One method of bootstrapping is to use services. Learn how you can utilize customers and businesses to help fund the development of your ideas.
- Bootstrapping using services, if you really start getting into the heart of how you do it, is to leverage a services business to develop a product business, which tend to be more scalable, you know? Products tend to be more scalable than services, and that's the rationale for why people want to do it. So, of course, you're wondering, why would you want to do it.
Now, let's say you have an idea. There's a certain problem that you want to solve. Certain customer problem. And by way, bootstrapping using services works better in B to B scenarios, much better than B to C scenarios, where you're trying to solve a business problem for another business. And you decide that you are going to solve this particular problem for this type of customer, and then you go through the typical validation phase.
You have to get to an understanding of, what is the customer's problem. And instead of saying that, "Okay, I will build the product "and then sell to this customer," you could go to the customer and say, "Why don't you give me a service contract, "and I will build this solution for you. "And then what I'm going to want to do, "I'll give you a discount for letting me "preserve the intellectual property "on what I'm building for you." What that does is, it gets you really close to a customer who has that problem that you're trying to solve, and you, that customer intimacy is really important because that customer intimacy gives you the details and the nuances of that problem, what the customer is looking for and the solution you get to develop and really engage in this relationship, because the customer is participating with you in the process of designing the solution.
And the reason you need to maintain, hold onto the intellectual property, is because if you are going to turn this into a product, you need ownership of the IP, and the customer doesn't have that IP. This, by the way, is kind of known in the industry, so a lot of customers would be very willing to work with you in this mode, if you say that, "Yeah, I'll give you a 10% discount, or a 15% discount, "on this project if you are willing "to let me preserve intellectual property "with the full knowledge that I would like "to develop this into a product." What that does, also, besides providing you with customer intimacy, customer insight, and specs, really, what you're getting is specs on what the product will look like, is cash.
So your contract is a service contract. A service contract may have an advance component, may have milestone-based payments, so there's cash coming on along the way, even if it takes you six months or nine months to develop, let's say, the solution, you construct to the contract such that there is cash coming in, and therefore, your project is funded, and by the time you finish that project, funded by customers, you have got a big chunk of the product built, and then if you understand this problem well enough, and if you understand what kind of customers are looking for the same solution, you can go talk to a bunch of other customers, and create relationships with all of them, and maybe even create service contract with another five customers, another 10 customers, so you're getting paid along the way, and you're not waiting 24 months or 36 months of no revenue, no cash, product development phase.
That is why I am such a big fan of bootstrapping using services, and huge companies like Oracle were funded in the bootstrapping using services mode. Larry Ellison went to do some consulting, contract software development project somewhere, and basically realized, as he was going through the problem, and figuring out how he was going to solve it, he was like, "Whoa, this is a big idea, and "I really would like to turn this into the first database." So let's say you are thinking about going this route, you should look in your own portfolio of expertise.
What are you really good at? What are you an expert in? And take that expertise and see what problems do you see out there that you are in a unique position to solve, and then go find customers in that general area and that problem domain, and start in this mode that I described of finding a problem, getting yourself a service contract, and build from there, build out a product from there on.