If you want to bootstrap a business, beware of “bootstrap busters” – challenges that make bootstrapping more difficult. Let’s start with “critical mass”.
Let’s say you want to launch a business that involves bringing together buyers and sellers. That could be an auction model, like eBay, StubHub, or Sotheby’s, or a classified model, like Monster.com, Craigslist or Match.com. If buyers come, and there aren’t enough sellers, the buyers may leave and never come back. And vice versa.
How do you resolve this dilemma? Maybe you’ll spend money on marketing early on, to reach a critical mass of buyers and sellers quickly. Or perhaps you’ll make the service free for a while instead of collecting fees. Either way, you’ll probably be operating at a loss, which is rough when you are bootstrapping.
Media businesses have similar challenges. Want to launch a magazine, online community, or email newsletter? You’ll need to build an audience of a few thousand people before you can generate revenue from advertisers. That can take a lot of time, effort, and/or money. Either way, you probably won’t be generating positive cash flow for a while.
Bootstrap busters like critical mass aren’t insurmountable, of course. I’ve seen plenty of examples where scrappy entrepreneurs reach critical mass without raising capital. Just be sure you know what you are getting yourself into, and that you have enough patience and / or resources.