ABSTRACT
This chapter discusses the use of bootstrapping as an alternative solution to conventional financing strategies such as banks, business angels and venture capitalists. High monitoring cost, moral hazards and associated mistrust are overheads for financers who make unfavourable investment decisions. As a mechanism to shield them from financial risks and to recover overheads lenders often put additional constraints on lending terms, making external finance prohibitively expensive for the entrepreneur. Financial bootstrapping has developed around the idea that resources owned or controlled by the entrepreneur often play a key role in pursuing new opportunities for those who are resource-constrained. It essentially acknowledges resource acquisition which is either internally or externally generated are often available at zero cost, or at least, below market price. The traditional view of bootstrapping coincides with a number of theoretical perspectives. A number of models have emerged to explain the process of bootstrapping and the associated practices.
