On the Business Week, some days ago I had the chance to read an article by Mr. Vivek Wadhwa (A valid Entrepreneur, and academic and… also quite good in suggesting how to burn Venture Capital’s money).
I started to shiver.
Not only Mr Wadhwa was reducing the concept of a Venture to a mere constitution of web applications and outsourcing, but most importantly was denying at first the value of VC culture (which is not only money flowing) and the value of knowledge (ultimately techinical skills) to build value in a Enterprise.
He did all that by praising a person which failed twice burning millions of dollars; He also compared the value of a startup only to a mere economical value, in that case the value of a BMW 328 Coupé (with automatic gearbox, I’m afraid *double shivering*).
My answer here is based on my personal accounting about bootstrapping. Something that I lived and I’m still living with a certain amount of effort, not to say pain.
The 2,800 € Startup
What Videk Wadhwa writes in his article has been applied in many countries for
years, making knowledge, not capital the essential resource.
Here is a personal account about it.
As an enthusiast Business Week reader, born and living near Italy’s business city
Milan, I had big plans for what I intended to achieve with help of the Internet.
I was still studying in University back in 2002 when together with a friend we
developed the first e-commerce platform for a local area, a province called
All the website development was done in-house based only on open-source
technologies that could be identified as cutting-edge back then. Essentialy startup
costs were consisting in the time spent in deploying the design, learning,
coding, the coffee and the fuel to visit potential clients and institutions.
In 2005 the idea was essentialy busted; sadness all around, but a lot of
experience and tech backgrounds were gained.
In the same year (I was 23yrs old) I was starting something new. Using the
websolutions developed in the previous project I was offering - helped by the
support of a voulonteer consultant - a ticketing platform for a State-owned
Railway Company called Ferrovie Nord. The proposal was of extreme intrest and
after four rounds of talks with the management we reached the make-or-brake
point. Suddently communications with Ferrovie Nord ended. I learned from an
insider months after that my project proposal was first copied by an inside IT
team and then stopped to favour another state-owned software solution that in
the end never saw full completition. Nowadays, people are still queueing to get a
normal monthly ticket renewed.
Frustration grew, but no of those unwelcome ending brought true economical
loss. My team and I gained loads of experiences on e-commerce and e-business
platforms and got eventually smarter in marketing.
No VCs means that you have to fight your way for every single penny you intend
to spend on the project or for every dime you intend to profit out of it.
No VC funding also means looking at all the project with both a practical
approach and a strategic approach: you have to go the hard way for every
service you intend to offer, as outsourcing is not an option.
Having programming skills means saving money, understanding much better our
offer and the users’ experience.
Ultimately those two aspects lead you to a stronger balance sheet which is then
submittable to the VERY FEW persons that in Italy can resemble some Seed
Today I used this same approach to what so far is a succesful venture: ONTC
Fencing Equipment. I bootstrapped the company out of my own knowledge in
web apps and e-commerce systems ultimately evolving an opensource platform
in a full erp system with included reporting tools (this platform will go on the
market independently). We took advantage in the passion and therefore
knowledge for the sport of fencing to offer on the markets the best quality/price
rated products; We entered with a truly disruptive force in a Oligopolic market in
an unconventional way, reaching the customer mainly from the web. Once again
the costs were: the effort put in working out the system; 400,00€ to order the first
samples from my Chinese supplier; 2.800,00 € in a used estate car to carry the
products to my customers when needed.
As ONTC gained traction I got seeded less than 20,000€ to accelerate the
company’s growth with a local italian warehouse.
My conclusions are quite the opposite from Mr.Wadhwa’s: at least basic
knowledge in your core products (make it web apps or the items you are selling)
is crucial so learning the most out of them is all but outdated. As for VCs, I’d love
to invite Mr. Wadhwa to get out of his limited web-oriented perspective and come
to Italy to experiment what it means not being able to get funded for any
potentially valid idea an Enterpreneur could have. VCs are still important means
of growth if used in the right time, on material products and for the influence they
bring to the Start-up company.
This way you might being able to bootstrap a company even without having the
luck of living in the Silicon Valley or New York….all at the cost of a ‘96 BMW 325
- startupfr posted this