Starting a business? If you spend a few moments to research the startup world, you will quickly find recommendations for programs, facilities, and processes that offer to help you get started and/or grow in the most efficient way. Each of these startup methods has its merits as an alternative to bootstrapping. The best choice for your endeavor may depend on the type of business you are starting, at what stage you find yourself, as well as the requirements and benefits of individual programs.
But which way is best for your business?
A “business incubator” is a program, often set up as a not-for-profit, to help create and grow new businesses, via providing support and other services such as low-cost work space, manufacturing space or equipment, access to financing, and technical services. They are often initiated and operated by municipalities, private companies, or universities. Staff members offer advice and expertise. Founders may also be provided shared services such as phone, secretarial staff, office space, and equipment.
Some incubators focus on specific types of businesses or founders, so entrepreneurs should seek an incubator that is a good fit for their business. The incubator program may end at the expiration of the lease period or completion of an incubation program.
Incubators are most suitable for businesses that have a local focus or service focus: retail, services, or consulting. Their main thrust is to promote entrepreneurship in their community. They generally assist traditional brick & mortar businesses with getting started, and some also work with technology-based businesses.
To locate an incubator near you, contact your local governmental economic development agency or university. To enter an incubator, be prepared to present a written business plan, along with a detailed application.
Pros: Low-cost workspace and access to advice and resources. Incubators are a great place to start if the founder is at the idea stage or early in the startup process, and desires general guidance and assistance.
Cons: Your business must meet the incubator’s admission qualifications and space is limited, so some qualified applicants may be turned away. Also, be aware that some incubators are operated by incubator managers for the purpose of building their own resumés, and not primarily for the benefit of the entrepreneur.
A “business accelerator” is a program that focuses on business growth, and preparing the business for scaling (large-scale customer/revenue increases). An accelerator provides mentorship and an educational curriculum, typically ending in a “Demo Day” pitch event where each founder gives a presentation for investors, which sometimes includes the media.
Accelerator programs are typically structured into cohorts with group-driven experiences with intensive training and iteration, for a block of time (1 week to 6 months, but sometimes longer). The founders may be required to relocate, in order to be in physical proximity of the accelerator. Accelerators often make a small “Seed” investment between $15K and $50K and might also require receipt of a percentage of the startup’s equity. A major component of accelerators is preparing the startup to be a good candidate for investment. This means that, in the view of the accelerator’s management, the new company has the potential to reach a very large market.
To locate an accelerator, search online for accelerators that specialize in your business sector. Founders are chosen for limited slots by a committee. Be prepared to provide a written business plan and to begin the process with an online application form. The application process usually includes an interview or a number of interviews.
Pros: Mentoring by high-level experts in your field, funding opportunities, networking, access to angel or venture investors. Helpful in guiding businesses with existing traction (customers and/or revenue) to expand to global scale.
Cons: This is a highly selective process for choosing participants from a large pool of applicants. Relocation may be necessary. Equity is often expected. Typically, accelerators are not an option for non-scaling businesses such as consultants or local services with a small potential market. Application rejection rate is high.
Rejection by an accelerator does not necessarily mean that the business model is not viable; rather that the accelerator did not feel that the business would be a fit for their own program and business investment strategy.
“Coworking” is essentially office-sharing among several individuals and/or small businesses. It can be an informal arrangement where a business owner with extra office space sublets desks and offices, or a cowork space can operate as a business that rents out desks and offices to freelancers and telecommuters, sometimes with additional services on offer. Some charge daily, weekly, or monthly rent, others sell memberships based on use of specific amenities.
The type of space and arrangements vary, too. Founders can rent desks that are first-come, first-served, or they can reserve an assigned space. Enclosed offices and open-plan seating may be available, as well as storage space. Some formal cowork spaces offer networking events where member businesses can meet and collaborate, which can be especially useful for a small, new business.
To locate a cowork space, search online in your area to find the space that has the services you need at a price that works for your business, and that is convenient for you to commute to on a daily basis.
Pros: Lower cost than that of leasing a formal office space. For kitchen-table startups, it improves time management and lets you leave work “at the office.” Social interaction and networking help make entrepreneurship less lonely and stimulate sharing of best business practices. A professional setting that is low maintenance helps keep founders focused on getting a business up and running. Flexible plans enable founders to reduce risk by adjusting use based on growth and budget needs.
Cons: Commuting, childcare, and eating lunch out can add to costs. Typically, founders must bring their own computer equipment, and safeguard it while in commonly accessible areas. Some may find open-plan facilities to be noisy and potentially disruptive to concentration, making a private office a better choice.
A “venture studio” helps entrepreneurs grow by combining company building with venture funding. They often play a matchmaking role by linking business ideas to people who can execute on those ideas. A venture studio works alongside several startups and “scale-ups” at the same time. They may start with ideas from within to create new businesses, or they may apply expertise (and sometimes a small amount of capital) to assist founding teams to build, scale, and grow companies.
