The Secret to Bootstrapping Your Business

What's up, everyone? Welcome back to another episode of Founders Journal. I'm your host, Alex Lieberman, co-founder and executive chairman of Morning Brew. This episode's a little bit of a change-up. I was recently on, I guess, a short podcast or a short video interview with my good pal Jesse Pujji. Jesse was formerly my co-host of The Crazy Ones. He was the co-founder of Ampush, one of the largest paid marketing agencies in the world. After he sold that business, he started GatewayX, which is his personal holding company. And within, uh, the holding company has a number of businesses, including Growth Assistant, which, uh, is a business that places offshore marketing assistants within marketing functions at companies. I think they just hit a $10 million run rate. All this to say, he interviewed me about bootstrapping businesses, what it means to bootstrap, the metrics you focus on, how you think about growing a bootstrap business relative to a venture-backed business. And a lot of other things. I got tactical with this conversation. I shared kind of what our playbook was at Morning Brew. And so, uh, I hope you enjoy our conversation. So please keep listening for my thoughts on bootstrapping and how to build a great bootstrap business.

What's up, Bootstrap Giants crew? I have a really special bonus email for you guys with none other than my buddy Alex Lieberman, fellow bootstrapper. What's up, Alex?

Hello.

Excited to be here. So we're going to keep this really short and brief and focused on bootstrapping. Alex, for those who don't know, is the founder and CEO of Morning Brew. He's now the executive chairman, but he was the original founder and CEO, successfully sold it for 9 figures. He's all of 30 years old and he bootstrapped the business. He didn't raise outside money to get it. So he is my dream for Bootstrap Giants or any of you guys listening, like he's the guy like I want to be like one day, or, you know, want my kids to be like in terms of business stuff. And, and so I figured he'd be the perfect person. He's my co-host for a long time with The Crazy Ones. So I was like, this is the perfect start to, uh, to the email. So let's just jump right in. This is going to kind of be like a lightning round around bootstrapping. So Alex, how do you define bootstrapping?

Well, I'll start by saying how I don't define bootstrapping. I think a lot of people have this notion that bootstrapping means being less ambitious, having a less exciting vision. Like, only the companies with huge ambition are the ones that raise money from venture investors. I don't believe that to be true. I think bootstrap companies can be anywhere on the spectrum of ambition, from a small mom-and-pop business that just wants to have the livelihood to live the life they want with their family, all the way to a wildly ambitious business like Mailchimp or Atlassian. So I think ambition is not the limiting factor with bootstrapping. I think bootstrapping is more about reliance and timeline. When you're a bootstrapper, you are reliant on yourself and only yourself versus someone else. And timeline to me looks a little bit different because you are reliant on only yourself because you don't have $5 to $10 million in the bank today to spend on expensive executives. Oftentimes the timeline To realize your vision takes longer, but if you are committed to a longer timeline, you can be just as ambitious.

Yep, that makes sense. And when you guys— why did you guys choose to bootstrap?

I'll provide a little bit of nuance. We weren't pure bootstrappers. We raised $750K, but I would say for all intents and purposes, we had the bootstrapper mentality. We raised it from not venture firms. We raised it from a few family and friends. So the expectation of the money was very different. And we bootstrapped because a few things. One, everyone told us that we heard horror stories about venture investing. We heard that it is the dumbest thing to raise venture money as a media company, which I generally agree with even to this day. I think 99% of media businesses should not raise venture money. And we wanted to be the captains of our own ship. Like, we wanted to be able to make decisions that were in line with our vision for what Morning Brew could be, which at the time was, what does the Wall Street Journal or CNBC for our generation look like?

Yeah. I love that. So this self-reliance mindset, and then, you know, this idea that you may take a longer time horizon, or your time horizon is less sort of fixed, I think what happens in venture, what metrics were your guys' top favorite 2 or 3 when you think about running the business from a bootstrap perspective?

Number one is cash, and like cash and cash flow. To me, at the end of the day, the only way you can be reliant on yourself is if you have the cash to be reliant on yourself. You know, I learned it with Morning Brew, but I'm doing it with pretty much every business I'm building right now is like, I want a business that can cash flow basically from the start and we can leverage that cash flow to fund the growth of the business. So cash and cash flow is number one.

Yeah.

And I would say the second thing is product market fit and unit economics, meaning I want to know that before we try to scale up our business, which I would say a lot of venture-funded businesses unfortunately fall in the trap in, I want to know that we have product-market fit. My favorite quote about product-market fit is the question that Raul Alvora from Superhuman asked, which is, if you weren't able to use our product tomorrow, how would you feel? And you have 3 options: very disappointed, somewhat disappointed, not disappointed at all. I want at least 40% of people to be able to say very disappointed before I'm spending on growth. I focus that question from day one. On any business that I bootstrap and start.

Yeah, I think that's totally right. I think that this idea, when you're an entrepreneur, you, everyone, every entrepreneur I know is very hopeful. And so one thing I've noticed, even times when we've taken money into certain companies here, like we chase more than we should because we have the money to chase when we raise money. When you're bootstrapped, you just don't have that luxury. You gotta triage to the thing that's working, otherwise you're just out of business.

And to be honest with you, I feel like actually It would give me a great deal of anxiety if I didn't run my business that way. If I did not feel like I had the foundation of the house that was built 20 feet underground that was holding up my property, I'd be concerned as hell. I don't know how I'd be able to sleep at night.

Yeah. Another good one about product market fit, by the way, there was, I think, Justice Rehnquist. Somebody asked him to define hardcore porn. Have you heard this one?

No.

