$30k on credit cards: what bootstrapping a company really looks like
If you believe the hype, there are two ways to start a company:
- Pound the pavement and raise money from venture capitalists, giving away control and equity in your company and setting up expectations of venture profile growth.
- Generate revenue that exceeds expenses, and grow that profit to support yourself, and eventually others.
For most entrepreneurs, it’s not that neat, and it’s not that clean. I thought there might be value in sharing my personal story of financial engineering, privilege, mental health, startup failure and success, and a credit score that has swung from 830 to 690 over the last five years. This kind of transparency might turn some people off, but I’ve realized that’s OK. They’d likely not be the folks I’d want to partner with, anyway. Because hey, faking financial prosperity is for LA real estate agents driving BMWs they can’t afford.
So here’s my story.
In August 2014, I left my last full-time gig, leading travel partnerships at Lyft in San Francisco. While I loved my colleagues and (mostly) enjoyed the work, I felt stifled by a even a semi-rigid office environment, and tired of living in a city with which I’d fallen out of love. I started taking 30 minute walks during the day that quickly lengthened to one hour walks, and finally two hour walks (shoutout Boba Guys in the Mission for the hydration).
With about $10,000 in the bank (and 3 months left on my cliff), I left my rented room on Shotwell St., flew to Seattle, and embarked on a four month solo bicycle ride across the United States, eventually ending up in New Orleans. I lived relatively cheaply on the bike (and supplemented my income by flying back to New York several times to promote live music), but my savings had dwindled by half.
I remember standing in the Mexico City airport at the end of 2014, waiting to board a flight to start my walk across Cuba. I figured some kind of financial cushion couldn’t hurt; I was still months away from re-entering the real world, whether that was another job or starting my own company. So, for the first time, I dipped into the sweet, sticky honeypot of debt. Within minutes, a Chase rep was reading the disclosures on my new 0% balance transfer credit card, which came with a limit of $20,000 and an option for same day direct deposit, cold hard cash, into a bank account of my choosing.
In the five years since, I’ve promoted music in NYC, freelance marketed for tech companies, consulted for Airbnb to help launch their Experiences platform, brought a live performance to Lincoln Center for the Rockefeller Foundation, produced a $100k holiday party at an iconic NYC jazz club, created videos for the National Cathedral in Washington DC, and written travel guides for an insurance company. If I’d owned a car, I would have driven for Lyft.
I’ve also started a technology company and an experiential travel company. The former failed, while the latter, Bolt Travel, is very much alive and in the nascent throes of early success. In getting these businesses off the ground, and maintaining my (relatively) inexpensive lifestyle (mainly spent abroad, in places where cost of living is significantly less than United States), life and business expenses have outweighed life and business revenue, and that credit card debt has grown to $30k — crucially, all sequestered at 0% interest.
To some people reading this, $30,000 will seem like a massive number. To others, that same $30k is a rounding error. I certainly err on the side of WOW THAT IS A LOT OF MONEY, but also recognize from my time working in VC, and at companies that raised billions of dollars — when it comes to financing a business, this is a molecular drop in Softbank’s bucket. It’s also a fraction of what one year of an MBA would cost (as pointed out by my friend Tyler, who chronicled his own personal finance journey both during the struggle (How I Pay My Bills), and after (Debt Free). So in that sense, you could argue it is an excellent investment.
About 18 months ago, I transferred the balances to a new 0% card, restarting the clock for another year and a half of safely parked debt. Then, just last week, I took a particularly liquid moment in the business to pay off the majority of this debt — $20k — and then, only days later, and on a fresh balance transfer offer from the bank, reload the exact same card with $20k, giving me a fresh 18 month reprieve. The “trick” here is keeping utilization (i.e., your total outstanding credit as a ratio of total credit limit) across cards low, so that you keep your score high and retain access to offers.
So for the last 36 months, all that money has remained parked on 0% credit cards, and now I have another 18 months of time to focus on paying it off. The jury is still out on whether this is clever financial engineering, or simply a lengthening of the rope by which I’m hanging myself. This can be tricky to navigate.
Lately, things have been going really well, Bolt has significant momentum, we’re profitable, and I’ve fielded increasing interest from VCs, angel investors, and some of the exciting new options for a sane, middle of the road, revenue-driven financing partnership (Earnest Capital, Indie VC, El Cap Holdings).
Recent positive cash flow has allowed me to pay off $5k, so I’m now down to $25k. And I’m nowhere near close to “maxing out” my credit cards. Over the past 15 years, I’ve earned millions of frequent flyer miles by opening new accounts (always paying them off!). One of the quirks of personal finance: opening more accounts (and increasing your total credit actually) improves your score and, over the long term, gives you more access to credit.
I just checked and across all of my accounts — not counting charge cards, which theoretically don’t have a limit, and without considering that I could always apply for higher limits or new products — I have $165,000+ of total credit limit. I’m only using about 15% of what I could eventually tap into.
Now, here is the really wild part. I fully intend to pay this debt back, and return to my lofty 830 credit score. But what if I couldn’t/didn’t? I don’t see a home or car purchase on the horizon in my future, so the only real downside to a credit meltdown would be loss of access to those premium credit cards. Again, I’m nowhere near there, and have zero anticipation of that outcome — but it’s a testament to what banks will have to deal with as they navigate changing consumer habits and a move towards access over ownership.
That’s not to say all this doesn’t cause me stress. The juggling is intense. These financial institutions expect to be paid; every month they drop into my inbox with a friendly reminder of our tenuous relationship. And like I said, $30k is a lot of money to me. But I feel OK with it.
More nebulous are the loans I’ve gotten from family. My mom has lent me a roughly equal amount of money that in some ways amounts to a venture partnership. If I fail, she doesn’t expect to be paid back, and if I succeed — with this expectation weighing much more heavily on my mind, than on hers — I’ll pay back multiples on the investment.
This lifeline, of course, speaks to the privilege I grew up with, and with which I continue move through the world. Even more valuable than these cash infusions is the personal finance education instilled in me from a young age, and the continued external investments in my credit score, starting from age 16: co-signed car loans, authorized user agreements on credit cards, even family cell-phone accounts. For many children of middle and upper class upbringing, these hands reaching down with a boost from up above are an afterthought.
It’s a scary prospect — stop to consider what life would look like if you started later in life without credit, and without understanding the sophisticated machinations of banks and credit card companies. It’s also why schools should teach financial literacy, so everyone starts out with an even footing and an understanding of how these complicated systems work.
You’d be surprised how many entrepreneurs accrue significant debt — and sometimes find themselves in difficult spots because of it. While running my last company (SlingShot, building tech around FF points/miles), I’d frequently see sub-600 credit scores submitted from founders I recognized, who led companies you’ve heard of — the result of accumulating lots and lots of debt across years of the startup grind.
None of this is meant to be advice. I take personal finance very seriously, and wouldn’t advocate for or against this strategy to get any business off the ground. But it is something that should be talked about more, and hopefully sharing my experience in real-time can continue that conversation. If even one fellow entrepreneur reads this, and finds some solace in the community of shared struggle, it’s worth it.
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The more folks that talk about these important topics, the less stigma there will be. Leave a comment below if you have something to add.
Thanks to Tyler Tringas, Frank Denbow, and Kunal Tandon for feedback on this post.
