I started and bootstrapped my second tech startup 8 years ago. We saw constant growth and reached just under 2M in sales until 2012 when we were hit by some challenges out of our control, including a bogus patent troll suit (which was eventually dismissed). Being bootstrapped, we just didn't have too much of a safety net in place to deal with these issues. While I have been able to hold things together from then to now, it has been more 'survival mode' than anything else. I have tried a LOT of things, but it's all been on the cheap. Advisors have told me to cut back which I have. Since then it has been a constant struggle and sales have been heading downward. I am pretty much alone as I have no investors. While I still think our company has a lot of potential, I have not yet been able to make a rebound happen. Our direct competitors are funded companies, and it's tough to go up against them without any funding and in a defensive position. The investor types I talk to have always communicated that we make too much for an angel and not enough for a VC. I have cut back pretty much all I can (we have always been pretty lean anyway). I have what I think are some great and innovative ideas, but I don't feel I have the time and funding to make them happen. On my own, I am feeling less and less we will be able to bounce back. I have no idea what I will do if I have to shut things down. I have literally poured my life into my business to keep it going, so stakes are incredibly high for me and my family. I want to be pro-active and make sure I have things in order so that if it gets to the point where it needs to be shut down, I am not scrambling to find a plan B. Additionally, I am not even sure how to shut down a business of this magnitude with many nuts and bolts. Does it have to go bankrupt? Do you just shut down the website? Has anyone else gone through something similar?

First, this is a tough spot you’re in. By making it this long you’ve already accomplished something most people never do.

My own company was bootstrapped and we’re in our 16th year now. We’re still employee-owned and have no outside investors. Looking back, there have been trade-offs to doing things the way we have but a major benefit is the very high degree of flexibility in how we do things.

As I’ve been thinking about your problem, the biggest question for me is what changed between 2012 when you were doing well and now? It sounds like you’ve dealt with the patent troll, so what else changed? Do you have new expenses you didn’t have before? Did your product become stale while you were distracted? Did a market shift disrupt your business model? Are you different yourself?

To reboot the business and keep it running, you may have to rethink your whole product and cut out parts that feel critical to you today. You said you have some well-funded competitors so you need to focus all of your energy on whatever your company can do that is better than everybody else, and make it the best it can be. Focus on whatever generates the most cash for you (vs revenue). If there is part of your business that’s bringing in revenue but not cash flow, kill it or raise prices. Cash flow is everything when you’re bootstrapped.

If you are only having a short-term cash crunch but are otherwise cash flow positive, then a business loan or debt of some sort could be an option. Giving up equity isn’t the only way to bring more working capital into a business. It’s much easier to get someone to give you money when you don’t need it, though.

In general you don’t have to go the bankruptcy route unless you owe people money you will not be able to pay back. If you just can’t afford to keep your own lights on but don’t owe anyone else money, there’s nothing to do but just shut the lights off.

With more details, I might have more specific ideas.

Answered 8 years ago

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