The Entrepreneurial Bible always is impressed by groups of people that bootstrap their dream on the side while they pay the bills with other employment.  This kind of activity shows real grit and determination.  This is what we saw recently during an interview with Amy Hoy and her small company of entrepreneurs who are building online tools for small teams & solo businesses.  Their first product is Freckle .

To quote Amy:

We’re bootstrapping because we’re all consultants or former consultants (including the author of Scriptaculous), and we’d really like our new business to be all our own. We have friends who have accepted VC and then had difficulties pursuing their vision, due to pressure from the investors — who of course, want to protect their investment. Because our #1 goal is a sustainable business, we feel we can make choices that others can’t, when they are answerable to an investor. (Even if it’s their Uncle John.)

Here is our interview:

Q:  When did you decide that you were not going to take VC funding?

A: From the outset, when we were brainstorming what we’d do as a company. (Freckle is just the first app in a series of apps we want to develop. Clearly taking VC just for a time tracking app would be overkill.)

Q:  How did you have to adjust your business plan by going the bootstrapping approach?

A: We’re two small companies (2 and 3 people) working together, and we both pay our bills with consulting. That means that we have to work extra hard to make time to focus on our product, and handle support questions, write documentation, blog, promote, etc. Our lead time on designing and developing features, tuning the marketing materials, etc., is all much longer because we can’t devote all our time to it.

But on the other hand, it gives us perspective because we use Freckle to track our own time for our clients — our other business relies on it. And it means that we don’t have to scramble for every potential customer to pay our bills, which means it’s easier for us to stick to our vision and just say “No” to some people who say “I really like your product but can we change everything about it?”

Q:  How often have you had to turn down VC overtures?

A:  I don’t think we’ve had to turn down any *serious* offers yet. A couple people have mentioned it in passing. But again, from the outside, we look like “just another time tracker” — once our more ambitious plans come to light, I think we’ll have to work on a polite deflection!

Q:  What is the biggest sacrifice you have had to make having gone the bootstrapping route?

A:  Time and focus. We’re pulled in two directions, with our “real” businesses and our budding Software-as-a-Service products. It’s a challenge.

Q:  Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?

A: Yes, with some caveats. We have a very clear vision of where we want the business to go, and how our products should look and act. We know what we don’t want to ever build and the customers we do not want to have.

If we were to find an investor who agreed with our direction and would trust us to do our best work, we’d absolutely be interested in taking a small amount of funding. We’d especially be interested if that funding brought us an amazing advisor, like 37Signals with Jeff Bezos.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?

A: Freedom to focus on our products 8 hours a day, 5 days a week.

Q: So do you see your goal to be another 37signals?

A: No, we want to be more of ourselves

We think there’s a lot of good things we can learn from studying the strategies of companies like 37Signals, the stuff that startup bloggers often don’t write about, but we didn’t set out to emulate anyone.

Our similarities are: SaaS, bootstrapped by consultants, focus on design. The differences are in everything else

Bootstrapping isn’t what you think of when you hear that a company is 18 years in existence.  But that is what you have with PA & Associates, in Baltimore, Maryland.  They work with companies of all sizes to achieve world-class carrier agreements with DHL Express, FedEx, UPS and highly-discounted truckload and LTL rates.  They are a logistics leader and a small growing company that has hit a rapid growth curve in the current, challenging economy where everyone is trying to make budgets go further.

Recently, we were able to catch up with Richard Palarea, CEO, about PA & Associates‘ growth plans using a bootstrapping approach:

Q:  When did you decide that you were not going to take VC funding?
A:  We never entertained the idea until an Angel approached us with “the million dollar” question (what would you do if you had $1M). It got us thinking about how we might boost the growth quickly. The decision was made after careful re-forecasting of our revenue and expenses. Our (outsourced) CFO reported that everything we want to accomplish could be done through bootstrapping.

Q:  How did you have to adjust your business plan by going the bootstrapping approach?
A: We decided to future-proof our business with a long-term vision. In reviewing our historical successes and accolades, most investors or shareholders might think that we’re looking past easy growth and revenue opportunities in leveraging our existing, proven model. Because what we do relies heavily on the cooperation and involvement of UPS and FedEx, we have decided to take a look 3-5 years out and create a business that will last another 20 years. This has allowed us to maintain decision making control, but also has us possibly forgoing some profit distributions in order to fund the new vision.

