Bootstrapping and Startups

by August 3, 2018 0 comments Blog

Thinking about Bootstrapping? A few quick tips to rescue!

 

At an initial stage, every business kickstarts by bootstrapping but as the startup starts developing, we try to seek investments. There are businesses which are run with acquiring funds from angel investors and at a later stage, from venture capitalists (VC). But there are businesses solely run on bootstrapping by their owner. There are a series of successful startups who run entirely on bootstrap. Quick Heal, Snackible, FusionCharts, Zoho, RecruiterBox  are a few to name companies who established themselves as being a self-funded startups.

 

According to investopedia, bootstrapping means a situation in which an entrepreneur starts a company with little capital. An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.

 

When you are deciding to start your own venture, you have a certain idea which you  wish to follow and execute without any interference from outside, by interference we do not mean the advices but people telling you what to do and what not to do.

When you approach an investor to invest in you, they always demand you to grant them with some equity in your company. And then uses that power to interfere.

 

Tips to start you with bootstrapping

 

  • Find the right partner/co-founder: Well we all know how tough it is to handle something alone. Why not seek a partner? Choose your co-founder wisely. Try to find someone with a complementary skill set to yours.
  • Complementary skill set: When bootstrapping, you try to spend a little less on the expenses which can be covered by working yourself. Well, having a partner with complementary skills help you cover a large range of work without spending much, you end up doing the job yourself rather than outsourcing it and saving a lot of money on it. For example, a web developer can pair up with a designer and they could handle half of the situations themselves.
  • Keeping an eye for each expenditure: Every penny spent towards your business should be done by asking one simple question, ‘Will this money help me acquire customer or make a network connection?’ Even if it is a small amount, be sure not to waste it.
  • Find a money-making model: A quick revenue generating model is essential for any startup. If you are bootstrapping, use a model which generates quick money while spending less. For example: Use of digital media to promote, cuts down a huge cost.
  • Stay Frugal: This is the time you are trying to earn every penny you are investing, do not spend like a already established business. Think practicality before lavishness. Stay frugal and not spendthrift. Control your expenditure till your revenue starts generating. Spend wisely.

  • Hiring: We have seen successful CEOs having a large team to work with but at an initial stage of your bootstrap startup, stay away from big teams, they require more money. Find interns and hire people who will actually give something to your company. Be wise.

 

Let’s know about the Pros and Cons of bootstrapping.

 

PROS

  • Cheaper and more efficient: When you are investing your own money, you lead to run a business which is more agile and lean, in an efficient way.
  • Retain complete control and ownership: Having self funded your venture, you have the complete control over your business and it’s profit.
  • Window of experimentation: You can experiment with your business without any pressure of investors and could execute your ideas in a free environment.

 

CONS

  • Risk: It is riskier in terms of financial losses as in a bootstrapped startup, revenues are required to keep the business afloat, in case the company incur any loss, the startup may decline soon.
  • Lack of Credibility: In long run, when you decide to approach any investor or capitalist for funds, because of no outside investor in your company, it could hurt your company’s credibility as it’d seem no investor was ready to invest in your venture.
  • Low money: Due to less budget, the company limits itself in terms of its growth and is unable to expand and develop.
  • Bankruptcy: That money is yours (Your own or borrowed). That money is sacred to you. It gives you freedom to work in your own way but if your business runs into a loss, there is a huge chance of you getting bankrupt.

 

These are a few tips, pros and cons if you wish to bootstrap your startup and not approach any Angel investors or VCs. A mentor is still important for you to help you find your way. Find the right mentor, with www.mentorally.com. Register with us for more.

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