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An internet entrepreneur’s guide to bootstrapping

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"Starting your own business is like jumping off a cliff and building a plane on the way down," says Nikhil Shah, founder of Mixcloud, the online radio website that launched yesterday.

Fortunately, Shah and his co-founder Nico Perez have made this, their first venture, fly. Here’s their bootstrapping guide for wannabe entrepreneurs.

"When you’re starting out, it’s a bit like the chicken and the egg," says Shah. "How do you get people on board without funding and how do you get money without a product?

"You just have to persevere."

When Perez and Shah failed to raise seed funding for their business concept, they were disheartened but not discouraged. "We decided to bootstrap our startup," says Shah.

"We moved into a warehouse where we live very cheaply – I would recommend that to any young business," he says. "And we raised a small amount of money from our personal funds and our family and friends.

"Because we knew we couldn’t afford to hire any staff, we started bartering our services in return for help on projects," he continues. "I was looking for someone to build a content management system and a friend put us in touch with a guy called Matt Clayton. He worked with us on a skill swap basis. He had all the right skills – he’s one of the best programmers I’ve met so far – and in return Nico did some design work for him."

The relationship with Clayton was so successful that the young entrepreneurs decided to bring him on board as a fellow co-founder.

"I highly recommend that every small company use this kind of skill swap for any new member of staff. Before you start paying wages, use this model as a trial," says Shah. "They do something for you and you do something for them."

The Mixcloud founders also supplement their income by working on freelance projects on the side. "I still DJ and run a few events," says Shah. "And Nico does photography. These were strengths we had before starting a business. And with our overheads so low, it’s enough to live on."

However, the time for Bootstrapping is nearly done for Mixcloud. "We’re actually looking for funding now," says Shah. "Doing side projects was fine for the first few months but there comes a point where you don’t want to distract yourself any more."

The startup made it onto the Guardian’s Tech Media Invest list. "We’ve got great momentum," says Shah. "And controlling our costs from the outset has put us in a great position going forward."Do you have any handy bootstrapping hints for startups? Email us at editors@realbusiness.co.uk

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