Bootstrapping refers to building a company without taking any outside funding, in other words using a founder's own capital to get off the ground. To bootstrap a company stands in particular contrast with equity financing, where a company sells ownership in exchange for capital.
Fun Fact, the term 'bootstrap' comes from folk tales of a man who pulled himself out of the mud by yanking on the straps of his boots. It was meant as a joke for something (if you don't believe me, try it), but now can refer to something difficult or improbable.
Building a company using your own money can be immensely rewarding, if the startup works out, the founder will not have to share any of the upside. However, without an infusion of capital from investors, or lenders, growing can go slowly. In addition to the difficulty faced with limited capital, most founders don't have the personal savings required to prop up a new company.
Anyone can bootstrap their business, though some businesses have extremely high startup costs that make this difficult, such as anything in healthcare research, hardware development, or with significant legal and compliance barriers and hoops to jump through.
Bootstrapping is often one of the first options people use as they're exploring the viability of their business, until they're not able to sustain the business on their own anymore and need to seek out other funding sources. Occasionally they get lucky and have enough customer revenue that this is their only source all the way through!
Ownership: Retain full ownership since you aren't taking on equity investors.
Less credit risk: Avoid debt since you're using only capital you already have.
Time: Bootstrapping allows a startup more flexibility to move at their own pace, whereas equity investors want to see results and lenders need repayment on their timeframe.
Unavailable: Most people just don't have the kind of money it takes to get a startup off the ground, or they risk using the savings they do have on a business and then wipe out their 401k with potentially no return.
Slow growth: Without outside capital it can take longer to get a startup to market, a product built, or the attention of customers. Sometimes this can be so slow as to mean you lose your chance at success because others take over and dominate the market ahead of you.
What happens if the business is successful
The best part about bootstrapping is you have the ability to define what success looks like for you, whether it's a part-time side gig, just you, something you hire people to run while you travel the world, a friendly neighborhood business, the next unicorn to take over the world, or anything else you decide. You have full ownership of everything, you don't have to pay anyone back, and you get bragging rights for saying you did it all on your own. Congrats!
What happens if the business fails
You've potentially wiped out your emergency fund, 401k, and everything else for this business, and now you're left with nothing. Would you rather have that money and be living more comfortably while making payments on a loan—or nothing if you raised VC funding—or would you rather be worrying about what you're going to do if your car breaks down and you now don't have the money to fix it?
Types of bootstrapping
One of the most common ways is to use money you have saved up—whether that's money specifically dedicated for this purpose, or draining your emergency fund and hoping you don't have an emergency.
A lot of people keep their day job while starting their new company on the side, using their income to fund their venture until the new business is successful enough for them to make the jump and go full-time. However, this can be difficult to do if you have other obligations aside from work, exhausting even if you don't, and can lead to slow growth. If you do it well though, it's one of the most efficient ways to start a business!
Some people may choose to sacrifice a car or other assets in order to find the cash they need to start their business.
If you've gotten to the point where you have customer revenue, congratulations! Sometimes just a tiny bit is enough to keep your company alive. And did you know many companies have started pitching and selling their products—even signing lucrative deals with customers—before they're fully built? It's a great way to validate your idea, and if they're willing to (as long as you're transparent about timelines and product status), sometimes you can convince them to pay upfront and then you can use that to fund product development.
How to get it
Sorry, this paragraph isn't going to be much help. Bootstrapping means doing it on your own, your way.
[Book] Quitter by Jon Acuff