Entrepreneurs Return To Classic Bootstrapping
"Don't quit your day job" is a saying that is back in fashion among aspiring entrepreneurs, as the supply of start-up financing has tightened across the country.
During the dot-com boom, of course, it seemed anyone with a half-baked business plan could raise a few million dollars, prompting thousands of young professionals to quit their jobs to run speculative start-ups. Now, however, even well-conceived ideas are slow to get financing. So more and more entrepreneurs find themselves working full time for someone else and then squeezing in time to develop a new venture.
"Classic bootstrapping," says Mark Rice, dean of Babson College's graduate school of business in Babson Park, Mass., applauding the return to self-reliance. Mr. Rice, 52 years old, started a solar-power venture in the late 1970s while holding down a full-time teaching job. And he is glad he kept the job; the solar business soon dimmed.
New concepts are once again getting tested first and financed second. It makes sense, but it can also make for some awfully long workweeks. John Gary, 36, sleeps about six hours a night, rising at 5 a.m. or so to get in a couple of hours of labor on his start-up, which sells software that allows exercise enthusiasts, personal trainers and coaches to graphically chart and plan workouts. He then heads off to his day job selling Internet access for a telecommunications concern. After a full workday, he heads home for dinner, a visit with his wife and 17-month-old son, and then more work on his start-up.
As an employee, Mr. Gary, who lives in Ann Arbor, Mich., gives himself a B, but hopes his bosses, who know about his venture, would grade him higher. What he really hopes for, however, is about $500,000 in financing so he can "quit the job I have, go full time, pay myself, get office space and get some help." Given the financing market, though, Mr. Gary is prepared "to nurse along" his company for a while longer.
How does an entrepreneur know it is time to quit the job and devote himself to a new venture? Tom Kinnear, a professor at the University of Michigan's business school and executive director of its Zell Lurie Institute for Entrepreneurial Studies, has a checklist: Co-founders have invested money; angel or other investors are ready to invest; potential customers are ready to buy the product; potential employees are ready to sign on; the product is based on serious intellectual property -- and, it actually works.
If you have all those elements, Mr. Kinnear says, "it's probably time to jump."
Patience is crucial. Dana Powell, 26, is on her third day job -- developing marketing and training programs for a big Chicago law firm, Winston & Strawn -- while pursuing her dream of starting a bridal magazine for black women. Ms. Powell first envisioned her Brides Noir magazine as a 16-year-old heading off to the prom and failing to find gown designs for African-American women.
"They show us in the background, or as a bridesmaid," Ms. Powell says. She told herself then: "When I come out of college, if there's not [such a magazine] available, I'm going to do it."
At the law firm, "I stay late to finish whatever I need to," Ms. Powell says. "And when I leave Winston, Winston leaves my mind," she says.
A partner, Erika Orr, who is 28 and a tax lawyer at Arthur Andersen, occasionally gets a Brides Noir epiphany while at the accounting firm's office. "I call home and leave myself a message on the answering machine so I don't forget," Ms. Orr says. They are hoping to raise $1 million and publish their first issue later this year.
Even an entire team can bide its time. Eric Sieczka, a partner and six workers all remain employed elsewhere while launching Pixel Velocity Inc., Ann Arbor. The firm developed software that speeds programming of video-processing computer chips, Mr. Sieczka says. He puts in about 50 hours a week at another technology firm he helped found, which is soon to be sold, and 20 to 30 hours at Pixel.
"I take my job in both organizations very seriously," he says. His mind is "very shared. Both companies require those moments -- driving in the car or whatever. That's a problem." Pixel hopes to raise $3.5 million to $5 million.
While working a day job, Bob Mazur, 31, developed an all-purpose device for opening medicine bottles and containers. About as big as a computer mouse and made to look like a cat, the PurrFect Opener breaks anticontamination seals, grips and twists child-lock caps, digs out the cotton ball, splits pills in half and busts into other hard-to-open medicine packaging that especially frustrates older people who take many medications.
For a year, Mr. Mazur worked on prototypes and conducted market research, all while working at Visteon Corp., an auto-parts maker in Dearborn, Mich. A year ago, he wasn't quite ready to jump, but Visteon laid him off during some cost-cutting, Mr. Mazur says.
Since then, he has lived on severance, savings and home equity, completing patent research. And now he's ready to start churning out Purrfect Openers, suggested retail price $5.99 -- a few at a time if he doesn't secure some financing, and by the truckload if money is available.
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