The 2,800 € Startup (an answer to Vivek Wadhwa)

BMW E36 Touring

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

Varese.

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

Capitalists.

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

Touring.

  1. startupfr posted this