As India celebrates its 71st Independence day today, it’s time to think about our glorious history as a nation and cherish our freedom. Merriam Webster defines “Freedom” as “the absence of necessity, coercion, or constraint in choice or action.” But how many of us are able to truly exercise this right? It was Napoleon Bonaparte who said, “Nothing is more difficult, and therefore more precious than to be able to decide.” For an entrepreneur, this decision could be whether to raise external funding or stay bootstrapped, to expand to new geographies or focus on a niche market, to hire zealously or conservatively, or to merge or to not.
“It is in your moments of decision that your destiny is shaped” – Tony Robbins
Maybe it is this very right – the right to decide, that Snapdeal exercised last month when it decided to walk out of a merger with Flipkart despite the best efforts of SoftBank. The consequences of this decision, however, are yet to fully unravel and only time will tell the implications of this bold decision.
It’s in the very pursuit of freedom, that entrepreneurs make the gutsy decision of quitting cushy jobs to pursue independence by starting up! Many of these entrepreneurs, despite the hype around raising external funding, choose to exercise and safeguard their interests, by bootstrapping their companies and refusing any kind of external funding!
Starting up is not a cake walk and the pursuit of such independence comes with its own perks as well as costs. As India celebrates its 71st Independence Day this month, Inc42 spoke to some of the champions for bootstrapping in the Indian startup ecosystem to understand what freedom from VC money has meant for them in their journey.
“The Objective Was Not To Get That Exit Tomorrow”
Perhaps it won’t be wrong to call Zoho, the poster-boy of bootstrapping in India. The global enterprise software company with annual revenues of more than $300 Mn has been built up to where it is today, brick by brick, without ever raising a penny in VC funding. Not only has Zoho transformed Chennai into a SaaS hub and inspired numerous entrepreneurs to walk down the same path, it has also been running profitably for every single year since it started 21 years ago.
In a recent AMA with Inc42, Zoho’s founder, Sridhar Vembu, replied candidly to a viewer’s question, “whether, at any point, did he feel that PE/VC funding would have helped him growth hack early on in his journey.”
To this, Sridhar, said, “It’s hypothetical, it’s hard to say but I never wanted to growth hack that way. The objective was not how to grow the fastest or the most. The objective was how to first put food on the table, be sustainable, and take it as a journey. It was not like tomorrow we had to get that exit. That never was the motivation.”
For startups who are at a crossroads, trying to decide between raising VC money or bootstrapping, Sridhar’s advice is to not overthink it. He explains, “Go outside your home and see the coconut vendor or the chai waala. They are bootstrapped. So, if you don’t overthink it, you realise that the chai waala is in business, maybe I can be in business too without outside money. Then you don’t worry too much about it. I used to look at them for inspiration; I still do, it’s important to not overthink these things.”
No wonder, for Sridhar, the freedom from VC money has enabled him to not run after an exit strategy but focus on the growth strategy. And Zoho’s 21-year successful run and years of profitability is the proof.
“Do You have Independence To Pursue Your Mission?”
Interestingly, one of the few SaaS startups Sridhar admires besides Zoho is Pune-based Wingify. Coincidentally another bootstrapped startup!
Wingify was founded by Paras Chopra in 2010 and its flagship product, Visual Website Optimizer (VWO), is used by more than 4,300 brands across 87 countries to analyse website activity and increase their conversions. VWO has been such a hit with the international audience that 99% of its customer base is outside India.
For Paras, the question of bootstrapping versus VC funding is of lesser importance than compared to the question of whether you have the independence to pursue your mission. And for mission-driven Wingify, the choice was clear from the very beginning.
Says Paras, “Wingify is a mission-driven startup. We want to be the most admired, tech company to come out of India. And the pursuit of this mission can take decades. This is why independence to us is very important. We do not want to be in a situation of seeking an “exit” for the company when we don’t want to.”
Thus, Wingify has chosen to remain independent of VCs in order to focus on its mission.
“Bootstrapping Has Helped Us Value Only One Source Of Money – Customers.”
