Bootstrapping - When and Why?
The investment climate in India has changed to a point that bootstrapping is pretty much perceived as only a necessary prestep to funding. As an extension to that perception, the assumption about any bootstrapped company is that they are selffunded not because it was their conscious choice to remain so but because they failed to raise money. There are several reasons why somebody might choose to start up. It could be as spontaneous as wanting to solve a problem they feel intimately about or as deliberate as wanting to do away with the ceiling in personal earnings that a job imposes. The reasons for starting up provide the basic framework for decision making along the way. Even the decision of whether or not to raise funds hinges quite heavily on this. It is notsowise to put all start ups in the same bucket because it is this mass bucketing which leads to the assumption that every company has the same kind of aspiration and that bootstrapping is just a prefund state for everybody.
Bootstrapping renders itself a smart choice for the life of several businesses for good reasons. Here are a few:
When you have a viable revenue model ?
Some ideas are inherently capital expensive; some others impossible to monetize without scale. Funding is a necessity in such cases. However, if you are working on ideas where there is a predictable opportunity for revenue generation, the best option is to hold out till you make revenues. Money comes at an expense and if pulled off well, you have the privilege of owning 100% of a growing company. More often than not, funding becomes a possibility only after building the prototype. If there is a predictable business model, it makes sense to spend the months after that phase to build revenues instead of raising money.
Scale comes with addressing largeenough markets. If you look to raise institutional investment, you should be ready to make plans to achieve that scale. If you are more passionate about solving particular problems for niche markets than achieving scale to multiply investor
When revenues excite you more than big exits?
The common assumption is that startups that raise money stand a better chance at big exits. That is not necessarily true. Any growing startup has as much chance at a big exit with or without funding. With a selffunded startup there is the additional goodness of sustained revenues till the big exit happens. When you really care about being your own boss When you raise funds, you don’t just give up equity but also your say. If you care to run your start up in your terms and the idea that you work on affords you that privilege, you should very much do it on your own. Self funded startups generally evoke one of the following emotions from people Sympathy (‘I can help you...I can get you connected’), Scorn (Oh, you want to be a lifestyle biz?) or a condescending acknowledgement of courage (That is not easy!). It only takes a few successes to change the emotion to something of envy.
|About the author||Dr. Manisha Acharya||@manishabadal|
Manisha is a Guest writer for Startuptimes.in . She manages KIIT-TBI and passionate about Startups & Business Incubators in Odisha, India.
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