Bootstrapping

AAA

DEFINITION of 'Bootstrapping'

1. A procedure used to calculate the zero-coupon yield curve from market figures.

2. A situation in which an entrepreneur starts a company with little capital. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.

INVESTOPEDIA EXPLAINS 'Bootstrapping'

1. Because the T-bills offered by the government are not available for every time period, the bootstrapping method is used to fill in the missing figures in order to derive the yield curve. The bootstrap method uses interpolation to determine the yields for Treasury zero-coupon securities with various maturities.

2. Compared to using venture capital, bootstrapping can be beneficial because the entrepreneur is able to maintain control over all decisions. On the downside, however, this form of financing may place unnecessary financial risk on the entrepreneur. Furthermore, bootstrapping may not provide enough investment for the company to become successful at a reasonable rate.

RELATED TERMS
  1. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity ...
  2. Interpolation

    A method of estimating an unknown price or yield of a security. ...
  3. Yield

    The income return on an investment. This refers to the interest ...
  4. Angel Investor

    An investor who provides financial backing for small startups ...
  5. Love Money

    Seed money or capital given by family or friends to an entrepreneur ...
  6. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
RELATED FAQS
  1. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  2. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  3. How do you find the break-even point using a payback period?

    It does not make sense to find the breakeven point using a company's payback period. A company's payback period is concerned ... Read Full Answer >>
  4. What is considered a reasonable interest rate for a syndicated loan?

    A 2010 survey of syndicated loans found an average interest rate of 7.9%. However, the majority of syndicated loans are floating ... Read Full Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  6. How strong are the barriers to entry for new companies in the telecommunications ...

    The barriers to entry for new companies in the telecommunications sector are very strong and primarily revolve around the ... Read Full Answer >>
Related Articles
  1. Budgeting

    4 Tips For Cutting Your College Costs

    Find out how to get the life you want on the paycheck you have now.
  2. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  3. Entrepreneurship

    How Peter Thiel Became a Superstar

    A review of the career of legendary Silicon Valley entrepreneur and investor Peter Thiel.
  4. Professionals

    Advisors: Get Those Referrals! (Here's How)

    If you're not talking to your clients about referring you to friends, you should be.
  5. Mutual Funds & ETFs

    ETF Analysis: Direxion Daily 20 Year Treasury

    Read about one potent, yet volatile, way to bet on rising interest rates -- the Direxion Daily 20 Year Plus Treasury Bear 3X exchange-traded fund (TMV).
  6. Entrepreneurship

    10 Richest, Most Successful Tech Geniuses

    Unlike many industries, tech billionaires are mostly self-made. Many of these billionaires came from humble means and, through their own genius, changed the world.
  7. Bonds & Fixed Income

    What are Floating-Rate Notes?

    A floating-rate note is a debt instrument with an interest rate that “floats,” or varies. They are also called floaters.
  8. Professionals

    How to Respond to 'I Already Have an Advisor'

    Every advisor has met someone who already works with an advisor. Here are some tips for keeping the door open.
  9. Entrepreneurship

    The 10 Richest Women In Finance

    Who are the top 10 women in the financial industry?
  10. Investing Basics

    Today's Top Young Investors

    Given the very different world that we live in as compared to the one the Warren Buffett graduated into, young, hopeful investors should be looking up to people closer to their own age.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!