1M/1M Strategy Roundtable: Bootstrap Using Services

Recap of 22 July 2010 Roundtable by Sramana Mitra

This week’s roundtable had several interesting discussions around techniques for bootstrapping, both in the entrepreneur pitches, as well as during the Q&A. One of the most effective mechanics that I know for bootstrapping the early phases of a startup venture is by using services – consulting services, contact development work – such that you can achieve customer intimacy and also bring in revenue that can help fund your business. Even if you do product or IP development in parallel, that revenue stream is very valuable, as is the direct access to customer feedback. Some of my favorite entrepreneurs who have bootstrapped using services are Paul Kocher (Cryptography Research) and Jerry Rawls & Frank Levinson (Finisar).Lopswork Ltd.

I gave this advice to one of today’s presenters: Ademola Osindero of Lopworks Ltd. from Nigeria. Ademola has a network integration services company for the last 3-4 years, which generates revenues. But now, he wants to build SaaS business apps for healthcare, for instance, and would like to raise $1M to do so. Well, the problem is that he doesn’t have any validation for the software business, and the chances of his raising money against an idea are slim. It is slim in a mature market like Silicon Valley, so I cannot believe that it has a prayer in a backward market like Africa. I advised Ademola to use his network integration services business to validate the healthcare IT product idea that he has, work with customers, build a product, and generate some revenue momentum by using the bootstrap using services principle.

In the Q&A, someone asked how to bootstrap a B to C user generated content site. Good question. This one is harder. One of the ways to do that is by offering market research data and analysis to the customers. Still a service, and can turn into revenues quickly, while giving you the runway to build your B to C business.

We also had Faith Kinslow start off by presenting her idea for Renewable Energy Now, which sounded like a content site through which she wants to raise funding for scientific research in alternative energy in universities. Well, I don’t see a business here, and advised her to use Facebook Causes for her fund raising interest. No need to waste precious time and energy in trying to build a business that has no chance.

Magnetic Pursenality

And then Karen Averill presented Magnetic Pursenality, a magnetic purse company that sources artisan products from wholesalers around the world, puts magnets on them, and sell through their web site and other distribution channels. One of Karen’s goals is to help reduce global poverty by bringing the work of poor artisans into focus. Now it turns out that this is an area that I have done a lot of research on, and in my Vision India 2020 book, I have presented several projects around rural and slum development using similar ideas. However, there is one fundamental missing piece in Karen’s idea: design. Artisans in remote villages around the world have no clue about good design that sophisticated customers in the West are willing to spend money on. As a result, the products that Karen is selling on her web site at this point are, pardon my bluntness, pretty ugly. Well, for a good cause or not, people simply don’t buy ugly products. So Karen either needs to work with a great designer who can provide designs to some artisans who execute against those designs. Or, she needs a great merchandiser who can pick a set of products that reflect taste. You cannot be in the fashion business without taste. This is a cardinal rule that cannot and should not be violated.

We also had a discussion about channels. For Karen’s business, once the design problem is fixed, she has the option of selling in the B to C mode on her website, or in the B to B mode, through catalogues. It turns out that she has done some great research to identify a set of catalogues that may be interested in buying her products, wholesale. Her next step, therefore, is to validate that channel, and see how much appetite these companies have for her magnetic purses.

At the end of the show, Ruchir Tewari introduced ShabdMitra, a mobile value added service that takes English SMS’s and converts them to one of the major Indian languages: Hindi, Bengali, Tamil, Telegu, Marathi, Gujarati, Kannada, etc. Assuming that his technology works, an extremely hard problem in itself, Ruchir’s questions were around his go to market strategy. He has designed some use cases, including one that I liked: advertisers trying to reach rural consumers can send an SMS in English, which can then be translated and broadcast to various geographies of rural consumers in their respective languages. There are issues around the need for the ad copy to be cool, and such. But it is an idea worth validating with some advertising agencies and marketers of consumer goods, who need to market to these vast masses of rural Indian consumers. If the value proposition resonates, then Ruchir can take it to a carrier along with a group of advertisers, and start a pilot. The regular mobile VAS business model applies. If an advertiser sends 100,000 messages, paying Rs. 2 per message, the carrier will split the revenue with the VAS provider. But the first order of business is to check whether the advertisers want such a service!

About Strategy Roundtables

I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. In addition, we are offering entrepreneurs access to investors and customers through our recently launched our 1M/1M Incubation Radar series. You can pitch to be featured on my blog following these instructions.

The recording of this roundtable can be found here. Recordings of previous roundtables are all available here. You can register for the next roundtable here.

About Sramana Mitra

Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies, writes a business blog, Sramana Mitra on Strategy, and runs the 1M/1M initiative. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon.