What is bootstrapping?
Building a company from scratch with personal savings, earnings from the first sales and mere luck, without any external help or funding is known as Bootstrapping. It literally means ‘to pull oneself up by one’s own bootstraps’. Self-financing a business by using only existing resources needs a lot of support and patience. The concept is purely based on the fact that one’s time and money will drive business expansion and thus it can be both satisfying and stressful at the same time.
Why can bootstrapping be a successful model?
Bootstrapping a nascent company can be a romanticised idea. It can also work if you are enthusiastic and able to put in the hustle. It might be fruitful for those who can pull this off. There are various reasons why Bootstrapping can be a successful business model:
Full Ownership:
Bootstrapping gives an entrepreneur 100% ownership of their business. It is one of the best funding options that doesn’t dilute the ownership. When a business is bootstrapped, the founders are given the sole ownership rights and thus have the benefit of gaining 100% profit.
Having Full Directional Control:
As soon as external funding is involved, it brings in responsibility to satisfy other people’s interest. This sometimes constrains the entrepreneur’s vision. In the bootstrapping model, there’s no third party involvement which gives the entrepreneurs complete control over the steering wheels to take the company in their desired direction. This control allows the entrepreneur to establish a strong foundation and have sustainable growth.
Sense of Accomplishment:
If you wish to keep your company as a part of your heirloom and make it more of a multigenerational business, then bootstrapping is the right option for your business. It will give you that satisfaction of creating and owning something valuable.
Limited Debts:
By bootstrapping, it can slowly bring in revenue and can establish a safety net that will fund future investments in the business. As they’re never reliant on outside funding, therefore there’s no pressure of paying off the debts or taking loans for that matter if things don’t work out as planned.
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Bootstrapping has a lot of benefits and is an excellent funding approach to keep ownership in-house and limit the external debts.
5 companies who have become successful by bootstrapping
Bootstrapping is a part of many successful businesses’ stories. Around 80% of the small businesses and startups are self-funded. Bootstrapped startups are an ultimate source of inspiration, some of them are:
- Zerodha: India’s largest stockbroking app and one of the finest bootstrapped companies to join the unicorn club.
- Zoho: The cloud business giant bootstrapped and managed to generate revenues worth $10 million by 2000.
- Kaleyra: A cloud-based multi-channel communication platform helping enterprise operators, worldwide, to power their business communication. Having a client base including big names like Amazon, Ola, Flipkart, AirAsia, Zomato, it has crossed a revenue of Rs. 693.6 crore.
- Wingify: A platform known to develop world’s best tools for website optimization. Having revenues in millions the startup bagged some blue chip clients namely Microsoft and Walt Disney and Co.
- Grab-on: A trusted e-commerce platform offering coupons, gift cards, promo code and vouchers. The company proved its worth by gaining profits within 15 months of its inception.
How half of India’s software company is bootstrapped
Nearly half the software product companies in India today are bootstrapped. The reason behind this could be the mindset that bootstrapping allows founders to follow their vision. Staying away from equity funding is like staying away from debt and many startups are preferring this nowadays. It can be mentioned that bootstrapping is a necessity as well as personal choice for entrepreneurs.
Is it good or bad for company’s growth – Insights for startups
The bottom line is that every business is unique and follows a different path. Bootstrapping may work for one company but for another it might be impossible.
Looking into the startup ecosystem in today’s time, it can be said that bootstrapping still is an attractive option for startup entrepreneurs. It has a lot of benefits and is an excellent funding approach to keep ownership in-house and limit the external debts. But before taking a final call one should always weigh the pros and cons and do a thorough research on the market condition for their particular sector.
