Friday, September 21, 2007

The 5 Stages of a Bootstrap Venture

Bootstrap ventures go through five distinct stages of development: Preideation, Ideation, Valley of Death, Growth and Rebootstrap. Each of the first 4 stages corresponds to the birth of a crucial element of the venture - bootstrapper, product, customer, organization - with a corresponding key action to accompany it - awaken, demo, sell and build. The successful completion of a particular action naturally leads to the next stage and forms the basis of the next action.

In Preideation the sole focus is the awakening of the bootstrapper to their passions and talents. None of the other elements require any energy - it simply isn't time yet. In Ideation the bootstrapper element continues with the quest for a complementary partner. Using the terminology of The Human Fabric, an Evangelist (Steve Jobs) and a Maven (Steve Wozniak) come together. Led by the Maven, the partners focus on the key action of Ideation - creating the demo (Apple I). The demo is a first version of their imagined product or service. The Valley of Death (VoD) begins when the founders go full-time on the venture. The Evangelist takes the demo and searches for customers (the Byte Shop) - anyone who will pay for the demo. Through the feedback from customer conversations the Maven evolves the product, moving it from alpha to beta to version 1. Meanwhile, more bootstrappers might get added to the team. Emerging from the VoD with positive cash flow, it is time to shift focus again to building and scaling the organization in the Growth stage. A basic organizational structure likely first emerged in Ideation when the partners created their agreement, but it was not time to truly focus on organization-building until now. With the emergence of the business model, key functions such as Marketing, HR and systems are created. The fifth stage, Rebootstrap, is the spawning of the next products and services for the company. See the stages and actions play out for Apple Computer.

From the above discussion we come to understand the key principle of bootstrapping - right action right time. Like a good parent, the founders' job is to understand the stage of the venture and take the appropriate action for that stage. Sometimes that might even mean moving backwards! We also see how certain commonly-accepted actions such as business planning or fund-raising from investors are taken inappropriately.

The master bootstrapper rises above the need for strict definitions of stages and actions - they develop an intuition for the process and take the right actions, trusting they will learn from each and discover how to proceed. For them everything occurs in its right time as well.

Here's a 5 min Youtube video from the Bootstrap Bootcamp explaining all the bootstrap stages.

No comments: