By Erica Swallow @ Forbes: (Bootstrapping) How One Startup Grew a $100M Business Without Spending Venture Capital

For many startups, raising a round of funding is a day of celebration. It’s exhilarating knowing that someone believes enough in your idea to put money behind it. Raising a round, though, doesn’t mean that a startup has “made it” or that the entrepreneurs behind the venture are on their way to tech stardom.

It isn’t always, though, the best route for every startup. In the words of Christian Chabot, CEO and co-founder of Tableau Software, a Seattle-based data analytics and visualization software company, taking venture capital is like having a loan. “Do you feel brilliant and motivated after you take out a big loan?” he asks rhetorically. He and his co-founders avoided venture capital at all costs during their early days and managed to break through the $100 million revenue milestone in December and now has more than 700 employees after nearly nine years of doing business.

Founded in January 2003 by Chabot and two Stanford computer scientists — Chris Stolte and Pat Hanrahan — Tableau was born when “the dot-com bomb was still exploding, and the stock market was hitting a five-year low,” says Chabot.

Having just completed a two-year stint as an associate partner at SoftbankVenture Capital, Chabot says he had seen firsthand what happens to young companies that raise too much money too fast. “I also saw what happens when venture capitalists get too much control of a missionary technology venture – and it’s generally not good.”

Chabot’s venture capital experience aside, his co-founders — the technology and development minds behind Tableau — were naturally skeptical of investors, leading the team to bootstrap from day one.

While the company did eventually raise a $5 million Series A in 2004 and a $10 million Series B in 2008, it all begin with three entrepreneurs who brought a few thousand dollars each to the table. Even today, every dollar of venture capital Tableau has raised is in its bank account, says Chabot. And raising that money was all about timing.

We spoke earlier this month about how Tableau managed to grow its $100 million business without spending any venture capital. Chabot provided a few key nuggets of advice for entrepreneurs looking to bootstrap to success.

Work for Free and MakeLifestyle Adjustments

“I believe it’s a myth that you need to bring a lot of capital to the table in order to be able to bootstrap,” says Chabot. “Frankly, I don’t think most people are willing to make the sacrifices that you need to make to be an entrepreneur and to bootstrap a company from nothing.”

Chabot says that the Tableau trio brought modest amounts of money to the table, to the tune of a few thousand dollars each, “But most importantly, we worked for free.”

“The hardest thing you have to do when you bootstrap is to work for free. There’s no income. It’s not that you have to be cutting big checks necessarily – there’s just no income. So you have to be able to adjust your lifestyle for some period of time, maybe a year or year-and-a-half.”

Tableau was able to run with capital efficiency in its early days because its founders took up modest lifestyles in order to save money. Chabot, for example, at 28 years old and having come out of venture capital, downsized his entire personal life and lifestyle. He moved from a two-bedroom apartment to a one-bedroom, cut out his television bill and cancelled his magazine and newspaper subscriptions, for starters. He also cut his personal spending drastically in other areas a year in advance of starting the company. He suggests that aspiring entrepreneurs make budgets a year out from starting up and stick to them. Cut out everything that’s unnecessary.

Stolte had just finished his studies, so the bootstrapping lifestyle wasn’t too much of a change from his student lifestyle. And Hanrahan also led a modest lifestyle as a tenured professor, says Chabot, so bootstrapping wasn’t much of an issue to his personal lifestyle, either.

The takeaway here, though, is that bootstrapping entails working for free and cutting out the unnecessary comforts. Entrepreneurs must accept this and make plans that acknowledge and bend to these realities.

Start Pitching on Day One

A look at how the Seattle Times is using Tableau Software to engage readers.

For software startups, Chabot says that entrepreneurs should be selling as soon as humanly possible. “Most people wait way too long before they go try to sell what they have.” Stay away from these common excuses, he advises:

• “We’re still building it.”


• “We haven’t tested it.”


• “It’s not going to ship until the end of the year.”

None of these common retorts, Chabot says, prevent a startup from selling its idea today. “If you’re really onto something valuable, new, and important, you can actually get customer interest, feedback, and maybe early orders even before your prime time.”

