The UK Business Awards industry should recognise the entrepreneur ‘bootstrapper’ says Professor Colin Mason of Glasgow University who has studied the financing of small and medium-sized firms for over 30 years. A prize for the owner-manager with the creativity to scale their business without raising equity finance is long overdue.

According to the British Business Bank Small Business Equity Tracker¹, 2,044 equity deals worth £8.8bn fuelled the growth of a tiny minority of ventures in 2021.  News headlines are dominated by the amounts invested by venture capital funds or business angels. These select few firms are hailed as heroes of economic growth.  especially by Government when it wants to promote entrepreneurship.

In reality, the vast majority of entrepreneurs use bootstrapping to assemble the resources that they need to start up and grow. This means finding creative and imaginative techniques to overcome the lack of cash or to conserve that cash. Many want to avoid, delay or minimise the need to raise external finance so that their ownership stake in their business is not diluted prematurely. Bootstrapped companies are overlooked in Government promotional campaigns.

Professor Mason says: “Entrepreneurs chase venture capital funding because it is thought that this is the only way to scale. But bootstrapping is a way of life for the vast majority of small firms, and for some, it has led to significant growth.

“E-mail marketing company Mail Chimp² sold to the tax software company Intuit for $12bn having turned away venture capital dollars in favour of profits and greater control over their business. Because they never sold any of the company to venture capitalists or granted stock options to employees their stakes in the company came out to roughly $5bn each.”

Bootstrapping refers to ways of minimising fixed costs, operating costs and employee costs, efficient processes, cash management regimes, and low and no cost marketing techniques to minimise spending and access resources at no, or reduced cost.

For example:-

  • Turn personal assets into cash. Jeff Lawson and John Wolthuis, co-founders of Twilio, self-funded the company’s modest start-up costs and took no salary. After Lawson and his wife married, the couple sold their wedding gifts to raise some additional cash before going on to raise a seed round of funding.³
  • Use free space such as coffee shops for meetings.
  • Offer to decorate or repair space in exchange for a lower rent.
  • Hire student interns to delay hiring staff.
  • Do your recruitment by engaging with university departments.
  • Barter with other companies for products and services that you need.
  • Do your PR yourself to get noticed. Saravana Kumar, founder of BizTalk360 had the required technical know-how but did not have much experience in selling. However, he was a blogger, specializing in the particular domain which is the BizTalk server and gradually built an audience of 15,000 followers. These blogging activities landed him his first customers.⁴

Whereas bootstrapping is a necessity for many entrepreneurs who lack sufficient personal wealth to invest in their business or who are turned down by banks and investors – for some it is a deliberate choice to maintain 100% ownership and control of their business.  Even businesses that have raised finance from business angels and venture capital funds will have used bootstrapping to develop their products and demonstrate initial market traction.

Trinny Woodall, founder of Trinny London, a beauty brand,  had a car boot sale at her home which raised £60k.  She subsequently went on to raise venture capital but at that point, she had a clear direction for the business and knew that the business was investable. “Sacrificing too much of your company too early in its journey feels like you are losing control before the engine has even started”⁵.

Professor Mason continues: “The venture capital industry has a host of awards that recognise successful investment teams, investee companies and exits. But entrepreneurs that have bootstrapped their way to success are typically under the radar and go unrecognised.

“Bootstrapping is one of the most critical and fundamental entrepreneurial skills. This needs to be acknowledged and celebrated. So, let’s create Bootstrap Awards that recognise the outstanding achievements of start-up companies that have bootstrapped their way to commercial success.”