Unlike an incubator that focuses on the infancy of a company or an accelerator that operates within a fixed period of time to help a business to get to market or prepare to enter the fundraising process - a venture studio is available throughout each step of the startup lifecycle, often to the startup’s first exit (i.e., Series A or Series B).
For a founder, a venture studio can take on certain responsibilities (in the technical, accounting, HR, or marketing arena, for example) to help the entrepreneur avoid early mistakes when cash flow is critical and time is short, and taking pressure off the time-consuming capital raising process.
Pros: You can have the best of several worlds with features of an incubator, an accelerator, and a cowork environment.
Cons: You will likely need to offer equity in your company to the funding party, and a certain amount of control or influence may be exerted by the venture studio.
To “bootstrap” a business means to start it with your existing available resources, without outside funding or assistance. The word “bootstrap” comes from the expression “to pull oneself up by one’s own bootstraps” - in other words, to improve one’s position by one’s own efforts. While bootstrapping might sound more difficult than other methods, it is by far the most popular way to start a business because outside funding (grants, loans, angel capital, or venture capital) is not generally accessible to the average entrepreneur.
Instead of applying for a program or signing up for a shared startup experience, you use your own experience and common sense to build your business. If you need to find out how to do something, such as accounting, you can research your options, and hire an expert to help you with areas where you don’t have the skill or knowledge.
Many bootstrapping entrepreneurs start out as employees who work on their startup businesses in their off hours, from their own homes. Funding comes from the founder’s own pockets and resources. By maintaining a paying job and cutting back on frills, many entrepreneurs can preserve a meaningful lifestyle while starting a business.
To make the best use of personal funds, entrepreneurs must start “lean” (keeping costs to a minimum) and focus their spending where it will be most effective so the business doesn’t run out of funds before it can take on enough paying customers to pay its bills. When using personal credit cards to support a business, it is a good practice to separate business expenses from personal expenses for tax purposes, and log each business expense.
Bootstrapping can be combined with other ways to start a business. For example, coworking can help you to establish a separate, dedicated space for your startup activity, and you can preserve your startup cash by choosing the minimum service level that the coworking space offers.
Pros: By bootstrapping your business, you retain ownership and control of your company. Even if your company takes out a loan, you are not required to give away equity (a share of ownership) to the lender. You can progress at your own pace without any requirement to follow the deadlines of a startup program.
Cons: Finding the funds to start a business can be a challenge. Scoring funding from angel and venture investors is quite competitive; also, it is unlikely that a conventional lender would secure a loan by accepting a share in an unproven business. Forging ahead without advice from experts in general business practices and those experienced in your business sector could result in a slow start, or an incomplete (non-money-making) business model.
Business Services Platforms:
As a boost to bootstrapping, business services platforms pull together a collection of services that cater to entrepreneurs. Typically, the services are individual offerings that are not interconnected. The services vary, with some offering access to deals and discounts on services such as fundraising, advice, educational material, marketing, or business tools. These platforms tend to cater to technology-based startups already positioned to reach national or international scale by disrupting the traditional business practices of an existing industry. This exclusive focus may leave out most great small businesses, whose growth and reach are measured on a local scale.
Pros: Services are curated to serve entrepreneurs. Entrepreneurs can continue bootstrapping and maintain control of the business, while gaining access to help that the founder would otherwise need to find on their own. Founders can keep a rein on the budget and control the speed of their progress.
Cons: Most business services platforms are made up of a series of disconnected services, lacking a central, coordinated space to build a business. They typically focus on the tasks required at the beginning stages of a business, but lack features to help an existing business thrive. They also tend to focus on tech startups, and lack essential collaboration and community tools.
Where Does Brilliant Factory® Fit In?
By contrast, BrilliantFactory.com is a fully unified suite of services for a single, low subscription fee and login. The product is a collaborative and inclusive ecosystem for the other 99-percent of tech and non-tech entrepreneurs, which welcomes participants from small business, mom & pops, the underemployed, stay-at-home parents, kitchen table solo-preneurs, recent grads, minorities, 2nd-Act professionals, veterans, and the differently-abled. Additionally, our platform works for enterprises of all types and sizes: retail, professional services, real estate development, health products/services, disaster mitigation, manufacturing, advertising, distribution, entertainment, aerospace, agtech, edtech, insuretech, conservation, micro-finance, and more.
Brilliant Factory is different; it’s the entrepreneurial ecosystem that offers the best of all worlds. Entrepreneurs can bootstrap their way to success while taking advantage of the tools available in Brilliant Factory to gain knowledge, find customers, learn from other founders, and build their businesses – all without having to meet rigid application requirements, give up equity, or pay large consulting fees.
Entrepreneurs have many options for starting and growing their businesses, but wading through the possibilities can be daunting.
Whether it’s an incubator, accelerator, venture studio, or cowork space, business assistance can mean applying and qualifying, as well as potentially paying for mentoring and other services with cash, by giving up equity in the business, or both.
Bootstrapping empowers you as a founder to start your business using your own resources, go at your own pace, and reap the rewards without obligation to others when the business takes off.
Image Credit: Pexels.com