This is the official— in the official Supreme Court definition, And I use the same one for product market fit. He said, you know it when you see it. And I think if you're asking if you have product market fit, you don't have product market fit.

I completely— that is absurd. I totally agree with that. And to be honest, the reason that I've kind of defaulted to the superhuman definition is because I totally agree with that, but it doesn't feel trackable, or— and it doesn't feel like you can set a goal around it where your whole team is converging on this focus of like, that's where you want to get to. Or I know, as you call it, like your desired future state. And so for me, like, we're able to put a metric to our desired future state.

Yeah, let's talk about— so, you know, there was this tweet yesterday from Sean Frank where Rent the Runway is at a $50 million market cap. And, you know, his business, I think, does $10 or $20 million in EBITDA, maybe more. Like, he's crushed it.

Yep.

One of the biggest things that I think in the Bootstrap Giants mantra beyond just how you start is kind of where everybody focuses is what happens as you scale. So talk about how your mindset of self-reliance, time, some of the cash flow focus, how did those start to manifest when Morning Brew was 100 people and even now it's even bigger than that? How does it show up today from a scaled organization perspective?

Yeah, there's a few things that come up for me. The first is that when people look at the Morning Brew story, they're like, how did they do it? How did they get from 1,000 subscribers at Michigan to 4.5 million subscribers on our daily newsletter today and all these other products? And the short answer is, is like, actually a lot of it was paid acquisition. Like, we grew a lot from paid acquisition, but we did it knowing that we had the right economics of our core business before we ever spent a dollar.

Yeah.

We knew that we had the organic growth of word of mouth and Morning Brew's referral program. And so, like, really the inflection point for us was in 2018 to 2019, we grew from 100,000 subscribers to 1 million subscribers. We 10x'd in a year.

Wow.

And we got to a place where we were spending $500,000 a month on paid marketing to acquire Morning Brew subscribers. But we only did that at the point again where we knew that the foundation of the house was set, where we could turn off those ads tomorrow and we would have a sound business. And that was the mental model for us, was if we got rid of all of our paid marketing, if we had to shave our team down to 5 core people, would the business still work? And the answer was yes.

Right.

I would say there's also this very classic thing that happens with a bootstrap business where there's— I view it as like 2 phases of a CEO's journey. There's like the builder-in-chief whose core focus and obsession is product, customer, product-market fit. That's it. And then there's the second chapter, which is company builder-in-chief, which is, you know, 5-year, 3-year, 1-year mission, 90-day goals. The heartbeat of meetings and executive meetings. And I think the reason that's specific to bootstrap businesses is oftentimes in the early days of the business, we couldn't afford executives.

Right. Any infrastructure. Yeah.

Yeah. We couldn't afford any of that stuff. Whereas with a venture business, you can actually get that going earlier on. And so I think that was actually the most pivotal inflection point in our business was when we went from chapter 1 to chapter 2, or said differently, we went from worrying about problems that are literally happening today to worrying about problems that matter 3 months or 6 months from now. And the biggest unlock for us in making that transition was just having some system for running the business. I know you use Desired Future State. I know some people use OKRs. For us, it was EOS. It was Traction. To me, the system doesn't matter. It just matters that you know when you need to implement a system. And for us, it was when we knew we were at a million subscribers for Morning Brew and we wanted to go into other products, but we knew we did not have the infrastructure or process. To be able to do that. And we just put a system in place.

I think one of the biggest things I just took away from that, the system obviously, but the, the concept that you thought a lot about unit economics first and growth second. And I think in a venture-backed company, again, for people who are listening, VCs actually don't care about unit economics. They don't care about great business model. They care a lot about growth. And there's been so many success stories in VC and there's nothing wrong with it where, you know, they grow first and then they figure out the business after. And they're like, oh, growth, we just got to chase growth. And so I think that's a little bit of the challenge that happened with, say, Rent the Runway is like at some point they're like, hey, they're going to grow really fast, right? So let's— they're worth $1 billion and it's like, well, but if they don't figure unit economics out eventually, then they're worth nothing. And VCs are taking levered bets, so they don't care. They just need 1 or 2 to work out. But you as the entrepreneur got to get stuck with the bag when the downside happens.

And I think that's— I think what comes to mind as you say that is Actually, the biggest thing that distinguishes a venture-backed business and a bootstrapped business in my mind is a very clear delineation of incentives. The incentive for a bootstrap founder most of the time is to build something that if I never sell it, if I never sell secondary, can cash flow to me and allow me to live the life that I want to live based on that cash flow. Whereas for a venture business, the incentive is to raise more money from an investor. And then what you really need to look at is what is the incentive of that investor? And to your point, the incentive of that investor is not necessarily about cash flow. It's not necessarily about the right unit economics today.

Love it.

Anything—

last thing you want to say to the Bootstrap Giants crew?

What I'll say is, as you said before, I don't think there's anything inherently wrong with raising venture money. And I think there are some companies that it actually makes a ton of sense to raise venture money, especially where the upfront cost of the business requires a shit ton of capital. But in most cases, like what I've loved about bootstrapping is the things that fire me most up in life, which is I love being creative, I love being scrappy, I love not having to rely on other people. And that has not changed at all my level of ambition about building huge businesses.

All right. Thanks, man.

I hope you found this interview with my bud Jesse Pujji interesting. Uh, I think it's the first time in a while that I've talked about how I think about bootstrapping. It's the first time I've really put a definition to it. And so I hope this was valuable. Uh, I hope it helps you navigate some of the decision-making, uh, around deciding whether to bootstrap a company or raise money for a company. And if you do bootstrap, the things that you should be thinking about tactically to build a really sound, strong business. Thank you for listening, and I'll catch you next episode of Founder's Journal.