Indian Startups had a stormy start to 2016.
The Unicorn startup in Indian Startup Space, Flipkart was de-valuated by few investors.
This was followed by closure of another famous grocery delivery service PepperTap.
The lessons from the storm were many. But there was none stronger than the most fundamental rule of startups.
“Startups should bootstrap. Get some traction and then get an Investor”.
Burning Cash on Customer acquisition maniacally will lead your startup anywhere.
Our Startups forgot the basic fundamental of business. Hence, the turmoil.
For a startup, Bootstrapping means starting a Business with little finances from Startup founders.
I call it the lab where you experiment with limited resources.
Having bootstrapped my startup, I can write with assurance the experiences gained while working with limited resources are invaluable.
They do not teach you these inside Business Schools.
Imagine a scenario. You are running a startup with only cash to survive for 6 months.
You have to feed yourself. You have to run a business that has an insatiable appetite for money.
There are chances, you will fall short of money most of the times.
Startup founders, once out of the first years of “bootstrapped startups” are Smart Business Owners.
They understand the value of money.
I beg to differ from the young entrepreneurs of today. Who are more interested in understanding “How to raise funds from Investors?” than understanding the basics of building a business.
I am a firm believer in bootstrapping.
Here are the reasons why every startup should bootstrap:
- You learn to use your resource Optimally:
Bootstrapped startups are always short on resources.
Be it money, employees, furniture, etc.
There are times, the basic essentials of office like stationary, etc might be short in supply.
By the time you are done paying rent, employees, etc at the end of the month, you have expenses for the next month staring down at you.
The whole experience teaches you the art of planning money and value of money.
You learn why every single penny is important in business.
Your employees hate you for being a miser. You don’t give two hoots about what anyone thinks of you.
You are trying to build the next big thing with limited or no resources.
I call it a blessing in disguise.
Startup Owners learn to make the best out of the worst.
The founders upgrade their skills by learning on the job.
I learned Taxation, Project delivery and other aspects of business because we could not afford a full-time accountant or a Project Manager when we started.
Not only did it teach me how all parts of business machinery have to work in sync to create a successful venture, it taught me an important aspect of business called as “Empathy”.
Today when we have employees in all divisions, I can handle them smartly.
I also can empathize with the issues faced by them, as I have been a part of the drill.
The learning has been steep and wonderful.
I understand every single day is a struggle when you are bootstrapping.
- You learn to respect “Money”
Remember the good old days, when our parents spoke about the value of “hard earned” Money.
So what exactly is the magic behind “hard earned” Money?
Well. To understand the same, you got to earn some of your own.
And you don’t earn money when your balance sheet shows negative at the end of financial year.
The point I am trying to put across here is the art of making profits.
Businesses are set up to make profits.
Few days back, when Zomato was devaluated by investors Deepinder Goyal (CEO, Zomato) picked up a twitter fight with known VC Mahesh Murthy.
Now Mr. Murthy was quite right in asking the tough question.
He was crystal clear with his message.
At the end of the day, profits have to show. You cannot wait till eternity to make profits.
So why are the heavily funded startups not making any profits?
To start with, they are spending more than they are earning with no clear plan of when the expenditure will stop.
All they are worried about is when the next funding will come and at what evaluation will it come?
Now bootstrapped startups don’t have the luxury of allowing the money to go down the drain.
From day one, they have limited money.
They are focussed on cutting expenses and increasing revenue.
The same old way of doing business.
My dad (despite running a multi-dollar company) in a small town still makes it a point to check electricity reading of their business units on a daily basis.
Once I asked him “why do you do this futile exercise?”
To my surprise, he saved a good amount of money with the simple exercise of controlling their expenses.
We bought the practice to our startup and saved 20% of our monthly electricity expenditure.
The 20% might be a small number in thousands but I had the money to spend on something else from an exercise where I just had to spend 5 minutes daily.
There are so many instances of us controlling our cost and focussing on revenue which allowed us to break even sooner than we had expected.
The focus for us from day 1 was to get in profits. I doubled up as a marketing person, operations head and accounts head to save us from unnecessary salary expenses.
I travelled in sleeper class and general class to save cost. Ate at road side restaurants and did every single thing a bootstrapped startup owner might do to see the positive sign flash at the end of the balance sheet.
Bootstrapped startups definitely teach an invaluable lesson to startup owners on Money.
Another “blessing in disguise” of running a bootstrapped startup is the learning you get by donning multiple hats and trying everything hands on.
Bootstrapped companies rarely have the money to hire every single person in every division.
So you see bootstrapped ventures, where owners double up as sales, marketing, HR, Development, delivery boys.
The experience of donning different hats is unmatched. You become an all-rounder who understands every aspect of business you are in.
I write this from personal experience. In last few years of our business, I have literally handled every single department of our company as an employee.
- You get to write your own Story:
Why did you become an Entrepreneur?
You had a cozy job. Good salary. Luxurious weekends.
Why on the earth would you want to start something so taxing?
Don’t you tell me “I wanted to buy an Audi”.
I have a cousin who started a venture as he wanted to buy an Audi.
Damn! Punjabi singers and their influence on Punjabi youth.
My cousin is still discovering his business’s market on his Bajaj discover.
May god fulfill his dream of buying an Audi.
On a serious note, why would you start a venture?
I started as I was never satisfied with what I did.
I was a coder working on a small module of a big Project in a bigger office.
Everything other than what I did was big.
I hated my job.
Within one year I quit to start our unplanned startup.
One of the inspirations to start something of my own was to build something without anyone always looking over my shoulder.
There are two reasons we have never tried to raise funds from VCs for our company:
- We do not like to be controlled by investors.
- Our growth story is our story. Not a story of a company funded by few VCs. We take a lot of pride in our success story. We have built this company from scratch by working our asses off.
The hard work, pain, agony is all ours and we are kind of selfish in not sharing it with others.
I can at least make tall statement till someone actually shows interest in funding us 🙂
I have a lot of respect for bootstrapped startups.
They are the ones, who learn to do business in a right way by learning the basics of running a business. They build the platform and then expand smartly over the same.
When they turn into business unicorns (not to confuse with startup unicorns), the journey is worth every single minute they have spent through this painful process.
Startups funded with millions of dollars cannot understand what it is like to run a venture without funding.
They are like athletes on steroids (funds from VCs). Whereas bootstrapped startups fight it out on their own without any external help.
This is why every startup needs to bootstrap.
You might even fail or wind up your venture because of financial woes.
The bitter truth is, most of the bootstrapped startups wind up in first years of operation.
It’s tough being an owner of a bootstrapped startup.
Frankly speaking, the owners of Bootstrapped startups are not at all similar to the smiling entrepreneurs featuring on cover pages of business magazines.
They are bootstrapped. i.e, they are busy trying to build most out of nothing.
I have personally been part of a bootstrapped start-up which I started with my partner a few years back and understand the agony of building a business with very little finances.
You still think you need an investor to make it large.
Here is some inspiration for you to bootstrap : (12 Amazing bootstrapped companies)
Not every successful startup started with a huge bank balance from VCs.