So what choice do startups have besides raising capital? Bootstrapping is a decision by the entrepreneur to start and grow a company with little capital, relying on personal investment or revenues of the company. Bronto Software is one of North Carolina’s greatest bootstrapping success stories, thanks to its founder Joe Colopy.
Joe started Bronto in 2001 and remained completely bootstrapped, never raising any outside capital. He didn’t have “rich uncles or angles or anything.” It wasn’t easy, but he was able to grow the marketing software company over time to an acquisition in 2015 by NetSuite for $200 million.
Why and how did he bootstrap? Joe spoke to a room of 70 NC tech entrepreneurs at the CED Raising the Dough Workshop on April 5, 2016 to share his experience, journey, and decisions along the way. Check out some of Joe’s reasons for bootstrapping:
Joe was able to keep a low “burn rate”; he didn’t have to give up anything to set himself up for starting the company. After leaving his previous job at Red Hat to start Bronto, he didn’t take a full salary for three years. In reference to those early years, Joe’s perspective was that “if you take $1 out of the company, it’s really like taking $3 out.”
- King over Celebrity
If Joe had decided to raise capital, he said that he could have more quickly run a much larger company; he refers to this choice as “celebrity.” But he notes that “from the wealth perspective, you are much more beholden” when raising capital, meaning you don’t just answer to yourself and your team but investors as well. Instead of celebrity, Joe chose to be “king” at Bronto by bootstrapping. Joe said, “We felt like we didn’t really need to (raise capital). It was one less thing to worry about.” And with that philosophy, the team at Bronto was able to build momentum which led to their successful growth.
- Size of the Slice
Joe urged the crowd of entrepreneurs to consider the ownership that they desire, a small piece of large pie or big piece of a small pie. He noted, “If you look at straight money, people who have bootstrapped to an exit have done very well for themselves.” If an entrepreneur goes public after raising capital, the average ownership is 10% to the CEO, according to Joe. “Dilution is very real.” He also noted, “If you are CEO of a public company, do you think you have liquidity? God no.” Joe chose a big piece of a small pie by remaining bootstrapped, and it paid off, as that pie ended up being not so small.
Joe Colopy and the Bronto team wanted to build a great business, “not chase a transaction.” He encouraged the early-stage founders to be realistic about their circumstances. Joe’s general belief is that he doesn’t believe in competition. “Early on, it’s all on how you serve your customers. Treat customers right, and that’s timeless.”
Special thanks to Joe for sharing these words of wisdom! Want more? “7 Things We Learned at Raising the Dough”