Some of you may have followed a recent discussion on my blog, 18,000 People On The Bench At Infosys.
I have to say, I am continuously frustrated by aspiring entrepreneurs telling me that they cannot move forward because seed funding is not available in India. My message has always been, bootstrap the beginning, and then you can raise funding after your business thesis has been validated. That way, you preserve equity, and have the option also to not raise money at all. In my book, Bootstrapping: Doing More With Less, which comes out in India in September, I have discussed this topic at length. Even in Entrepreneur Journeys (Volume One), I opened the book addressing the issue of bootstrapping. This book has been available in India for a few months now.
Indian entrepreneurs, you must learn to bootstrap. Here’re some short video interview clips that Dwevesh Divedi of Breaking the 9 to 5 Jail produced where I have discussed the topic further. If you have a 9-5 job, you are in a perfect position to bootstrap a venture on the side. Hundreds and thousands of aspiring Indian entrepreneurs in corporate jobs: your seed capital is coming to you in form of a pay check. Use it, my friends.
- Why Bootstrapping is Important - August 8, 2019
- Bootstrap to Exit - March 12, 2019
- 100th 1M/1M Roundtable: Dedicated To Steve Jobs, Reinforcing Mission To Restructure Capitalism - October 7, 2011
Karthik, I presume based on some collaterals? SBI would be quite happy to hear that – having some meetings with their board recently to figure out a way to enlarge the number of loans they make to SMEs and they admit they’ve been quite strict so far.
I personally think entrepreneurship is a full time job (if not four-five jobs combined), not a part time hobby. You are either in it or you are not. Just get into it and enjoy the ride!
@Vijay: Most of entrepreneurship in India up till now has been community driven. These communities have worked out models of financing within themselves, which work fairly well. Thats the equity part. Banks do provide capital to SMEs. In fact looking at the number of entrepreneurs they would have backed, SBI would be the largest VC in India!
Iqbal,
I dont think anyone would opt to bootstrap, but given a scenario where investors follow herd mentalities, Banks are yet not open to give loans to early stage companies, Bootstrapping is an option that you need to keep in mind and be prepared. The mindset would help you even if you do get funded.
Unfortunately the deal is you never know if money really increased the chances of success or totally killed it (case study of the last 450+ startups funded in India in the seven year time period, out of which only 7 have made exits). Those numbers dont make it easier either.
When an entrepreneur is as inexperienced as you say “Picking up that infosys guy, giving him a laptop and asking him to run from there’, you have to be careful making statements like that. There are people going to investors and saying “I am experimenting entrepreneurship”. VC Funds are not college scholarships to learn what you would in an MBA school, especially in someone else’s money. If you dont know those basic principles, better go learn.
And milestone based funding is a bad idea. a really really bad one. The targets and in some cases even markets of early stage companies shift from one board meeting to another. You really dont want to make that your target to achieve.
And think about it. Less than 16% of the Fortune 500 companies raised institutional funding. Makes me wonder how they all managed. In my books, being resourceful is the first quality of an entrepreneur. If you cant manage to gather some funds to chase your dream, you fail on that, and quite miserably.
There are some very smart companies, which have done some consultancy on the side, used that time to also train and build their team, and used that cash to pull them through the development phase – that’s a team i’ll back anyday, rather than those sitting on the fence and asking for money, without anything to show for.
PS: I presume you are talking about the 18,000 companies that get angel funded in the US. Lets move to local statistics. We have 32 million SMEs in the country. They surely didnt get institutional funding. Then seriously, what gives, to all this “new age entrepreneurs”?
Not all startups can be boot-strapped. Boot-strapping also harms a startup, you have a lifetime in a startup, and its limited, during that time you need to achieve a lot, its not just product development. This for a un-experienced entrepreneur is difficult.
Try seeing how long it takes a techie sitting on the bench at infosys to learn
a) Write a business plan, what is cashflow, how does that differ from P & L
b) Work out a GTM plan, define you channel, work out a sales model
c) Sort out your HR, hire someone, make sure there contracts of employment fit into employment law
d) Define the product, get a UI guy to design it
e) Go and meet with customers
f) Get their feedback
g) Go home cook, feed yourself, get up again, and learn a new language
h) Beg steal and borrow advice from people….first find the right people
i) Try to find a co-founder if you can
In fact don’t ask the guys at infosys, knock on the door of your local accounts dept, hr dept, or any other department where they are sitting, do not even ask them to come up with an idea, give them a laptop, and ask them to launch it into the market, without a dime….its not easy.
This is not too say you cannot bootstrap, but I think it is an overused word, and everyone jumps on the bandwagon. Boot-strapping has possibly killed alot of ingenious ideas which may have made a difference. Instead of boot-strapping why not just monitor what the startup spends the money on, why not just allow them to draw down based on milestones. Its not the money they want, its the security and the flexibility the money gives them that is needed.
If money can increase the rate of success, do not boot-strap, whether it can or not, is a call for both the investor and the investee.
Iqbal
P.S I am sure those 18000 people do not have a circle of Friends and Family who are capable of funding them 50 lakhs either. Google founders did, facebook guys did, and twitter did, so what actually is bootstrapping, is it no money, or money from non-professional investors……
In India Bootstrapping is the best option. Entrepreneurs who give reasons like lack of seed-funding for not starting up something are just looking for excuses. It will take time for a startup community to develop where funding early stage startups is possible. But that will start happening only when current set of startups achieve something substantial.