If you were to google “bootstrap”, you’d be forgiven for thinking it’s a statistical technique. Similarly, if you read the biggest magazines you’d be forgiven for thinking that most successful startups take in outside funding. On the contrary: many bootstrap.
Bootstrapping a business is a less-talked about – and thus less glamorous – way to start a business. It’s nevertheless not just a potential way to get a business going, it can also be a very nimble and responsive way to run a start-up, one that entrepreneurs choose for the independence it gives them.
One Nordic start-up that made this choice is Mentimeter, which has been discussed on ArcticStartup before. ArcticStartup spoke to Johnny Warström, one of the company’s founders, about why their company chose to bootstrap – and how they got to the point of hiring an outside CEO. Indeed, deciding not to take outside funding was a deliberate decision to prioritise the founders’ independence:
”Not taking in outside capital via VCs is about the people engaged in the company owning the future of the company. We are very interested in the start-up environment and we’ve seen many ways to build a company; when we had the chance to choose ourselves it was clear that only letting people close to the vision of Mentimeter should influence the company, not outside cash.”
Nimble, customer-centric approach
When the company’s founders started Mentimeter, they decided to run a very customer-centric development approach. In November 2011 they released the first version of Mentimeter, then a free audience response system, to the public. Warström describes their first release: “Mentimeter has always been an iterative, minimal viable product, so we did the first skeleton of the product because we realised that there wasn’t a product like it on the market and we wanted to know if there was a customer need for it”.
On release, they got feedback from their first customers and decided to develop a premium version of the product for companies and organisations.
One of these customers was a large corporate, who started using their basic service and later asked them to expand Mentimeter to incorporate some tools that they needed. The corporation, says Warström, “were not really interested in developing an interaction tool themselves – that wasn’t their core – but they wanted that functionality from someone, and they couldn’t find it on the market”.
“The evaluation we did was if this functionality can be used in our base service, then we’ll do it. If we see that other companies that use Mentimeter basic will pay for the service developed after a single customer’s request, then we will do it. We don’t want to make the base service very spread out – or make special features just for one customer. We still want a very clear roadmap, with features that all customers can use. And the things that they requested, we’re converting users on today.”
This expansion included a 100-point prioritisation tool and a 2-dimension rating tool.
And the Mentimeter team are talking expansion again: “We’re talking to 2 large universities in Sweden, who want to work on the same model – where we can distribute the service to the rest of our community, as long as they get the services that they need, at the right cost.”
Today, the company has hired an outside CEO – the founding members of the company make up the board and are still as engaged with the company as before, and have kept up their day jobs.
Openness to new ideas
Despite opting not to bring on outside investment, the founders nevertheless decided to pass the reigns to an outside CEO; seemingly in contradiction to their emphasis on independence, because they saw three benefits.
Firstly, says Warström, “By including an external CEO, without the connection of being one of the founders, we could more clearly define the rules … So you can put on the hat of a board member, but when it comes to daily operations you are under the CEO and the CEO is now our operational boss.”
Secondly, the strengths of the actual CEO, Oscar Mo: “We are much in need of people who just want to be engaged in Mentimeter and the CEO is really good, as a person, to engage these people.”
Finally, the founders saw the value of a fresh pair of eyes: “We would much rather employ someone who can challenge our review of how to manage the company, the actual features of the company and the roadmap. Getting someone in who believe in our vision but has an external view is very valuable. That second opinion is what will take us to the next step.”
What can we take away from this?
This early stage product release allowed Mentimeter to guage the market for their service – and the lean and iterative development model they adapted meant that they could respond quickly and directly to customer suggestions.
Many still consider the attentions of Venture Capitalists (VCs) and Angel investors validation of their business ideas. This is despite a 2012 report in the US (http://www.kauffman.org/uploadedFiles/vc-enemy-is-us-report.pdf) which suggested that VCs in the US are “failing” to identify quality start-ups.
However, by starting out with a “lean startup”, releasing it to the public and acting on their feedback, Mentimeter could take their time and build a relationship with their consumers and tailor their solutions according. Moreover, in doing this, they discovered that among their consumers was a large corporate with whom they could build a mutually beneficial relationship. This is a far clearer way of identifying who values a company, and why.
Despite having clear ideas about the direction the company could take, the Mentimeter founders nevertheless saw the value in bringing in fresh ideas and fresh talent into their company as they grow. Although the company is still small, with only the CEO a full-time employee and the rest hired on a short-term consultancy basis, the company has remained true to the ideas that the founders set out with:
“We never wanted to just buy people out, but instead engage people who believe in what we believe in and build a company with a lot of ‘why’. Mentimeter’s ‘why’ being that we want meetings between people to be fair, interactive, innovative and fun, as well as contribute to a more democratic world. It’s easy to see how this vision would have been compromised if we brought in external investment early on.”
A PhD student and voracious reader based in Stockholm, Claire Ingram is interested in open innovation, co-creation, start-up funding, public policy and pictures of puppies on Reddit. You can contact her on Twitter @Claire_EBI.