Sunday, December 27, 2009

Bootstrapping Cash Management

About 2 years ago I read a great Paul Graham quote that stuck with me. "Startups don't die mid keystroke."

The point of it was, as long as you keep typing (moving forward) you will succeed. Its about iterating, changing things, trying different sales pitches. Now not everyone is given a endless amount of time to do this. This is how startups die. Almost all of them, run out of money.

My punch line is, the reason PerBlue is still in existance today is that we "Conserve and manage our cash carefully." find ways of not spending money. Give stock instead of cash. Live at a cheap place. Encourage people to carry other jobs if needed. Do anything you need to conserve cash. Know your monthly burn rate. How many months do you have left alive, use these constraints in your strategic plan. Jason Fried talks about Bootstrapping enforces you to practice making money.

Jason Fried - Bootstrapping from Alexa Lee on Vimeo.

Notice I said, conserve cash, not "take on debt." I personally don't believe in debt. PerBlue is a debt free company and I hope to keep it that way. We are an equity company. Howard Schultz (CEO of Starbucks) has some great points about this in his book Pour your heart into it. (I know this is not everyone's strategy but I think people need to be careful with debt.)

Short and sweet.
  • Persist as long as you can
  • Watch your burn rate, so you know how much life you have left.
  • Conserve Cash
  • Debt should be a plan Z not a plan B or C. (be creative)
  • Practice and figure out how to Make Money.