Entrepreneurs often have to decide whether to look for external funding or go the bootstrap route. Many entrepreneurs end up seeking funding to ensure that they have enough resources and minimize risks.
They believe this will help them gain traction and grow fast. This is why funding stories are a common phenomenon in India’s startup community.
There are many companies, including Wingify, GrabOn and Zoho, that have proven that bootstrapping works. Zoho is a profitable unicorn. Zoho’s revenues from operations increased by 29 percent to INR 4,274.7 million during FY20, compared with INR 3,308 in FY19.
“It helps that our company is private and bootstrapped. We believe we make enough money and don’t have to compromise ourselves to make more. Wall Street would crucify any CEO who doesn’t at least profess to aim for endless growth, which is why we politely stay away,” said Sridhar Vembu, CEO, Zoho Corp, in a tweet.
This is the foremost Benefits of bootstrapping. The moment you take outside money, you also bring with it the pressure to satisfy the needs of others.
You are answerable to many, so the pressure to achieve quick success is high. You will also have more freedom in decision-making. For instance, you can hire the talent that you feel will match the vision of the company.
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You are diluting your equity share as you raise funding rounds. If you’re bootstrapping, and you’re the sole founder of your company, then you will own 100% of it. You will still have equity, even if there are co-founders. The whole thing can be yours and yours.
When they begin their business, entrepreneurs often have a clear vision. Each person brings their own opinions, which can lead to a departure from the goals and plans entrepreneurs had in mind.
It is common to say that after a company goes public the long-term vision of the company is forgotten and instead quarterly numbers are the goal. The long-term vision often gets lost and investors are drawn to vanity metrics.
Bootstrapped businesses can only survive if they have positive cash flow and profit. This may explain why many bootstrapped businesses fail.
They run out of cash. To survive as a self-sufficient company, you must create a business model that is positive and can generate positivity immediately. Even though it may take time, the right products and services can bring success.
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Sometimes founders will say they don’t have the time to spend with their team because they are too busy attending investor meetings. Bootstrapping doesn’t mean you have to spend too much time fundraising. It’s also not necessary to spend too much time meeting with investors and explaining your growth.
The loans or self-finance of bootstrapped businesses are borrowed from family and friends. These loans are often very small. These loans are often returned quickly.
There are very few chances that you will end up with a large amount of debt. “Having a lot of debt can distract from your business. Angel investors and VCs may want to take a piece of you. Bank loans can also cause you to have too much debt.
You won’t spend your money on unnecessary things if you have limited resources. This results in better long-term spending habits. Bootstrap founders often put off additional expenses until they are profitable.
You have fewer distractions when you are bootstrapping. Bootstrap entrepreneurs spend more time creating value for customers than on fundraising.
Instead of spending time awaiting approvals, they can concentrate on improving their products and services. They test products and make course corrections when necessary. This results in consistent, sustainable growth.
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The growth process can be slow when you are a bootstrapper. The journey is comparatively less stressful because you have more freedom. You don’t need to listen to others and have full control of the business. People who share your vision can be hired.
Even if you don’t achieve your goal immediately, if your business model is sound, it will be more steady and peaceful.
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