Why Bootstrapped Companies Are Better Than Silicon?

  • Posted on: 9 March 2019
  • By: chris_admin

When UniteGPS was founded in 2014 we needed maps. So naturally, we contacted the people at Google maps who demanded $40,000 per year for access to their mapping solution. As a start-up trying to bootstrap our company we faced the decision to invest $40,000 with an off the shelf Google solution or to invest those funds in specific features that customers were requesting while using our creativity to solve the need for maps.  

"Bootstrapping in business means starting a business without external help or capital. Such startups fund the development of their company through internal cash flow and are cautious with their expenses. Generally at the start of a venture, a small amount of money will be set aside for the bootstrap process."

Solving Problems with Creativity: Mapping Example: The decision was easy because we did not have funds to pay Google. We set about a process of evaluating more than 25 possible solutions. Since Google controls 92% of the market for search that dominance has extended to their mapping solution such that it occupies the mind space of map users worldwide. UniteGPS has seen this dominance in RFPs that unnecessarily call for the overpriced "Google Maps" solution. Our evaluation revealed many worthy mapping solutions available for a fraction of the cost of Google Maps. In fact, Google's dominance of the map space seems to be a function of advertising rather than product superiority. Similar to the way Coca-Cola, and Anheuser-Busch differentiate themselves from equally good substitute products. The point is we solved the need for maps at less than 5% of Google's $40,000 price tag. This is a forever savings that lowers our overhead compared with most competitors that opted to solve the mapping problem with expedience and cash.

Solving Problems with Creativity: Design Example: Early in our company evolution we needed professional design and branding. We began a relationship with a local graphic designer who seemed to have aspirations of being the next Andy Warhol. He developed scribble sketches that were expensive, time consuming and did not fit. Meanwhile a friend who was a former Creative Director at Saatchi & Saatchi suggested we were wasting our time and money and directed us to a crowd source platform called Design Crowd.

We created a Design Crowd account and in fifteen minutes created a design brief explaining our company mission and some basic guidelines around our need for a logo. Design Crowd shares the brief with designers all over the world who participate in a "contest" by submitting logos. The contest tools include a way to down select to your favorites submissions and let your friends vote the best-of-the-best on social media. The upshot is we leveraged valuable input from hundreds of people in the final selection of our logo that provided great confidence we were making a good selection. The contest cost around $300, which was far less expensive and 10 times faster than the incomplete work of the local designer. By the way, we also used a company called Hatchwise to develop a professional PowerPoint presentation and the result was equally as good as Design Crowd.

Solving Problems with Creativity: Solution Design & Testing Example: When it comes to ideas to improve software there is no shortage of customers providing insightful feedback. After all, they are thinking about how their business works as they use our solutions so who better to suggest the next incremental improvement to the solution. Not only are customers providing wonderful input they often willing to provide their time to review prototype solutions, test and provide their seal of approval. We try to provide a win-win quid pro quo where the client gets the newly developed feature for low or no cost depending upon the level of development effort required. The value of customer in-kind contributions is tremendous.

Listening, Patience, Understanding, Continual Improvement: Listening to customers to understand what is valuable to them and incrementally iterating on our solution to make our solution better is the most important ingredient to our success. This includes answering the phone, knowing customers by name and providing service that gets their problems solved. Our clients are transportation organizations so we need to appreciate that most will not be super duper tech users and many may be easily frustrated by technology. We have promoted a culture of patience and understand that our team is to extend to clients. The goal with each client contact is for the client to feel that we are looking out for their interest because that is what we are actually trying to do.

Silicon Valley Wants to Buy Your Business: Silicon Valley Investment house Andreesen Horowitz just invested in a start-up that competes with UniteGPS called Samsara. The $100M investment is additional funding needed to keep the company going since the company already burned through $130M of investment. It all sounds very grand until you realize what you are paying for as a customer.Samsara is burning capital at a rate of $46,000 per client while the UniteGPS burn rate is $0.00  

Andreesen Horowitz has a public video showing at least 25% of your Samsara bill goes to pay for the sales person.  On top of the generous bounty paid to sales staff Samsara also pays generous executive compensation including a $600,000 salary to its CEO, who has no experience in transportation. Meanwhile, at UniteGPS as a matter of philosophy the leader earns no more than any developer.

According to TechCrunch, Samsara claims to have 5000 customers that seems like a number artificially inflated to including non-paying customers that are trying their solution for free. Moreover, Samsara says it will deploy the new investment "to hire 1,000 employees." A salary of at least $52,000 each spread across 5,000 customers is overhead of $10,314 per customer per year which is too high to be cost effective for clients.

These Silicon Valley investors have literally invented a number that their 5,000 customers make them worth $3.6 Billion. By this same standard, UniteGPS would be worth $200M which is incredibly unrealistic by a factor of at least 30x overvalued. The truth about Samsara is it reamins to be seen if they will ever make money with such a bloated cost structure. Given their massive losses Samsara is currently worth $0.

In summary, UniteGPS is a real company working in the real world. We make cost conscious investments in our solutions. We judiciously spend our resources because our overhead needs to be covered on to our customers. Our customers are regular people on a budget and not able to over pay for the money that is wasted on high priced executives or highflying schemes to create a unicorn business. We plan solution enhancements in genuine partnership with our clients. As our client, you receive personalized service from transportation professionals who know your business. We view ourselves as in the trenches on the front lines with our clients. UniteGPS is successful because customers have voted with their precious dollars that our solutions add value and not because we were artificially pumped up by Silicon!