“It takes money to make money.” You can bet that phrase originated with an investment banker, not an entrepreneur. If you’re passionate about building a successful business, it’s possible to do so with little or no capital–as long as you understand a few important concepts up front.
In 2007 my beautiful girlfriend (now my wife) and I started an online ad network. From my house in New Jersey, the two of us, working alone, bootstrapped our company from zero revenues to over $1 million within 18 months. Here are the key lessons we followed about starting a company with zero upfront capital:
Lesson #1: Ideas Trump Assets
An ad network aggregates websites to represent to advertisers. To exist, you need something to sell (websites) as well as someone to buy (advertisers). It’s a classic chicken-and-egg problem; so solve it, we decided to partner with the largest ad exchange at the time, or order to instantly have inventory to sell.
We spent our first three months flying around the country and pitching ad agencies without landing a single sale. Why? Our story wasn’t differentiated enough. Ad agencies figured, why buy from us when they could go directly to the ad exchange themselves for the same inventory we were trying to sell?
It wasn’t until we got the idea to drop our ad exchange partner, be transparent and honest about our home-based business, and pitch website publishers ourselves that our situation changed. By being open and transparent with publishers we were able to sign 40 websites, relaunch our company, and close our first contract for $75,000. We were on our way.
Lesson #2: Sales Start with Image
By frankly describing our company to website publishers as a two-person operation, turning a perceived drawback into an advantage, we learned another important lesson: in order to buy, customers must have a comfort level with you, your company and your values.
As small business owners themselves, publishers appreciated our honesty. Our story was relatable. We were underdogs–and everyone likes an underdog. It made us an attractive business partner. Over the years we’ve worked hard to maintain that trust.
While we were completely transparent with those first 40 website owners, however, we knew that big-time ad agencies would never relate to a home-based business. So for them we created a different persona. We signed on with SaaS services, like RingCentral, that gave us an 800 number and a phone tree system. That way, when they called us they heard, “Thank you for calling Yashi. Press 1 for Sales…,” etc.) We also used Google Apps email, which gave us a @yashi.com domain instead of @gmail.com. These, and other low-cost SaaS products, helped us appear larger and most established than we really were at the time.
Lesson #3: Effort Overcomes Cash
Life Hacking is a popular buzz phrase these days. One of the arguments in life hacking is that quality of work is more important than quantity. While that’s true to some extent, I’ve found that quality comes from quantity. Basically, practice makes better.
When my then-girlfriend and I started our business from my house, we had virtually no capital. What we had in spades, however, was passion and a survival mentality. We worked from sunrise to sunset–seven days a week, about 14 hours a day, on average. I believe we each worked over 5,000 hours in our first year.
It may have been grueling (and probably unhealthy); but it was also exhilarating. We kept our heads down, bounced back from setbacks, and focused on incremental compounded growth. It worked! We generated nearly $750,000 in 2008 and by Q1 2009 we had our first $1 million in sales. Best of all we did it as a two-person, home-based business.
Lesson #4: Profits Cure All
Mark Cuban says “Sales Cure All.” We’ve modified that motto at Yashi to, “Profits Cure All.” Simply put, profit creates leverage, and leverage leads to control.
There is no better way to create and maintain control of your own destiny than to become profitable as early as possible. Control and alignment are the cornerstones of our growth and success.
At Yashi Media we’ve remained scrappy as we’ve grown, adding people over time who are as aggressive and spirited as we’ve been since day one. In 2013 we generated $14 million in sales, and we’re seeking to continue our 70% CAGR in 2014 and beyond. We’ve achieved all this despite having started with the barest of bank accounts and no early investors, simply by hustling and embracing the grind on a daily basis and remaining profitable.
Not every business can get its start with zero seed capital, but more can than you might think. Our example proves that knowledge and motivation can be even more valuable than greenbacks. Don’t wait for money–if you have the vision and a plan, go for it.
Jay Gould is the Founder and CEO of Yashi Media, a 2014 Red Herring Top 100 Winner.
Image credit: CC by Philippe Put