Comments on: Start with smaller clients http://bootstrapinbangalore.wordpress.com/2008/09/06/start-with-smaller-clients/ Resources for starting a startup Thu, 19 Nov 2009 05:37:09 +0000 http://wordpress.com/ hourly 1 By: Saurabh Chandra http://bootstrapinbangalore.wordpress.com/2008/09/06/start-with-smaller-clients/#comment-142 Saurabh Chandra Wed, 10 Sep 2008 07:39:33 +0000 http://bootstrapinbangalore.wordpress.com/?p=45#comment-142 I agree there is industry specific variance but the basic principle remains the same. Although cash requirements in manufacturing are more, it is also easier to raise debt since you have a physical collateral. My example is more tuned to service sector (including but not only software) but giving percentages will not add to the point I am making here. The example of the customer helping the vendor with cash advance and other assistance is noteworthy. Toyota has been a pioneer in even assisting the suppliers with best practices and technology. I wouldn't say it goes against bootstrapping because all the help you can get is welcome. There are no rules and all the cash is welcome :-) I agree there is industry specific variance but the basic principle remains the same. Although cash requirements in manufacturing are more, it is also easier to raise debt since you have a physical collateral. My example is more tuned to service sector (including but not only software) but giving percentages will not add to the point I am making here.

The example of the customer helping the vendor with cash advance and other assistance is noteworthy. Toyota has been a pioneer in even assisting the suppliers with best practices and technology. I wouldn’t say it goes against bootstrapping because all the help you can get is welcome. There are no rules and all the cash is welcome :-)

]]> By: Ankit Jain http://bootstrapinbangalore.wordpress.com/2008/09/06/start-with-smaller-clients/#comment-141 Ankit Jain Mon, 08 Sep 2008 07:50:54 +0000 http://bootstrapinbangalore.wordpress.com/?p=45#comment-141 In auto-component manufacturing setup, it is a common practice that when an OEM sees that a critical parts vendor is facing cash flow problems, it tries to bail the vendor out by providing advance payments. The advances are use by vendor for raw material purchases. If it is unable to procure raw materials, the assembly line of OEM may stop altogether. The OEM also helps vendor by exercising its influence in the ecosystem and asking raw material (steel ingots, forgings etc.) suppliers to go liberal on payment terms with a critical vendor. If the bootstrapped business is a key component in the big client's delivery schedule, maybe similar practices can be applied. Here "raw-materials" may mean hardware equipment and software purchases / upgrades. However, of course, one can argue that then the whole idea of "bootstrap" is lost. It would be nice if you can also include a cost-breakup (%age) of expenses in a typical software bootstrap. The heads which amount to cash flow problems will be different among industries. Cash flow problems can become more daunting in a manufacturing setup, where raw material procurement is affected and thus production and delivery. In auto-component manufacturing setup, it is a common practice that when an OEM sees that a critical parts vendor is facing cash flow problems, it tries to bail the vendor out by providing advance payments. The advances are use by vendor for raw material purchases. If it is unable to procure raw materials, the assembly line of OEM may stop altogether. The OEM also helps vendor by exercising its influence in the ecosystem and asking raw material (steel ingots, forgings etc.) suppliers to go liberal on payment terms with a critical vendor.

If the bootstrapped business is a key component in the big client’s delivery schedule, maybe similar practices can be applied. Here “raw-materials” may mean hardware equipment and software purchases / upgrades. However, of course, one can argue that then the whole idea of “bootstrap” is lost.

It would be nice if you can also include a cost-breakup (%age) of expenses in a typical software bootstrap. The heads which amount to cash flow problems will be different among industries. Cash flow problems can become more daunting in a manufacturing setup, where raw material procurement is affected and thus production and delivery.

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