2016 was perhaps one of the worst years for Indian startups. A storm hit the startup ecosystem which sent over 200 startups out of business, with even few of the nation’s best like AskMe, TinyOwl and Peppertap, failing to survive.
The number of startups failing on a yearly basis have been increasing. This consequently leads to funding going low. Obviously, no one wants to invests in a sinking ship! The year saw startup funding going down by 50%.
Now that is a red flag!!
Funding aren’t the only things drying up. Even hedge funds have disappeared. There have been almost 10 deals involving hedge funds in the first three quarters of 2016. On the other hand almost 50 deals in the same period last year. These numbers were suggested in a study by tech industry think tank iSPIRT and advisory firm Signal Hill.
This brings forward the huge chink in the startup culture. The inevitable dependency on funding. No matter how revolutionary an idea is, without funding, it won’t make it into the market. The obvious way out of this dilemma of cashlessness is Bootstrapping!
As per definition bootstrap startup is one with minimal financial resources. Did you know, that some of the most successful startups were bootstraps? The likes of Github, Gawker, Dell, Hewlett-Packard, Apple, Microsoft, TechCrunch and Craigslist all were started under $1000. Today, these companies reap billions of dollars.
It basically focuses on profitability and financial discipline. A lot of control on the money is there, in bootstarp operations.
Couple of reasons why bootstrapping is the right way to go.
Create A Culture Of Frugality…
About 90% of Indian startups failed in 2016. Of those, 29% failed because they ran out of cash. So how does bootstraping help here? To begin with, it focuses on creating a culture of financial control. This control is implemented from Day 1. And a bootstrap culture is what it takes to make the operations lean. For the current startup scenario, bootstrapping is very necessary.
Control is necessary. With multiple investors, there is always going to be a lot of opinion, a lot of chaos regarding decision making. This leads to a lot of time consumption. But with bootstrapping, there is a lot of confidence when it comes to taking decision regarding funding or resources.
And because of constant focus on money, there is constant focus on the source of the money also….the customers. Investors and founders might focus on quick returns and publicity from a startup. But bootstrapping will make sure that your ficus remains on the customer. In the initial years it is advised to work on getting credibility from the customers.
Concluding the piece, a successful entrepreneur always has a clear vision of what they want from the company. This gives them direction. But bootstrapping as a concept, allows one to take decisions in the well being of the firm only. In an era when startups are facing funding problems nationwide, maybe it is a good idea to go back and take lessons from the big shots who have used this approach, of bootstrapping, and achieved startup success!