Bootstrapping? Some Survival Tips (from another bootstrapper)

In my earlier column, I shared the pros and cons of bootstrapping. After all, it’s a decision that you stick by for a pretty good amount of time.

The boots and the straps!
The boots and the straps!

Bootstrapping isn’t about one’s inability to raise funds – it’s a choice you make. To play the game you want to, by not depending on investor money – but on customer money. That is, you can’t afford to have fancy metrics for customers. But, products your customer wants to buy from you.

Assuming you ar a happy bootstrapper, here are some survival and growth tips for you (fyi: I have been bootstrapping for the last 6 years. We said NO to several investors, primarily because we wanted to be in the control of our journey).

Wants vs Needs

When you are funded, you can afford to spend money on things you don’t need – fancy office, furnitures, stationary etc etc.

When you are bootstrapped, focus on things you need. Wants come later – you can always have fancy office, furnitures, stationary etc etc at a very posh location – but it’s time to focus on building products and solutions that matter to your customer.

So hold on to your wants and focus on needs. Having said that, don’t be stingy. Spend where it is important – but do ensure that you aren’t trying to be somebody else.

Don’t read too much of funding news

You aren’t chasing the funding beast – so don’t read a lot of funding news. It might just make you a bit more insane.

Better – read up about your industry and be in the know of important trends, customer movements and activities.

Remember: you aren’t in the cool zone. You need to build and sell. You can’t afford to take your eyes off the revenue target.

Involve your team. Be transparent.

While you are comfortable with your bootstrapping status, your team will be impressed by the glitz that funding brings. Fancy office, furnitures and salaries too.

As a founder, it’s your responsibility to ensure that the team knows why the company has chosen to take the bootstrapping route and not raise funding.

The impressionable minds might just think that the company failed to raise funding – so be transparent about the internal goals, the roadmap and spend time with your team

Celebrate small wins

As a company, you will have your own share of hits and misses. More misses than hits (let’s be practical).

Celebrate wins with your team – no matter how small they are. Again, you don’t need to go to a pub for each and every small win. Learn to be frugal (have ice creams) but ensure that you celebrate each win – big or small (they all count).

This keeps the momentum going and keeps the team motivated.

Remember: bootstrappers need to take the entire team together and make them believe in the bigger cause. Unlike your funded counterparts, you have lesser ammunition – but it’s not the size of dog in the fight, but the size of fight in the dog that matters.

Make it count!

Bootstrapping Mistakes That Entrepreneurs Often Commit

Close to 50% of startups shut down within the first three months. Apart from scaling up the idea, managing finance /capital is really important for founders to know.

Here are some of the mistakes bootstrapping entrepreneurs often commit.

Not taking care of finance

This is an extremely important habit for any entrepreneur to build – i.e. taking care of one’s finance and always be in the know of runway one has.

No matter what your funding status is, you need to pay your bills, employee salaries, infrastructure costs (for e.g. website hosting) etc. You do know how much money you need to shell out every month – it’s really important to have a sense of working capital and the runway you have.

Finance management is a discipline – you let it go and there will be some really bad surprises on your way!

Not taking salary

In the first 4 years of my bootstrapping life, I wasn’t withdrawing any salary. While it looks good to the world outside, the reality is that I was in a very tight spot.

My logic was that I need to spend the profits/revenues back in the company, but when you woke up a day to realise that you just don’t have enough money to survive, you can’t think of running a healthy business.

The easiest corollary to this is when the air hostess tells you that when there is a low air pressure (i.e. tough condition), you need to wear the oxygen mask first and then take care of others (for example, kids). Because if you can’t take care of yourself, how can you take care of others (including your company)?

More than that, one needs to respect one’s time and efforts and while you don’t need to take market salary, you should withdraw enough to live a healthy lifestyle (assuming you/the business can afford it).

Make sure that you have a sustainable lifestyle and your family is comfortable with your entrepreneurial avatar.

