Given that startups are often measured on how much funding have they raised, does it make sense to bootstrap?
By bootstrapping, I don’t mean one’s inability to raise funding – but a decision to not raise funding and instead run the business on customer funding.
As a bootstrapper myself (for the record, NextBigWhat.com never raised any external funding till this date), I am often asked on pros and cons of bootstrapping and whether it’s a good way to build a business.
Here is sharing a few perspective that I hope will help you decide.
Bootstrapping: Why It’s Cool [PROS]
You are your own boss.
There is nobody to report to. No boss. No investors. Nobody is asking for weekly updates. Importantly, you can decide on the companies’ direction / take risky bets.
You are free to take the path you’d like to. It’s your bullet (or car whichever you prefer), your petrol. Drive wherever you want to. Stop wherever you want to.
Helps Stay Focused
Unlike investor focused businesses, you clearly know that your only source of income is customer money, which basically translates to only 1 thing – build a great product/ service and do whatever it takes to sell.
That is, you have very less distractions to worry about. You aren’t buying into creative metrics (GMV et al), but the only goal is customer dollars.
Bootstrapping : Why It’s NOT Cool [CONS]
You are your own boss.
And that’s the hard thing about it. You don’t know when you are slipping / when you need a ‘kick in the butt’. Nobody pings you for any business update (unless you have advisory board).
You are a free bird. Fly or die! Nobody cares.
Be it about hiring or sales, your credibility is defined by who is talking about you. Media won’t care because you are not a ‘sexy story’.
Having investors brings a lot of credibility. Everybody starts taking you more seriously, just because you have a few branded backers. You won't be a part of 'many circles'.
#Growth Vs. Revenue Debate. Every Day!
From morning to evening, you will be struggling with growth vs. revenue (rather, profit) debate.
If you look at the current startup ecosystem in India, profit is considered a dirty word.
Everybody is talking growth. But for those who are bootstrapping, growth mandates one to infuse more money – which simply mandates more revenue (and better profit margin).
That is, you do not have the liberty to lose sight of revenue and instead, focus on the growth (or play with funny metrics like GMV). This can potentially delay your growth plans – but that’s all what it is
In all probability, bootstrapping does mean that your runway is not just shorter, but also you have very little fuel left.
To some, it helps stay focused (there is no money to play around with – so better build a rocket that won’t explode). To some, it brings a lot of fear factor as well (especially when you know that your competitor has raised a massive round and is under-pricing to win your customers).
"Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're a lion or a gazelle— when the sun comes up, you'd better be running.”
Whatever it is, keep walking / running and keep selling.
Happy Bootstrapping! Got questions? Please go ahead and ask me anything.