The frugal entrepreneur, working late into the night, fueled by cheap beer and ramen noodles is more than myth; it’s the reality for many who are working around the clock to build new businesses.
I had the pleasure of recently meeting the Indianapolis-based Max Yoder, and upon hearing how he was building his company, I was somewhat surprised at his methods. (He runs Quipol, a rather clever and straightforward social-media flavored service for folks to poll their audiences and get highly detailed metrics back on their results. -- ed.) Yoder takes the idea of self-funding very seriously. He graciously agreed to share some of his tips with us. Be warned, his level of dedication and discipline is not for everyone.
Read on if you want to learn how to start creating a technology product and the business around it, all on a shoestring. Or actually, slightly less than that.
What is the most crucial financial skill for an entrepreneur bootstrapping their business?
Max Yoder: Turn everything about your personal life into a fixed cost. I treat my grocery expenses and my entertainment expenses the same way I treat my rent and insurance expenses -- they're the same each month. I'll take X amount of dollars out of the bank every month, right around 39 percent of my post-tax monthly income, and I'll allocate it according to my plan. When it's gone -- it's gone. Every other dime, the remaining 61 percent, gets dumped into the startup. I realized quickly that startups are full of unforeseen variable costs, but, if you're managing your personal expenses well, it becomes a lot easier to absorb those blows.
What has been the hardest lesson for you, self-funding your venture?
Max Yoder: I don't have any semblance of a social life anymore. Every spare minute and every spare dollar gets devoted to Quipol. My personal relationships have suffered, I don't sleep very much, and I'm an emotional rollercoaster that my girlfriend has to manage. I'm learning to be more even-keeled, but it's hard when you invest all of your time and energy into one thing, and then you put it out for the rest of the world to take apart and critique. I'm not complaining -- it's just the way it is. The thing is, I can stop whenever I want, but I haven't felt compelled to do that yet, so I guess that's saying something about what I'm getting out of the experience.
What does the Midwest offer the aspiring bootstrapper?
Max Yoder: I live in Indianapolis, which pairs a ridiculously low cost of living with a flourishing tech sector. There's this unbelievable level of access here: I can have coffee with people who started 500-million-dollar tech businesses, and I think that says a lot about the culture. Everybody wants to help everybody. If you can show that you're passionate and focused, this city will have your back. And I'm new to this, so I need all the help I can get.
What turned you off from raising capital?
Max Yoder: Seth Godin said it best: "Raising capital is not the same as succeeding." It's easy to look at all the news out there and say, "Hey, I'm a startup. Startups raise money. Good ones raise tons of money. I should raise a ton of money so I can be a good startup, too."
I'd much rather devote my efforts to building a product that people love. I'd much rather devote my efforts to developing relationships with my users. The reality is this: raising money takes a ton of time, so, if I can afford not to do it, that's what I'm going to do. We'll see how well that plan works out for me in the long run. I'll let you know if it totally blows up in my face.
Alex is a writer and technologist who covers emerging companies in the Midwest. He has worked previously for numerous early stage technology companies, contributes to The Next Web, and has a particular interest in watching the social web monetize.