Which Is A Better Way: - ‘Bootstrap or Funded’?
According to an estimate, more than 80 per cent of the startups fail to even make a dollar as revenue. Thus, starting a startup is a very tricky business. It’s not just about an idea which can make you huge but also about the execution. The most prevalent dilemma among startup founders is whether to look for funds or stay bootstrapped.
While getting funded enables your business with fuel for a successful fire, many startups choose to take the path less trodden. For many entrepreneurs, it isn't clear which path would best work for their startup, whether it is that of going with venture capitalists (VC), an angel, crowd-funding or staying bootstrapped. Either way, each scenario has its pros and cons and it’s up to the entrepreneur to figure which option best fits his or her startup.
Amit Kumar, Co-founder and Director, Delivery & India Operations, Polestar told BW Businessworld, “Many startup founders believe that in order to grow at a steady pace it is important to generate revenue early on. However, what we found was that by managing to develop a successful profit plan in our early days would not only help us keep our heads above the water but also enable us to grow without bringing in external funding.”
With bootstrapping, the road is often challenging but it also enables a startup to monetize from day one and push it to simultaneously juggle with various functions like sales, client delivery, and operations. At the same time staying bootstrapped helps to stay focused on growth and profit.
Javed Tapia, founder, Slonkit, told BW Businessworld, "When it comes to funding, it cannot be a one size fits all approach and different strategies work depending on the stage and type of the startup. However, one of the important factors to consider is the readiness of the startup to generate revenues. If they are in an advanced stage then funding may make it easier to accelerate revenues. While being bootstrapped in the early stages helps the entity, become financially more prudent and sustainable in the long run."
One has to plan meticulously for sales, expenses, resources, and utilization. Any deviation must be caught early and corrective actions taken immediately. In-house developed integrated enterprise application helps to drive these plans into action and brings visibility to the team.
“With VC funding, comes instant growth and VC backed networks to tap into. However, VC’s also have their own ideas for growth and some of these ideas have to be taken into consideration. That’s why it’s so important to ensure that your ideas are in-line with those of the investor on board. For entrepreneurs looking for funding, I’d say be on the lookout for an investor who is strategic and would bring in an industry understanding and coupled with great market insights,” adds Kumar.
Being bootstrapped gives a startup, the freedom and opportunity to stay focused on growing the business. A bootstrapped scenario also helps attract the right talent. “We hire only those who are tuned in with the company philosophy and focused on pushing the bar, which results in better productivity. When it comes to hiring, we only hire people if it would help us with growth and not for the heck of it,” adds Kumar
Contrary to popular belief, being bootstrapped helps you focus on efficiencies and unit economics becomes a priority from day one (instead of spending heavily on resources). The initial times of being bootstrapped help to build a company culture which benefits the organisation in the days to come.