Overspending Due to Peer Pressure

As a bootstrapper, you need to realise that you can’t take off your eyes from the target. While your funded competitors are spending on fancy office spaces, furniture, games and infrastructure, you need to be smarter with your money.

You may not be able to spend on fancy things, but ensure that you are spending smartly on employees and make your office a great place to work/spend time.

Be assured that sometimes your team/employees will ask you whether you are a miser when it comes to spending money (because your competitors are spending a lot), so always ensure that you align them the company vision.

Rethink Bootstrapping When the Timing is Right?

After a certain point in time, you might need more capital to scale the company. Don’t shy away from raising funds – just because you have been bootstrapping too long.

Happy scaling up!

Bootstrapping? Hot or Not? Some Perspective

Given that startups are often measued 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*.

The boots and the straps!
The boots and the straps!

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.

Freedom.
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.

Credibility
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.

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 (and an innovative term called GMV). 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 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 underpricing to win your customers).

Whatever it is, keep walking and keep selling.

Happy Bootstrapping!

Bootstrapping ? Some tips on surviving

Bootstrapping isn’t about one’s inability to raise funds – it’s a choice you make. To play the game you want to, by not depending on investor money – but on customer money.

That is, you can’t afford to have fancy metrics for customers. But, you just want to focus on building products your customer wants to buy from you.

bootstrapped

Assuming you are a happy bootstrapper, here are some survival and growth tips for you (fyi : I have been bootstrapping for the last 6 years. We said NO to several investors, primarily because we wanted to be in the control of our journey).

Wants vs Needs

When you are funded, you can afford to spend money on things you don’t need – fancy office, furnitures, stationary etc etc.

When you are bootstrapped, focus on things you need. Wants come later – you can always have fancy office, furnitures, stationary etc etc at a very posh location – but it’s time to focus on building products and solutions that matter to your customer.

So hold on to your wants and focus on needs. Having said that, don’t be stingy. Spend where it is important – but do ensure that you aren’t trying to be somebody else.

Don’t read too much of funding news.

You aren’t chasing the funding beast – so don’t read a lot of funding news. It might just make you a bit more insane.

Better – read up about your industry and be in the know of important trends, customer movements and activities.

Remember : you aren’t in the cool zone. You need to build and sell. You can’t afford to take your eyes off the revenue target.

Involve your team. Be transparent.

While you are comfortable with your bootstrapping status, your team will be impressed by the glitz that funding brings. Fancy office, furnitures and salaries too.

As a founder, it’s your responsibility to ensure that the team knows why the company has chosen to take the bootstrapping route and not raise funding.

The impressionable minds might just think that the company failed to raise funding – so be transparent about the internal goals, the roadmap and spend time with your team

Celebrate small wins

As a company, you will have your own share of hits and misses. More misses than hits (let’s be practical).

Celebrate wins  with your team – no matter how small they are. Again, you don’t need to go to a pub for each and every small win. Learn to be frugal (have ice creams) but ensure that you celebrate each win – big or small (they all count).

This keeps the momentum going and keeps the team motivated.

Remember : bootstrappers need to take the entire team together and make them believe in the bigger cause. Unlike your funded counterparts, you have lesser ammunition – but it’s not the size of dog in the fight, but the size of fight in the dog that matters.

Make it count!

Bootstrapping My Way Amongst Fund raising Unicorns !

I am an Entrepreneur & started Nurturing Green in 2010 when a friend of mine Gifted me a Zodiac Plant in Austria & I thought of how kool it will be to create a business model in India where Gifting is an inherent behaviour & flowers category is seeing de-growth across the world. Shifted back to India in 2009 where I saw myself juggling to start my journey without Parent’s money & no savings at all. Somehow, with the help of friends, family & fools, I was able to crawl the first few milestones of my startup journey. We raised a small Angel round in 2011 beyond which we bootstrapped & grew through customer money ever after.

