I just noticed something similar in my newly compiled list of famous failed startups in India – there are hardly any names of startups that have bootstrapped.
Looks like, bootstrapped businesses barely do not get the attention of our industry or are they smart enough to grow slowly by spending wisely.
Why are so many funded startups a failure? To start with, the funded ones forget one basic rule of running a business.
“Businesses should bootstrap. Get some traction and then get an Investor”.
Burning Cash on Customer acquisition in an unplanned way will not lead your startup anywhere.
Well! Our Startups forgot the basic fundamental of business. Hence, the turmoil.
What is Bootstrapping in Business?
For a business, Bootstrapping means starting a Business with limited financial investment 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.
The experiences that are not taught in Business Schools.
Imagine a scenario. You are running a startup with only cash to survive for 6 months.
You have to feed yourself and You have to feed a business that has an insatiable appetite for money.
There are chances, you will always be short of money.
Startup founders, once out of the first years of “bootstrapped startups” are Smart Business Owners.
They understand the value of money.
This is where my thought process is entirely different from the young entrepreneurs of today.
They are more interested in understanding “How to raise funds from Investors?” than understanding the basics of building a business.
I, on the other hand, like to understand more about the profitability of a business and then start it – bootstrapped.
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, even the basic essentials of office like stationary, coffee, etc might be short in supply.
By the time the startup owners of bootstrapped startups are done paying rent, employees, etc at the end of the month, they have expenses for the next month staring down at them.
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.
Running a bootstrapped startup means, Startup Owners learn to make the best out of the worst.
The founders upgrade their skills by learning on the job.
In one of our recent ecommerce businesses, we learned Taxation, product procurement, Selling on ecommerce platforms, and other aspects of ecommerce business because we could not afford a full-time accountant or a 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 “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 the financial year.
The point I am trying to put across here is that we should know from day one “How to make profits”.
Businesses are set up to make profits.
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-million dollar company) in a small town still makes it a point to check the 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 showed me how much he has saved with this simple exercise of controlling their expenses.
We bought the practice for 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 roadside 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 the 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 cosy 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 fulfil 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 did not like my job. Within one year, I quit – to start our 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 a 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 the 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 business 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?
Time to review your strategy!