Entrepreneurship, Second Edition

10.2. Bootstrapping New Ventures

Jim Poss is a typical example of how an entrepreneur bootstraps a startup by scraping together resources, including financing, services, material, space, and labor. In Chapter 2, you read about how Steve Jobs and Stephen Wozniak at Apple and Sergey Brin and Larry Page at Google raised their capital. Jobs and Wozniak developed their first computer, Apple I, in a parent's garage and funded it with $1,300 raised by selling Jobs' Volkswagen and Wozniak's calculator. They then found an angel investor, Armas Markkula, Jr., who had recently retired from Intel a wealthy man. Markkula personally invested $91,000 and secured a line of credit from Bank of America. Brin and Page maxed out their credit cards to buy the terabyte of storage that they needed to start Google in Larry's dorm room. Then they raised $100,000 from Andy Bechtolsheim, one of the founders of Sun Microsystems, plus approximately $900,000 from family, friends, and acquaintances. Both Apple and Google subsequently raised venture capital and then went public.

There is a pattern in the initial funding of BigBelly Solar, Apple, and Google that is repeated over and over in almost every startup. The money comes from the Four Fs introduced in Chapter 9: First, the founders themselves dip into their own pockets for the initial capital; next they turn to family, friends, and foolhardy investors (business angels). If their companies grow rapidly and show the potential to be superstars (see Figure ...