How To Bootstrap your Startup with Your Paycheck
Paycheck Financing: A Great Way To Bootstrap Your Startup by Sramana Mitra
Entrepreneurs looking to launch their startups are often faced with myriad difficult decisions, chief among them being the question of seed financing. If you’ve ever found yourself asking, “How can I fund this?” or “Can I fund this on my own, while I’m still holding my current job?” the answer is yes—you absolutely can.
Vasu Akula and his two cofounders launched Voziq in late 2011 with one simple goal in mind: to help companies who purchase advanced analytics and business intelligence solutions better utilize the information they gained access to.
What makes Washington, D.C.-based Voziq unique is that Vasu and his partners didn’t utilize outside investors in order to bring Voziq to life. Rather, they funded Voziq themselves while holding on to their day jobs. Vasu is one of the many entrepreneurs who have bootstrapped a startup venture while holding on to a full-time day job.
Vasu and his co-founders had originally toyed with several different ideas. However, Vasu decided to bootstrap Voziq’s business through services, while holding on to his paycheck. It was a great way to bring immediate value to the customers, learning about their needs, all the while building a product with the long- term view in mind. Yes, the product has been on a slow-burner, but invaluable customer relationships have already been established, key customer inputs gathered, and of course, cash has continued to flow in.
The idea behind Voziq started with Vasu and two fellow IT professionals, all of whom had spent fifteen-plus years working with over 100 Fortune 500 companies. Vasu realized that while most companies utilized some form of data analysis, they didn’t often move past that point. By his estimation, 95 percent of companies that purchased advanced analytics and business intelligence solutions weren’t utilizing the data to its full potential. Technology was sitting on shelves, not delivering value.
Vasu realized that there was an untapped opportunity there, and Voziq is the platform that he and his associates built from the ground up. It focuses on social media analytics and helps to reveal the insights in large volumes of data. Using categories, benchmarks, and custom reports, Voziq transforms the voice of the customer, the voice of the client’s competitors, and the voice of industry influencers into actionable scenario-based information for various departments within the client’s organization.
As a self-funded start-up, Voziq’s finances were always tight, and so its co-founders decided to retain their day jobs until they had achieved reasonable validation with actual customers. Vasu says that Voziq was able to reach this goal by utilizing oDesk and other freelance contractors outside of North America, where they were able to obtain quality work for a relatively lower cost.
Voziq’s situation illustrates the scenario of a startup with two or more co-founders. Vasu notes that not all of the startup’s founders needed to move out of their day jobs at the same time; one or two could continue working while others are firming up the business plan and reaching out to prospects. This way, he says, you can fund your company through your paychecks while others are executing the core ideas of the startup.
He also emphasizes the importance of being willing to sacrifice when first validating the business idea. Since each of Voziq’s co-founders maintained their day jobs, they each took a chunk of business and product development tasks and executed these during evenings and weekends. Once they began to see some traction, they each took on roles as independent consultants in related areas to continue to earn a paycheck while they continued to focus their outside efforts on Voziq.
Vasu his associates have transitioned into Voziq 100 percent in 2014, as they bring in more customers and revenues.
While getting off the ground and becoming profitable are the ultimate goals for any venture, these are especially significant milestones for a self-funded startup. With these goals within reach, Vasu says that Voziq plans to continue looking to customers rather than investors as a way to further bootstrap and validate their work. They have successfully transitioned into a cash flow-positive scenario, and are ready to take Voziq to the next level of success and profitability.
What I find gratifying about the Voziq story is that it can be a template for numerous other entrepreneurs that we hear from constantly. Hundreds and thousands of professionals around the world harbor entrepreneurial dreams. Most of them lack capital. For these entrepreneurs—heavy in expertise, light on funding—bootstrapping with a paycheck is a fine path to get going!
In many parts of the world, there isn't much of a seed capital eco-system. Thus, somewhere between 6-24 months of bootstrapping while holding on to a full-time job is a reasonable option for many aspiring entrepreneurs.
In fact, I would go so far as to say that most aspiring entrepreneurs ought to start their entrepreneurial journey while sitting inside a corporate umbrella. Especially for technical people, it allows for the enhancing of their technical skills, while also developing the bricks needed to build a venture.
One thing you will find, however, that no incubator will be willing to work with you until you have quit your job. As such, we've decided at the 1M/1M global virtual incubator to support aspiring entrepreneurs while they line up their ducks and start putting together their ventures, without requiring that they quit their jobs.
In a recent paper titled Should I Quit My Day Job?: A Hybrid Path To Entrepreneurship by Joseph Raffiee and Jie Feng of the University of Wisconsin– Madison published in the Academy of Management Journal, the authors cited research and statistics supporting this methodology:
“According to the U.S. Bureau of Labor Statistics, in 2011, roughly 10 percent of self-employed workers were also employed by existing firms. Going a step further, research shows that many hybrid entrepreneurs ultimately decide to commit to their ventures full time (Folta et al., 2010). Indeed, anecdotal evidence indicates that some of the world’s most innovative and successful entrepreneurs started their companies as hybrid entrepreneurs. For example, Steve Wozniak remained an employee at Hewlett–Packard long after co- founding Apple (Wozniak & Smith, 2006), Pierre Omidyar launched eBay while working for the software development company General Magic (Cohen, 2002), and, with the help of investors, Henry Ford founded the Detroit Automobile Group while employed by the Edison Illuminating Company (Ford & Crowther, 1922). In 1997, 20 percent of CEOs on Inc. magazine’s 500 fastest growing private companies list indicated that they continued to work a paying job long after founding their organization (Inc. staff, 1997).”
Excerpt from Bootstrapping With A Paycheck.
Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Sramana has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology.