The Stanford Summit is exciting; a marvelous opportunity to catch up with people you know and to make new contacts. Obviously, the economy was a major topic of conversation.

Lorenzo Carver, CEO of Liquid Scenarios, and I sat down for a conversation regarding the positive and negative experience we have both had bootstrapping our companies during the past few years.

We both, after extensive experience sitting on the venture capital, investment banking and entrepreneurial sides of the table, chose to bootstrap our companies through product development and product launch.

I first met Lorenzo at last year’s AlwaysOn Stanford Summit and met him again at this year’s Summit.  It was a pleasure seeing him again as we have both moved forward strongly during the difficult economic environment.  Lorenzo has had a varied career advising companies, developing strategy and assisting in raising capital.  He has raised several billion dollars for his and other’s ventures during his career.

Also my ventures, EMANIO and the M3 Foundation, have developed well during the recession despite strict fiscal discipline.  Or maybe thanks to it.

As I spoke with Lorenzo, he mentioned that bootstrapping is “a double edged sword; companies that are bootstrapped need to have customers and serve customers in order to survive”.

In other words, the order of business for bootstrapped companies is business.  Making money is the order of the game.  In contrast to VC funded companies, bootstrapped companies quickly have to find their way to revenue and profits.  All investment in product or market development is coming from revenue and profits, so acquiring these are the core responsibilities of the CEO and the rest of the management team.

Lorenzo continued, “Companies that have financing when things get tough have more options, but often lack the strong teams and lack control in how to keep the team together when things get tough”.  In other words, the act of bootstrapping builds a certain discipline in a team.  Everyone is aware of the fact that their livelihoods are dependent on getting that revenue and profit.  Costs have to be kept low and sales have to get done.

Well financed companies most often lack that discipline and there is tremendous waste in a lot of VC funded companies.  However, they also are able to do more and grab opportunities that bootstrapped companies are unable to act upon because of a lack of resources or the need to stay profitable.

We were both in agreement with the fact that everyone we had worked with was in a similar situation to the one we found ourselves in.  The business environment turned toxic overnight and fourth quarter last year and first quarter this year were horrendous for everyone we had spoken to, including partners and customers.

There is no question that there will be more bootstrapping as companies are having difficulty finding investment capital or lenders.  This, in turn, will bring greater scrutiny of budgets and purchase orders across the spectrum.  We both believe, though Lorenzo is more optimistic than I am, that bankruptcies will continue to grow and that the business environment will continue to be difficult for years to come.

However, there are few times better to grow a company than during difficult times.  Many of the great companies of today were started during difficult economic environments, had difficulty finding capital and had to find innovative ways of growing.  This developed their corporate cultures to be strong and focused toward creating great value propositions with scant resources.

To any budding entrepreneurs out there, this is the time to truly consider your dreams and take the step.

KG Charles-Harris is CEO of Emanio and a special contributor to MAPping Company Success.

I lived more than 25 years in and around Silicon Valley. There have been many books written about the area, people and happenings (one of my all time favorites is The Nudist On The Nightshift), with many focused on those who start companies—the famous and infamous Silicon Valley entrepreneurs.

Contrary to much of what you may read in the media none of it is dead; not the VCs, who are raising new funds, or the angels, who invest their own money, and certainly not the entrepreneurs.

Nor are the folks who write about them; some write from the halls of academia, some from the heights of punditship and a few who have actually been there/done that.

One such is Sramana Mitra, a tech entrepreneur who founded three companies, consults with Silicon Valley VCs, writes a column for Forbes and has a MS in electrical engineering and computer science from MIT.

Bootstrapping: Weapon of Mass Reconstruction is the second book in her Entrepreneur’s Journeys series and it’s a great read.

As opposed to a series of lessons to be taught, the book is a series of interviews with entrepreneurs highlighting their fascinating histories, the different paths they took and the difficulties they overcame.

It’s about the need for solid management skill—a book about implementers with vision as opposed to visionaries who depend on others to make it happen.

What you learn from them is up to you, but whether you plan to start a business or not you would have to work very hard not to benefit from their experiences.

The book’s focus is on companies that started and progressed without venture investment. Mitra does an excellent job of pointing out that even without IPOs, M&A and VCs throwing money like beads at Mardi Gras starting a company in your garage with a few friends is not only a solid approach—but a better one.

“If the next Google is to emerge and bring with it thousands of new jobs, it must first start over some kitchen table where not only hope but opportunity is readily available. Where entrepreneurs not only start businesses at a higher rate, but also survive and thrive at a higher rate.”

She points that many businesses fail for lack of funding, but if you don’t look for funding that roadblock ceases to exist.

“Through much discussion, writing, and brainstorming on each topic, I arrived at one core thesis: Not just entrepreneurship, but bootstrapped entrepreneurship is the true weapon of mass reconstruction.”

Having lived through the dot com bubble I know that this is true. Too much available investment makes trust fund babies of companies that need to grow up hungry, tough and scrappy.

Image credit: Sramana Mitra