Today, after 6 years we are a 100+ organisation bootstrapping to become India’s biggest Gifting Company along with helping our customers create Green Spaces Indoor through Live Plants & related products , bringing Fresh Air inside & even creating world class Landscaping for cities/govts . Along with Presence in 11 cities & being omnichannel , we are also showcased in Harvard Business Review twice & have won many national awards including ET-Power of Ideas .And yes we are healthy EBIDTA Positive & growing Y-O-Y at 3 digits . Such long eventful entrepreneurial journey has taught us few lessons which I would like to share :

  1. GMV etc etc is crap, Unit Economics is the only nirvana : Post Flipkart era, i.e, 2011–12 it was all about GMV. You give out Investor’s money into exorbitant Salaries & crazy Discounts thinking customer behaviour will change which might reverse back after removing extra non sustainable incentives. While we went out to raise money too to expand in 2012–13, we have been tagged as ‘Lifestyle’ business & non sexy to be touched by prolific investors as they couldn’t have cash out easily (Well they didn’t in Ecom case too yet ! ).Today when I look back, I am thankful to all the rejections (more than 30+ BTW :( ) as they made us learn the basic principles of business . How to make world class products & how to drive higher growth rates with minimal costs.
  2. Topline is sexy to have, Bottomline is Sexier & Cash Flow Positive is Orgasm : I have learnt this after 5 years of my journey. I always thought of increasing topline by burning cash & thinking I will be able to bring the bottomline to required nos & cash flow + post burn. I was wrong !!!! & I learnt it early.We made this a basic pillar of every expansion we did in terms of hiring to geographic growth to increasing more retail presence. Today more than 80+% retail points make money & 20% will do in next 6 months max or we close it.
  3. Understanding why you need Money : In 2013–15, it was fancy to say to people that we raised $ X million or become a me too brand & raise easy money w/o a correct business model. Things have taken a U-turn & again in 2016 , investors are talking about Unit Economics or why you need money for—Expansion or burning into discounts etc ?No real business can work w/o knowing these basic sustainable practices or a foreseeable sustainable business maths . One should know if he/she needs money to grow & is the unit maths making business sense before raising money.
  4. Customer Money is the best Money : Ohh we have been so blessed to bootstrapped this whole time. Last 4 yrs have been really tough & we were always tempted to raise money through equity (Not that we were getting it in 2013–14 !!!! ) . But somehow we managed to gain more traction, get repeat customers , make real net money & BOOM ! Our cash flow today is positive.Even as base has increased, we are budgeting to reach 2–2.5X growth coming fiscal without external equity money . Thanks to the future inflows we can predict from our lovely customers !

Image

  1. Adversity makes you Innovate : Pre 2011 was a very tough phase in my life. I had to live for a year in my Girlfriends apartment to save living costs. I begged for even 10,000/- for many months from my siblings to give our only gardener salary. But that made me a stronger person & made me learn how to live & survive in bare minimum costs. In 2013–14 when we were not able to raise money & our growth couldn’t be survived with the cash flows coming in, hence we had some real BAD days.I cried, I failed, I gave up & re-started, Again next day failed & again started , Finally I survived !
    Image 2annu-groverBut in this phase, I learnt to innovate in everything we did ! Right from saving costs (We worked from an Apartment with 8k rental only to getting 2nd furniture for office ) to making better Retail deals. Now innovation has got into our blood & as we expand is getting into our culture.

[About The Author: Annu Grover: #Entrepreneur #GreenEvangelist #Storyteller #Founder #StartupGuy #NurturingGreen.]

Why is NOW The Right Time To Stop Calling Your Bootstrapped Startup A #Startup !

Many entrepreneurs have been zoning in the startup landscape, but only in a literal sense. While they might have moved past that territory, it’s difficult even for the founder to assess if to be called a company or not yet.

According to the GEM global report, more than 100 million businesses launch annually. As we know it, more than 90% of those fail. And of those that stay, let’s accept that not all of them can be startups perpetually. The longer their lifespan, the higher their chance of survival in the market. So if I were to gratifyingly summarize this into a stanza, this is what it’d say-

Startup startup everywhere, most of them do sink,

Startup startup everywhere, but few do make it to the ring..

