My start-up company has a product, the (4-in-1) Trans4mer, that was invented after my own experience with in-home physical therapy. That therapy had me using multiple exercise balls, bells and weights, which are both costly and space-consuming. Our product is a market disrupter but we have start-up financing problems. How do you effectively take advantage of this situation as a bootstrap-funded start-up vs. well-funded leaders in the health and fitness industry?
Gary Shorter, President, GoXercise Inc.
The entrepreneur’s question raises a much larger question about focus and market entry. Many entrepreneurs think they can grow fast across multiple market segments using bootstrapping techniques. This is seldom the case. The most effective way to bootstrap finance a company is to grow slowly, identify a market segment without direct competition and develop superior value.
I sincerely believe GoXercise is an effective solution for someone, but that isn’t the issue. What matters is what an entrepreneur can do to develop this solution into a sustainable business, and that often requires a laser focus on a specific market segment and value proposition. Often it requires moving the value proposition from a nice-to-have solution to a need-to-have solution by focusing on a specific need or application.
Bootstrap financing relies on a well-defined — perhaps narrow — market entry point. Often, this market segment can be defined such that you have no direct competition; you can own the segment. If there is a segment you can own, then there is little need to spend significant dollars on advertising or compete on price. You can build a base of dedicated users who become your product evangelists. From this base it becomes easier to expand to new customer segments, and if necessary, raise money. Demonstrating significant value and demand is more difficult than raising money.
About the author: Alec Johnson, associate professor of entrepreneurship, University of St. Thomas Opus College of Business