profitable course after profitable course. They are now hiring. They are getting bigger and more profitable.

Let’s recount again. Estelle has no MBA, she graduated with a degree in Political Science. No outside money. She’s in her mid-20’s. She made it work.

You can, too.  

In an example close to home, early this year I founded Stream Engine Studios with Gino Caparas. The initial concept was to create a digital marketing firm. Then it morphed into an online explainer video production house. We put up around P30,000.00 as initial capital. Then I managed to convince Gino to take a leap from his comfy corporate job.

There were some hairy moments, but ultimately, not a year into operations, we have recouped our initial investment many times over. We have hired more people to help us out. We can now do this sort of work.

Let’s recount. No MBA’s. No formal training in design or animation. No big outside money. Gino’s just making it work.

You can, too. 

I can go on and on.

Karen Yao was a pre-school teacher-turned HR practitioner who parlayed her expertise into a successful freelance consulting career and ultimately, into startup Congruent Partnerships. No big capital investment.

Sophia Lucero was a computer science graduate who had a knack for front-end work. Since she graduated in 2006, she has never been a regular employee for any corporation. Instead, she pursues her passion as her very own startup: doing freelance web design, UI Consulting, writing, and even pursuing her personal advocacies, such as co-founding the Philippine Web Designers Organization.

August 29 speaker Howard Go resigned from his lucrative Telco job in 2010 to pursue a passion – designing games. His startup, Mochibits, has come up with hit app after hit app. No big capital investment.

No money. No experience. No fear.

YOU CAN, TOO!

(Let’s hear of even MORE examples from you guys! I enjoin you to bless and encourage others by posting your own bootstrap experience! Perhaps your story is the very example which can convince one other person of doing her own leap. Don’t be shy and tell your story by hitting the comments below! Let’s inspire a movement!) 

Buhay Bootstrap (plus, free startup glossary!)

Peter Cauton

The year is 2006. Pao and I were about 15-20 pounds lighter. Pao was still enjoying his mullet haircut, while I was still enjoying some hair.We wanted to put up a flexible benefits solutions firm, capitalizing on my own early-market experience with flexible benefits.

None of us were really “entrepreneurs” when we started. I was an HR guy and Pao was a programmer. We tried pitching to investors for startup capital, but I think this failed for two reasons: a) the mammoth 100+ page business plan (AKA complete waste of time) we crafted, and b) at that time, no one understood what our idea was and could become. So we ended up bootstrapping.

Funding. There are two general ways to fund a firm: a) raising capital from investors, or b) bootstrapping. Bootstrapping basically means getting no outside funds. The founders themselves would put up the initial capital (another common ploy would be credit cards, although nowadays there seem to be no end to spammed loan offers), minimize costs by all means necessary, survive, and wait for the business to break even and eventually, be profitable. What you give up when you get funding from investors is equity – and thereby control. When you bootstrap though, and it works – you retain control.

We put in around 90K all in all and got started. Pao actually took the leap much earlier than I did. In a crucial move, he went full-time in STORM immediately. I worked with him part-time. To minimize costs, the company began operating in the living room of my 1-bedroom condo. The bedroom effectively became my house. (When I stepped out of the door – boom, I was at work!) We didn’t pay for any office furniture – everything was something someone had donated, so uhm … it wasn’t exactly a breathtaking sight. Our monthly costs were Pao’s salary (near minimum), electricity, and the cheapest internet provider at that time – Destiny (don’t get me started). We felt like we could manage the burn and survive until we got a client or two.

Burn rate is a synonymous term for negative cash flow. It is a measure for how fast a company will use up its initial shareholder capital. If shareholder capital is exhausted, the company will either have to start making a profit, find additional funding, or close down. (wikipedia)

Our plan: to make money from flexible benefits consulting first, and then eventually use the funds to develop an online flexible benefits system to market. Game.

Excited, we planned out a half-day seminar on flexible benefits in Discovery Suites.  Then we started calling people to come. The event was jam-packed, filled with a lot of large firms. Peso signs started broadcasting out of our eyes and stuff. We we’re Kings of the World!

Until we talked to them.

None of them wanted merely consulting. They wanted the online system.

Hokay. This was a significant problem. We had wanted a kick-ass online system. We had previously developed the specs and we designed the data flow very carefully, capturing the various nuances of a comprehensive flexible benefits program. The resulting design was a gargantuan task which would take months to develop for a team. On pao’s salary alone we had 2-3 months of burn left. So what to do?

This led to our first pivot.

Pivot: this is when, due to new insights gathered from the market a firm does a quick turn, a quick strategy change, WITHOUT changing the overall vision of the firm

We needed small, quick wins to allows to raise funds to hire one more programmer to help Pao finish our system as fast as possible. Prior to this time, I had conducted an organizational climate survey for a friend’s organization – and thought that might be a cool service. However, there were a large number of competitors in the business, so we thought an online web survey tool (there wasn’t a popular one at that time) could make us unique in this market.

Amazingly, Pao did the tool in a month, we dubbed it WebSurv. (we still use it now for some projects) Websurv helped STORM land its first few projects – analyze/report projects for some medium-sized firms.

We eventually got to hire our first employee, Angela (who, during her initial interview, took fifteen minutes waiting just outside the door of my residential condo unit before finally mustering the courage to knock). This set the stage for everything. We finished the flexible benefits system before the year ended, managed to land two major flexible benefits clients as 2007 started, and the rest is company history.

In six years, STORM has manage to become a bona-fide player in the local HR technology market, with its sights set abroad.

Some items to takeaway:

1) No, it’s not as glamorous as you might think. (not at all!) It takes a whole lot of sacrifice and humility.

2) It really helps to have a partner with you to weather the storms (pun intended).

3) It’s mighty tough to get investor money (a bit easier nowadays though). Bootstrapping is entirely possible though and has a lot of upside. Check this out. I’m a big believer.

4)  Your plan has to be really be very very flexible to changes.

5) It can take a long time – so patience and perseverance are paramount.