The following list might be helpful to assess how far you’ve traveled through the startup land and when is the time to dust its shavings off .

The reason? Because you need to come out of the startup zone; which at times becomes a comfort zone if you’ve done it for a long time. Because you can’t continue to solve the same set of problems if you desire to march your way into the growth factory. And because you need to emerge as a company with a credible brand in the market.

So here we go-

1. You’re thinking profit as opposed to product market fit– you are no more in survival mode. You’ve attested Charles’ theory of being fit enough to join the race. You keep a close eye on your profit numbers and not just your revenue. Running your growth engine at full speed is your utmost priority so you are even willing to feed in all the profit back onto the belt.

2. You’re on a constant mission to improve operations– Researching the right tools is your new-found interest. You’d go to any damn roundtable session just to see what tools other players, who are peeping from the heights, have used to scale. You’re on a constant mission to automate all those recurring tasks that take a lot of your team’s effort and time.

3. Hiring becomes a continuous process– There were times when a need to add another person to the team was felt just because there was too much on the table for yourself. Then you were hiring to complement skills. But now you hire because you need to maintain a constant pool of good candidates who could help your growing team in any which way.

But obvious, you have started following processes that come with it (read performance reviews, leave policies, office timings), which you might occasionally dislike.

4. You have separated out functions- There were times when you and your initial team wore multiple hats; you were the Devops guy as well as the office boy. But now you have separate departments with dedicated members. Marketing and sales are now different functions, practically enough to sell directly and indirectly.

This helps your team members keep focused and of late you’ve validated the productivity and efficiency in overall outputs.

5. You prepare budgets and roadmaps- You swear by quant-based marketing/sales/ops. You plan all your activities (by far) and track everything against the metrics positioned. The “n”x growth target tags along wherever you go and you have all the forecasting in place.

Guess what, now you also prepare budgets for marketing, sales and HR on the additional things to invest in, apart from the fixed costs.

6. You no longer know the names of your clients- Who doesn’t remember their initial customers? Some of us can say their names even in our sleeps. But as you start growing out of the startup phase, it gets practically impossible to remember their names.

As you grow further, you’ll find them only in numbers and targets, completely oblivious to their names. That’s when things start to get emotional, when the past presents itself in a colorful backdrop. But you hold on to the courage and sheepishly feel happy for the fact too.

7. You spend most of your time “on” your business- Mitchell Harper had written a great article on Pulse called Good CEO’s aren’t busy. He quotes Jack Dorsey on how good CEO’s are editors and not writers.

Once you’ve moved past the fluxes, most of your time goes in strategizing and overseeing operations vs doing things yourself. You’ve got most of the things covered and no task is solely dependent on you. Things are taken care of while you’re away for a vacation and you then know your startup has become quite independent of you.

How many of the above could you check off? At PromptCloud, we’ve successfully checked off all. I’ve seen people measure startup stages in terms of their annual recurring revenues (ARR) or/and the number of rounds of funding they’ve managed. This theory is frustrating as it’s inherently flawed. You might be making billions in ARR on paper and would have put up a team of 1000, but who knows how much of the world’s cash you’ve burnt already and what your losses are?

A friend from the startup fraternity once said that as long as the problems you have while on your entrepreneurial journey keep changing, you are on the right track. So if your problems have changed enough, time to be called a company. Alright, you can still call yourself “a startup at heart” okay?

[Guest article by Arpan Jha from Promptcloud team.]

[NextBigWhat invites insights from our audience. Do connect : editorial@nextbigwhat.com.]

Of Bootstrap Mentality & Red Pills : Key Ingredient for Startup Success

Bootstrap was term coined from the computer lingo ‘booting’ which means starting a computer or starting a chain of processes which eventually starts up the operating system.  In the startup world, bootstrapping essentially means funding your own venture and not being too dependent on external sources.