“One of the great advantages as a software company is that you have a product that has a price tag. From the first days of forming the company, we would get in our cars, put our laptops in the backseat, and drive around trying to sell our idea.”

Tableau’s founders were upfront when sharing their prototypes with potential clients, disclosing that the product hadn’t been tested, was missing a few basic features, and didn’t come in a shiny box. “But it did a few magical things that could really help someone,” says Chabot.

The beauty here is that Tableau was able to sell its prototype idea to these early customers, even though it had issues. They offered discounts and exceptional service for these customers and worked with them to make the product better over the coming year. For customers, this early access — barring all software bugs — could be seen as a way to customize a product for their needs, as Tableau worked closely with its customers to solve issues.

While Tableau continues to expand its sales team, it also now has the Internet and social tools on its side for spreading the word about its product. It has produced an extensive series of customer testimonial videos on YouTube, for example, including the embedded video above that discusses how the Seattle Times is using Tableau Software to build editorial-driven data visualizations.

Hire People Who Dig Your Mission

“The most important part of a bootstrapped company’s culture is a sense of mission and purpose,” says Chabot. “A sense that you are a secret, ManhattanProject-style team, quietly working on something that is going to be really, really important. There is a certain kind of personality that literally is so excited about that, they cannot imagine working anywhere else.”

Tableau’s early culture was built around its mission to “help people see and understand data.” That, and the thrill of building something new, says Chabot.

The company hired its first employee during its second year, focusing on finding someone who was excited about both Tableau’s mission and building new things. This hiring practice helped them maintain their early stage culture as they assembled their “secret SWAT team” to work together in overturning the establishment and building their budding product brick-by-brick.

Chabot says that you can tell during interviews who will be a fit for your bootstrapped startup. The right people thrive in low-cost environments and are totally up for working at a fraction of the market rate for their given position if it means working on a cool product they are excited by.

If the discussion feels like a struggle, though, that’s a bad sign, he says, especially when it comes to the money talk. For those money-interested candidates who weren’t going to work out, he recalls saying, “If you want to make a market rate, you should probably go to a company that has a product in a market, because we don’t yet.” Zing!

Be Capital Efficient

An early Tableau holiday party, hosted in “someone’s living room,” instead of a swanky venue.

You don’t need a ping pong table to have a startup culture. In fact, if you’re worried about having a ping pong table, you’re focusing on the wrong values, says Chabot.

Once again, it’s all about having a purpose. If you have that, everything else will fall into place.

When it comes to office spaces, keep it cheap. Says Chabot:

“Our first employees reported to work in my bedroom, which was our first Seattle space. Our second Seattle space was my basement. That was the big company move because the basement was a lot bigger than my bedroom. And our third office space was a low-cost corporate office space in a so-so commercial building in Seattle with dirty carpet and in desperate need of a paint job.”

During our discussion, Chabot got excited just talking about the company’s beginnings. “Those are the good ol’ days! You don’t want to skip those years!” he exclaimed. “You’re robbing yourself if you skip those years!”

So, move around from one tawdry office space to another, use old computers, and have your holiday parties in someone’s living room instead of at a fancy banquet hall, says Chabot. “Do everything really cheaply and work for not a lot of money. Those are the fun, team-building times. I have lifelong bonds with the team of people who went through that together. As it turns out, we’re really reaping the rewards of that investment we made. But I bet if you go to all of them, they would say that even if it hadn’t worked out, they wouldn’t trade it for the world. That’s just what it feels like.”

Raising Capital When the Time Is Right

So, why did Tableau Software eventually raise $15 million in venture capital? It was all about timing, says Chabot:

“Our philosophy was to ‘raise customers before raising capital.’ We wanted to build a little company with a product, customers and positive cash flow before raising venture capital. This required several years of bootstrapping. But there are good reasons to raise capital at some point in a company’s life. We ultimately decided to take that step — we just didn’t want to do it too early. One of the important reasons to bootstrap before raising capital is that you can raise money on more attractive terms and maintain control of the company.”

That money, though, stays safely in its company’s bank account, serving as a cushion in the event that things don’t go as planned, says Chabot. It also gives customers confidence that the company has staying power.