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Seeding the cloud: financial bootstrapping in the computer software sector

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  • Ciarán Mac an Bhaird
  • Theo Lynn

Abstract

This study investigates resourcing of computer software companies that have adopted cloud computing for the development and delivery of application software. Use of this innovative technology potentially impacts firm financing because the initial infrastructure investment requirement is much lower than for packaged software, lead time to market is shorter and cloud computing supports instant scalability. We test these predictions by conducting in-depth interviews with founders of 18 independently owned nascent enterprises, of which three-quarters have adopted cloud computing. We identify particular bootstrapping methods used by start-ups in the computer software sector. Cloud computing enables firms to develop and launch products with minimal resources, reducing barriers to entry, with consequent increased competition. The primary business bootstrapping technique is foregoing wages, supplemented by small amounts of grant funding. Customers are a source of knowledge and expertise for product development, which occurs in an iterative process. Product bootstrapping techniques have changed in response to technological innovation, although methods to acquire tangible assets are identical over time. Astutely applied, financial bootstrapping is a resource management strategy essential to the growth and survival of high-technology firms.

Suggested Citation

  • Ciarán Mac an Bhaird & Theo Lynn, 2015. "Seeding the cloud: financial bootstrapping in the computer software sector," Venture Capital, Taylor & Francis Journals, vol. 17(1-2), pages 151-170, April.
    • Handle: RePEc:taf:veecee:v:17:y:2015:i:1-2:p:151-170
    DOI: 10.1080/13691066.2015.1021030
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    References listed on IDEAS

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    1. Bürgel, Oliver & Fier, Andreas & Licht, Georg & Murray, Gordon, 2000. "Internationalisation of high-tech start-ups and fast growth-evidence for UK and Germany," ZEW Discussion Papers 00-35, ZEW - Leibniz Centre for European Economic Research.
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    Cited by:

    1. Chammassian, Raffi Gabriel & Sabatier, Valerie, 2020. "The role of costs in business model design for early-stage technology startups," Technological Forecasting and Social Change, Elsevier, vol. 157(C).
    2. Cummins, Mark & Mac an Bhaird, Ciarán & Rosati, Pierangleo & Lynn, Theo, 2020. "Institutional investment in online business lending markets," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Mac an Bhaird, Ciarán & Vidal, Javier Sanchez & Lucey, Brian, 2016. "Discouraged borrowers: Evidence for Eurozone SMEs," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 46-55.
    4. Power Jane & Power Bernadette & Ryan Geraldine, 2022. "Determinants of equity financing: a demand-side analysis of Irish indigenous technology-based firms," The Irish Journal of Management, Sciendo, vol. 41(1), pages 52-68, July.
    5. Neville, Conor & Lucey, Brian M., 2022. "Financing Irish high-tech SMEs: The analysis of capital structure," International Review of Financial Analysis, Elsevier, vol. 83(C).

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