Bootstrapping a startup
Bootstrapping a startup

Let’s face it, to have a bootstrapped startup you need grit and total faith and conviction in your product, something a lot of new startup’s find it difficult to conjure. While most startups believe that only funding guarantees success, we beg to differ. Bootstrap mentality is critical for a startup to succeed, irrespective of whether it has raised funds or not. Bootstrap mentality keeps the organization focused on being frugal, innovative and agile. Here are some suggestions on how to maintain a bootstrap mentality while running your organization:

Hiring: Hiring is the key element in any startup and every success story is as good as its team. They say that to make an effective presentation, ask the question ‘Why?’ / ‘So What’ to each slide and if you get a convincing answer, then you are doing good. Ask the same question while hiring someone and if the answer is in lieu with your vision and larger good of the company in a prudent manner, then that’s a good hire.

Going on a hiring spree on receiving funding will ensure that you burn before you earn. Last but not the least, if you come across a ‘proven team’, then that’s just a rabbit out of a hat and you can believe us blindly. Proven teams are highly overrated and irrespective of who says what, they may not be right fit for a bootstrapped company. A young team which proves itself is where you should bet your money.

Spend Wisely: Put need first, want later.

Most startups on receiving funding go berserk with huge spends on office infrastructure, hiring, system upgrades, software’s and all kinds of fancy things. Some even spend on creating apps and elaborate marketing campaigns. This is the sure shot way of burn out before you start making any money. So, question all expenses and never incur it unless you have found out a way to balance it with the money you make. Remember that it is better to be a successful business than to be a popular sink-ship.

Another pro-tip – Keep everything short – small up-front capital requirement, short sales cycles, short payment terms and recurring revenue cycles.

Barters and Associations: Barters from age-old days have been pivotal to successful business deals and if you could compensate a cost with barter, then nothing beats it. It is a win-win situation where there is no physical money spent and a mutually benefitting association is formed. These could actually extend your customer base if you use it wisely. Use it abundantly and wherever possible.

Experiment: To be a bootstrapped company, put on your lab clothes, lab goggles, burn gloves and experiment. Don’t be afraid to think out of the box, try different things, get out of the herd mentality. You would burn your fingers, but a few tests and trials and you would shine.

Similarly, to the way, we at Vista Rooms went ahead and created our mobile app on Instagram, no need to worry about downloads, or upgrades or coding. We could do it because we experimented, so keep experimenting to see what works for you.

Stretch Your Team: They say that God invented e-commerce to sell directly and reap greater margins, use it well. Stretch your team to don different hats be it marketing, operations or sales. The marketing guy can always look at operations when required, or the sales team could help in marketing initiatives. The lesser the number of people between you and the customer the better. This would ensure your team size is optimal.

Product first, sales later: Most startups do the reverse of this.

The focus on sales and upscaling is so high that the product never gets a chance for betterment, till the time it becomes an absolute necessity. By then a competitor would have gained ground and whatever product enhancements you do may not save you. Focus on bettering the product and delighting the customer and rest assured your marketing budgets could reduce down. Genuine customers would always go for better products, no matter the cost. More marketing will not always bring you customers, there has to be a constant focus on understanding customer needs and action on feedback.

Funding is never guaranteed: Successful startup ventures follow this as a quote from the Bible. They would focus on being able to sustain without any funding and manage their overheads in a manner that they are able to manage with little or no funding. They have made up their minds that they will not need funding and work towards that goal. Most bootstrapped companies would worry on expanding business or bettering their product, instead of running behind wooing investors.

Red Pill or Blue Pill: Taking a leaflet from Apple’s ex-chief evangelist Guy Kawasaki’s blog, the Red pill or the Blue Pill dilemma sources from Neo’s quandary in the movie The Matrix, where he is given a choice to either accept reality or be in deep dream space. Bootstrappers take the red pill every day with pride and go deep into the rabbit hole to see how deep it goes.

We encourage you to have a bootstrap mentality, irrespective of whether you have raised a large amount of funding or not. Make your team focused on being frugal and innovative and take the red pill daily.


[About the author: Amit Damani, Co –Founder, Vista Rooms, when not having quintessential talks on anything entrepreneurial, runs one of the fastest growing online aggregator for budget hotels in India.]