What is a bootstrapping?

<aside> 💡 Bootstrapping – the process when entrepreneurs start a company with their own capital, usually with accumulated money or quick loans.

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Pros

• Investors received a positive signal when founders invested their own cash in a startup.
• Founders have full ownership, control, and vision over the company.
• Founders being forced to build a business model that really works.
• Founders can move quickly and avoid fundraising delays.

Cons

• The risk of incurring financial losses is real.
• Founders lack access to smart money and other support/opportunities.
• Limited capital can limit visibility, marketing, and customer service, stifling growth

Deal example

• There are 2 founders: Steve and Ben. They decided to start a startup called Smoogle.

• Steve invested $40,000 from the sale of his car, and Ben invested $10,000 from his own savings.

• Steve had an operational background, so he serves as CEO. Ben, an ex-engineer, serves as CTO. They establish the company in Delaware and issue 10,000,000 shares (basic number).

• Steve and Ben have agreed that Steve will receive 6,000,000 shares (60% equity) and Ben will receive 4,000,000 shares (40% equity). Take a look at how the cap table will appear:

  	Stocks	Number	Price / share	Equity
  Steve	Common	6,000,000	$0.00	60%
  Ben	Common	4,000,000	$0.00	40%
  Total		10,000,000		100%

• This is a general example. Usually cap table and deal terms are more complex.