Bootstrapping In The Age Of Fractional Work

How to get your startup off the ground with limited capital

Picture this. You have a killer idea for a startup. I’m talking Uber or Airbnb level good. You’ve gone through all the legwork to validate the idea. Everybody you talk to loves it. This is your golden ticket, and you know it.

However, the MVP scope seems like it will be difficult to deliver without the help of additional developers. You don’t have the capital to finance them, and raising venture capital in the current market conditions seems like a long shot. You’re in the classic ‘chicken and egg’ challenge of a very early-stage startup: you have no cash, no product, and no traction. What do you do?

You bootstrap by leveraging fractional work.

Problem 1 - The cost of reaching PMF has gone up.

In many ways, it’s never been easier to start a startup. If you have an idea, you can be incorporated and up and running in an hour or less with almost zero overhead costs. You can meet your co-founder on Hacker News. You can build a web app leveraging open-source code and have your cloud servers up and running on AWS. You can find customers through the internet. You can become friends with VCs on Twitter. All of this was not possible in the pre-internet age. 

However, as the complexity of technologies (blockchain, AI, open-source tech, deep tech, encryption) and client expectations (UI, UX quality, functionalities volume) increases, so does the cost to reach PMF. 

In addition, the high demand for quality developers and increasing salaries also contribute to this cost increase.

Problem 2 - Good devs will cost you

Even in the current environment - not even mentioning the crazy end of 2021- developers remain in high demand and very well paid. In a ‘startup city’ (e.g., London, SF, Paris), a Medium dev will cost you $10-12K/month, and a Senior one will cost you $12-15 K or more. Typically, an experienced developer has a Linkedin message inbox with 250+ unread messages. So, top-down, you’re not the only one pitching your next big idea. 

Bottom-line, A FAANG engineer will make anywhere between $200-300K in total compensation. No matter how good your idea is, if you didn’t exit your previous business for a multi-million-dollar figure, you’ll have a hard time convincing him/her to quit his job and join you. The incentive for them to (1) quit their very well-paid job, (2) take a 50% or more cash cut, and (3) work with people they don’t know is rather small, especially in the current uncertain environment.

Solution: leverage fractional work

Experienced engineers (e.g., FAANG) are typically not overworked (Twitter is still running, right?) and often look for exciting tech opportunities to brush up their skills and build. They’ll often have the energy to take on an additional project outside their full-time job. 

Let’s say you need 2 Full-Time Devs to complete your MVP. Typically, this would cost you ~$20-30K of cash-burn to finance them.

Instead, you can build a team of 8 PT resources by offering each:

1. A fair equity package¹: e.g., 0.15-0.8% of the company per dev.

2. An aggressive cash offer: e.g., $1000-1500 per dev per month.

3. A clear recurring working schedule: e.g., Mon-Fri 6 pm-8 pm local time.

If you managed to convince 8 part-time devs, you’d end up with 2 FTEs (8 x 2hrs/day) for $10K per month (8 x $1250/month). Or 60% less than what’d you have to pay if you had hired 2 FT devs (~20-30K).

It’s a win-win

The developer:

• Doesn’t have to jump from their current well-paid job into the unknown.

• Is paid for extra hours (no ‘bootstrapping coding’ for free).

• Can start vesting the equivalent of an FT package of equity (relatively speaking, 4 times faster than FT².

• Can observe how fast the startup executes and how well the startup gets financed before jumping in the boat (typically after Pre-Seed/Seed).

The startup:

• Can typically attract talents that would have been out of reach (risk-wise, cash-wise).

• Benefit from a 50-60% discount on the ‘cash’ side of the total compensation.

• Can extract condensed value during a recurring 2 hours of work per day (less room for ‘fake work’).

• Has a ‘plug-and-play’ FT team once the pre-seed is secure by converting PT devs to FT devs.

• Get to know the developer (skills, mindset) before an FT job offer.

Of course, the company must ensure the developer has the legal right to work PT and that there’s no conflict of interest between the developer’s FT job and the company’s product.

The Result

If you leverage ‘fractional bootstrapping’ by following these steps, you now have the skills and productivity of a full-time employee at a fraction of the cash price.

Before you know it, you might be in the Pre-Seed territory with a Product to show, a team around you, and, ideally, early traction. 

Also, to learn how to best manage PT global remote team, check out our article on ‘how to scale global remote engineering teams’ (Sifted, Feb 23)

Conclusion

For early-stage startups, convincing talent to join your startup full-time can be very complex. The risks are too high, and you likely can’t afford them anyway. 

If you’re ready to try ‘fractional bootstrapping’ and are looking for a headstart on this process, Frame offers a free pre-incorporation partnership agreement. To get access, sign up to Frame here!

Nicolas is the founder of Frame, an all-in-one collaboration OS for startups. Frame offers pre-built collaboration apps like Notes, Task, Wiki, Whiteboard, and more. If you want a free ‘fractional work template’ on our Wiki app, sign up today!

1. If you’re very early stage, you can even propose an FT-equivalent package. For more info on sizing equity package, check out the his great simulator built by Index Ventures

2.  We advise to maintain the same vesting schedule (typeicaly 1 year cliff, 4 years vesting, monthly), even if the developer is working part-time