Use of financial bootstrapping in new businesses: a question of last resort?

Winborg, Joakim

doi:10.1080/13691060802351248

Cited by 58 publications

(57 citation statements)

References 5 publications

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“…Scholars in one research streams argue that bootstrapping is a strategic resource‐management decision (Grichnik et al, ) to avoid resource dependencies and maintain full control (Patel et al, ). It may also have the advantages of lower costs of capital and lower risks (Winborg, ). Scholars in another research stream view bootstrapping as “a second best strategy that becomes particularly important when access to external finance is more difficult or simply impossible” (Vanacker et al, , 682).…”

Section: Hypothesesmentioning

confidence: 99%

Start‐up financing: How founders finance their ventures' early stage

2018

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Although the entrepreneurship literature has advanced our understanding of start‐up financing, little is known about the mechanisms founders use to finance the beginning of a venture. Drawing upon resource‐based view, this study relocates bootstrapping is a strategic choice rather than a necessity. By analysing the financial behaviour of 3,017 new business owners, we reveal owner‐financed bootstrapping is a strategic choice rather than a necessity. We also demonstrate related techniques that are used independent of industry, initial capital, financing difficulties, and impeded revenues.

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Section: Hypothesesmentioning

confidence: 99%

Start‐up financing: How founders finance their ventures' early stage

2018

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“…Importantly, while prior research has often framed bootstrapping as a reactionary activity of entrepreneurs (e.g. a last resort) driven by a lack of external financing, entrepreneurs also proactively use bootstrapping techniques (Grichnik, Brinckmann, Singh and Manigart, 2014;Winborg, 2009). Some 95% of firms in the studies by Freear, Sohl and Wetzel (1995) and Harrison, Mason and Girling (2004) were engaged in at least some bootstrapping activities.…”

Section: Challenging Common Wisdom With Respect To "Traditional" Sourmentioning

confidence: 99%

Market Orientation, Growth Strategy, and Firm Performance: The Moderating Effects of External Connections

Filatotchev

Bruton

2016

Manag. Organ. Rev.

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent repository link Dzidziso Samuel KamuriwoCass Business School, City University London, UK Tom VanackerGhent University, Ghent, BelgiumThe authors are listed alphabetically and contributed equally to this research effort.2 AbstractThe proliferation of new sources of entrepreneurial finance potentially makes it easier for ventures to raise capital and grow. To date, entrepreneurial finance literature has developed a rich tradition of research on venture capital and angel finance. However, the emergence of "new" sources of finance, such as crowdfunding, and the limited attention paid to "traditional" debt financing and financial bootstrapping, offer opportunities to explore, from different points of view and theoretical perspectives, the challenges that ventures face. The objective of this SpecialIssue is to explore these new and traditional sources of finance and suggest how these phenomena can extend entrepreneurial finance literature and guide new theory building. This paper outlines the new sources of entrepreneurial finance, and in comparing them with more traditional sources, we propose theoretical and empirical challenges that these new and traditional sources present to entrepreneurship scholars. We also provide a brief summary of papers in the Special Issue and outline promising avenues for future research.3

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“…We address the dearth in the literature identified by Grichnik et al (2014) and Winborg (2009) by investigating heterogeneity in resourcing strategies in hightechnology start-ups with a sample that is significantly younger than that of earlier studies (e.g. Malmström 2014).…”

Section: Introductionmentioning

confidence: 99%

“…Bootstrapping techniques are therefore adopted by design rather than necessity, as increasing capital efficiency is the principal intention (Ries 2011), rather than compensating for lack of resources (Winborg 2009 (Carayannopoulos 2009). …”

Section: Resourcing High-technology Start-upsmentioning

confidence: 99%

Seeding the cloud: financial bootstrapping in the computer software sector

Bhaird

Lynn

2015

Venture Capital

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Seeding the cloud: Financial bootstrapping in the computer software sector.This study investigates resourcing of computer software companies that have adopted cloud computing for the development and delivery of application software. Use of this innovative technology potentially impacts firm financing because the initial infrastructure investment requirement is much lower than for packaged software, lead time to market is shorter, and cloud computing supports instant scalability. We test these predictions by conducting in-depth interviews with founders of 18 independently owned nascent enterprises, of which three quarters have adopted cloud computing. We identify particular bootstrapping methods used by start-ups in the computer software sector. Cloud computing enables firms to develop and launch products with minimal resources, reducing barriers to entry, with consequent increased competition. The primary business bootstrapping technique is foregoing wages, supplemented by small amounts of grant funding. Customers are a source of knowledge and expertise for product development, which occurs in an iterative process. Product bootstrapping techniques have changed in response to technological innovation, although methods to acquire tangible assets are identical over time. Astutely applied, financial bootstrapping is a resource management strategy essential to the growth and survival of high technology firms.Keywords: software industry; bootstrapping; cloud computing; social networks; private equity; business angels; disruptive innovation IntroductionHigh technology based firms are an important source of employment creation, economic growth and technological innovation (Colombo et al. 2010;Freear, Sohl, and Wetzel 2002;North, Baldock, and Ullah 2013;Rasmussen and Sørheim 2012). Central to the development of a high technology small firm sector is a considerable level of start-up activity and new firm formation. A barrier to this expansion, however, is the ability of firm founders to acquire adequate finance for their nascent ventures (Basu and Parker 2001;North, Baldock, and Ekanem 2010). This is particularly evident for introduction of technological innovation for new firms in the computer software sector.We contextualise our findings in relation to the literature by comparing bootstrapping techniques used by firms in our sample with those used by computer software firms studied by Wetzel (1995), andGirling (2004).We address the dearth in the literature identified by Grichnik et al. (2014) Resourcing implications for software firms adopting cloud computingCloud computing refers to applications delivered as services over the internet, and the hardware and systems software in datacentres that provide those services (Armbrust et al. 2009). Thus, cloud computing may be conceptualised as a combination of three layers of abstraction: software-as-a-service (SaaS), platform-as-a-service (PaaS), and infrastructure-as-a-service (IaaS) (Weinhardt et al, 2009, Vaquero et al, 2008. The first layer is the focus of our study, and ...

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Use of financial bootstrapping in new businesses: a question of last resort?

Cited by 58 publications

References 5 publications

Start‐up financing: How founders finance their ventures' early stage

Start‐up financing: How founders finance their ventures' early stage

Market Orientation, Growth Strategy, and Firm Performance: The Moderating Effects of External Connections

Seeding the cloud: financial bootstrapping in the computer software sector

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