Q:   How often have you had to turn down VC overtures?
A: Just once…so far.

Q:   What is the biggest sacrifice you have had to make having gone the bootstrapping route?
A: I don’t feel we’ve had to sacrifice anything (yet). If anything, the opportunity has produced a keen vision of where we want to go, an awareness of other revenue opportunities/partnerships/alliances we were overlooking and a discipline to convert opportunities to clients and convert projects to billings.

Q:   Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?
A: It’s a possibility. I think if we found the right group that offered more than cash and if we had a need that required immediate, strategic spending to either create barriers to competition or gave us a significant advantage where there was a sensitivity to the timing. We would look for a venture group that could provide strategy, guidance and other advisory services and advocacy.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?
A:  At present, I don’t feel we are missing anything. As the landscape emerges, we might find that immediate access to strategic capital may be attractive. That, however, would be for an opportunity that we do not yet know about.

When you think of bootstrappers you don’t often think of people who work in the finance realm.  But that is exactly what you find in RJMetrics.

Jake Stein is a co-founder of RJMetrics.  RJMetrics offers hosted business intelligence dashboards and database analytics to companies that operate online and facilitates the real time monitoring and reporting of business data to investors, managers, and advisers.

RJMetrics was described by Jake as :

RJMetrics is a securely hosted business analytics tool for database-driven sites. After profiling thousands of potential investments during our time in venture capital, a trend became apparent: e-businesses had mountains of untapped data in their back-end databases, but managers were unable to produce deep analyzes, keep them current, or use them in business decisions. Based on this insight, we founded RJMetrics to make business intelligence solutions accessible to any company that operates online.

Our QA with Jake about RJMetrics:

Q:  How often have you had to turn down VC overtures?
A:  We’ve turned down overtures from five different investors.  Of course, there’s no way to know if they would have panned out into actual investments if we had pursued them,  but I think at least some of them would have. We like everyone we’ve dealt with, and we know several of them from our prior jobs in venture capital. They would certainly be on the short list if we do take funding.

Q: What is the biggest sacrifice you have had to make having gone the bootstrapping route?
A: Our biggest sacrifice has been narrowing the scope of the problem we address (helping web businesses monitor and analyze the data in their back-end databases). We have a ton of ideas about improvements, features, and ancillary products that we have not rolled out, but I think that is a good thing.

If we had a bunch of cash on our balance sheet and hired a lot of people, it would be tempting to do a lot of things at once. As a resource-constrained company, we have to carefully prioritize everything we do, and postpone or nix anything that will not result in a dramatic improvement.  We are successful if we do a small number of things extremely well, not if we do a decent job at a lot of different things.

Q:  Do you ever see yourself taking a round of funding?  If so, what would be the driver to do that?
A:  I’d say the chances are 50/50 we take funding.  There may come a time when the capital, advice, connections, and resources that a venture firm brings would outweigh what we would have to give up in independence and equity value.  I know that’s not a particularly specific answer, but we don’t have some plan like “When we get to five million dollars in sales, then we’ll get funding to take it to twenty million dollars in sales”.

We have gotten plenty of business so far through referrals and free advertising from some of our popular blog posts and a business intelligence rap video (really), but we may look to augment that with traditional advertising that we fund through an investment round.

Q:  What is the biggest thing you are missing as you bootstrap without the assistance of a VC?
A:  My honest answer is money. The politically correct answer would probably be that we’re missing out on advice, connections, or something like that, but I don’t think we would make significant changes to the business if we took funding today. It would be very nice, however, to get a little bit closer to the salaries we were making when we worked in finance.  We’re focused on maximizing for the long term though, so we’re trading off a little now for (hopefully) a lot down the road.

I have been lucky enough in my time to work with one of the greatest boot strapping entrepreneurs, Greg Gianforte.  Greg is the founder of now publicly-traded Right Now Technologies, but he started RNT as a complete boot strapping venture.  He built it from scratch and shunned traditional VC until they needed him more than he needed them.  And because of this philosophy, he was able to mold Right Now into the image that he wanted and in the timing that he saw best.

With Greg in mind, WV is going to do a study of entrepreneuers who have shunned VC and are making it on their own.