How Bootstrapping Helps Startups in India?


As the past few years have shown, raising money for a startup is easy. But building a sustainable and economically viable business is still really hard. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. Public and private markets have started to remember this, post the phase of correcting for years of overly exuberant startup funding. As finance dries up, entrepreneurs do really well to take the benefits of bootstrapping into consideration.

Taking money from investors seems like the path to success and bootstrapping has several advantages. Firstly, it helps one to stay scrappy and to realize talents. One may not know if he/she even had. Secondly, it can help attract the right talent. And, finally, and counter intuitively, it helps a person to maintain his/her control of his company while finding the right partners to help scale.

When you bootstrap, you are forced to get good fast. As humans, we prefer to put in only as much effort as we need to, but whether we recognize it or not, we all have extra gears. Sometimes it’s not until things get really tough that we find the gears that allow us to shift into overdrive — that is what bootstrapping does for you. Admittedly, it is hard, but it forces you to get creative with your strategy and come up with solutions you would never have thought of.

Let’s take an instance where a person attended his first trade show. He had borrowed a trade show booth and bartered with the event organizers to give him the booth space for free. Once he arrived, he suddenly realized that he had nothing to hand out and his Kinko’s signs weren’t appealing enough for people to even stop and chat.

Other companies had spent tens of thousands of dollars on their spaces; he would have been the odd man out. But it was hot and everyone was thirsty, so he got creative and bought 100 Vitamin Waters at a nearby CVS. Back on the show floor, he offered them to people in exchange for watching a demo. Thus, he ended up making two more trips to CVS and giving away more than 300 Vitamin Waters.

Learning to improvise like that is essential to startup success, and it’s difficult to learn unless it’s forced upon you. Bootstrapping does just that.

Same is in the case of Applancer – a market place for app developers across globe. Mr. Sahil Kohli, CEO, thought of bootstrapping it as this platform is close to his heart.

Applancer – A market place for app developers across globe

It also helps attract talent. If you’re bootstrapping, you probably don’t have enough cash or cachet to attract high-profile talent. Early on, bootstrapping companies aren’t able to hire candidates with tons of experience. Instead, they attract people who are willing to bet on themselves — and on your vision.

What does it mean to ask people to bet on themselves? It means they are crazy enough to turn down a $60,000 salary to work for $8,000 a year in someone’s basement because they believe they can turn an idea into a billion-dollar business. The result is a culture able to solve problems with fewer resources, which creates a huge competitive advantage.

Finally, bootstrapping means greater control over both your business and your partners. He became an entrepreneur because he wanted to write his own story. But securing funding while still a budding business naturally limits a company’s options down the road. Instead of being able to develop, evolve, and grow into an enduring, profitable business, the company can have a tendency to focus on appeasing and pleasing the funders, which all too often creates a short-term focus or pressure to realize an early exit.

After bootstrapping for a decade, his company, Qualtrics, did raise capital: it had raised nearly a quarter-billion dollars over the past few years. Today, people congratulate them on their success in fundraising, but as entrepreneurs, that’s not what they are most proud of. They began with the goal of building something great that would change the world and last for a long time, which is why it has never made sense to him to congratulate people on accepting funding — that is the easy part.

We live in a world of instant gratification. But in the entrepreneurial community, we need to remember to hold out, to take the time to build the business into something actually worth VC funding. Then, when funding comes, you will be able to use the investment to scale quickly, not to figure out what you are trying to do. At that point, you can raise money from funders who function as true partners. Above all, you will control your own destiny.

Bootstrapping a business is a lesson in hard work and flexibility, but ultimately it can help accelerate a company’s success. I have pulled together top 10 tips for surviving the bootstrapping journey:

1. Choose a Cofounder Wisely
Having two perspectives heading the company can be critical. When bootstrapping, the vast majority of the work is done internally, so cofounders need to complement each other’s skill sets. If you’re good at different things, you have a better shot at being able to do everything between the two of you, keeping expenses low.

2. Design a Business Model That Generates Cash Quickly
Not all businesses are equally ripe for bootstrapping. The most successful bootstrapped companies have a business model that generates cash as quickly as possible. Without any cash inflow, you’ll burn your reserves before gaining any real traction.

3. Watch Cash Carefully
Spending out of a personal bank account is sloppy and risky–instead, fund a bank account specifically for the business. By creating a separate business account, you can track and learn what adds cash and what diminishes cash from the business. Free tools such as Mint can help track spending and calculate burn rate. Watch your cash like a hawk, daily.

4. Reduce Personal Expenses
Without a salary, you won’t have money to spend–so don’t expect to live a posh life when first starting your company. Consider every purchase and only spend what’s necessary. If possible, bunk with a family member or friend to decrease rent expenses and come to terms with the idea of a less-than-lavish lifestyle.

5. Don’t Outsource Jobs Which You Can Do Yourself
When bootstrapping, hiring out for a job you could do yourself is an avoidable expense and a wasted organizational learning experience. For example, I delivered lunches myself for three months before hiring our first driver. This saved us $1,200, which may not sound like a lot, but it was actually 12% of our capital.

6. Nothing Is Impossible to Learn
If you don’t know how to do something, learn it. Neither my cofounder nor I knew how to write code, but we didn’t have money to hire an engineer. Kevin learned how to code himself, and programmed a website in just a few weeks. Building our own code allowed us to iterate quickly because we knew the technology inside out. Don’t be afraid of learning new things; you’ll be surprised by your abilities.

7. Be Thrifty
Being fancy doesn’t always get the job done. Pick functional over posh office space. Start with the free versions of Dropbox. Print free business cards. Consider refurbished computers instead of the newest MacBook Air. Use a free banking service. Saving on little things goes a long way.

8. Invest in Your Website Domain and Incorporating
Incorporating and securing your website domain are major exceptions to the “price over quality” rule. We initially used an online incorporation service, but ended up with complications that cost more in the long run. If someone intends to get VC funding, it’s better to have a clean incorporation records. Regarding your domain, don’t think you can buy it later once you have more traction. It turns out that once you get traction, the price increases exponentially. Buy the domain outright from the beginning, and start building brand equity around it from day one.

9. Be Discerning When Chasing Revenue
Remember, your goal is to get as much traction as possible to raise a big round. While you chase revenue, you will randomly encounter tricky opportunities that achieve a significant bump in growth at the expense of modifying your operational model or product offering. Evaluate these opportunities before jumping on them: Seize them if they’re aligned with your long-term goals, and decline if they’ll become a huge distraction from achieving further growth. At an early stage, what might appear to be a revenue touchdown may distract you from building a real replicable business.

10. Don’t Accept “no” for Answers
When you’re so small, vendors and suppliers will not want to work with you. So work to build personal connections with partners that may help your business in the long run. This may help obtain the resources your startup needs to get moving, at a price that won’t break the bank. Don’t be afraid to share your story and appeal to people’s human side. To succeed as a bootstrapped startup, you have to persevere for the answer you need.

Bootstrapping a business is difficult, but it’s by no means impossible. Even the word ‘Impossible’ says ‘I-M-Possible’. With the right amount of hard work, dedication, cooperation collaboration, and passion for a company, it’s almost easy to give up a chunk of personal life today for the sake of the future. Ultimately, bootstrapping is making an investment in yourself that will pay off for your company in the long run.