The Dude on the right is the official FusionCharts mascot. His birth was a hat tip to our (FusionCharts) developers who tirelessly hack away at creating awesomeness.
For Pallav, being bootstrapped has enabled him to value only one source of money i.e. customers. And that’s also what has kept him focussed.
He says, “This resulted in our DNA to be always thinking about customers’ problems, and building products that add real value to them. Yes, we did fail with a bunch of products, but we kept on learning and improving. Also, I think doing crazy experiments (some of which work, some don’t) become a little easier, as the only people we need to convince is our members.”
For a startup that counts some of the most creative companies like Google, LinkedIn, Apple, not to mention an ex-US President as its customers, bootstrapping has only made its path from crazy to creative easier.
“Don’t Know If Staying Nimble Would Have Been Possible With Multiple Investors On Board.”
Just like Nadhani, Nithin Kamath, founder of the online discount broking firm, Zerodha, started out on his prodigal path to success in his teens. Kamath started investing in the stock market when he was just 17 years old. He learnt the ins-and-outs of stock trading and investing with hard-earned experience, learning the ropes on his own and even went bust at one point of time.
In 2010, he founded Zerodha with a focus on two major points – cost and transparency. This bootstrapped startup has grown from 10K users in the first three years to 3.8 Lakh users today, with the aim of making online trading cheap and transparent for all.
Nithin, in an earlier interaction with Inc42. had stated, “I could have raised external funds but this whole obligation of picking up their phone calls at any time of the day and being answerable is something that I did not want to go through.”
Today, he feels that not having VCs has helped in a bunch of ways and one of them was staying nimble. “Staying nimble has helped us grow. I don’t know if it would have been possible with multiple investors on board.”
“Freedom From VC Means Work Where You Want.”
This startup was bankrupted twice, yet it boasts of over 110K clients worldwide today. The online scheduling software firm, Appointy, is the perfect example of why startups should never say never. This bootstrapped startup from the streets of Bhopal now serves over 100K customers spread across 110 countries with less than 1% of its customer base hailing from India. Why so you ask? Because it only focusses on customers who know the importance of scheduling.
Appointy, which is responsible for over $450 Mn+ of commerce every year for its clients, has come a long way from its humble beginnings in 2001. This year, it achieved another feat after being chosen by Google as one of its initial launch partners for Reserve with Google, a feature targeted for scheduling appointments from within Google Search itself.
For founder Singh, doing all this and yet steering clear of VC money has brought with it the freedom to “work where you want.”
Nemesh explains, “I always believe that every company is unique and every successful company has done something different. VCs want fast, measurable growth, which is only possible in a region where the ecosystem is developed to support fast growth. These kinds of ecosystems have their own cons, which are subsidised by VC money.”
Appointy tried to raise VC funds, but the first thing they were asked of was to relocate. Nemesh chose to follow a different route – staying in a Tier II city and building an ecosystem with a state-of-the-art office to attract and nurture talent.
For Appointy, this very freedom gave them phenomenal results. “Our Tier II economics has become our biggest strength. We can sell a better product at half the price and still make more than 50% profit over any other company out there.”
Appointy has the independence to hire local talent and cut personnel costs to almost half of what it is standard in a Tier I city.
And the cherry on the top,“We can buy BMWs and Mercs and enjoy them with almost zero traffic on the road (the average commute time to office is less than 10 minutes) in a peaceful environment!” says Nemesh.
It’s no wonder that Nemesh and his team are loving this freedom from their state-of-the-art office in Bhopal.
“You Can Experiment With Some Very Long-Term Solutions To Problems.”
SaaS-based job applicant tracking system, Recruiterbox, acquired its first customer in 2011. Today it has grown to 2,400 paying customers without ever raising VC money. In fact the majority of its clients are outside India – about 70% in the US, another 20% in Europe and English speaking countries such as Canada and Australia, and 10% in the rest of the world, including Latin America, Asia, and India.
As of today, its ARR has risen steadily to grow to about $5 Mn. Along the way, the 51-member firm (35 people in Bengaluru and 16 people in US) has managed to grab noteworthy names like Couchsurfing, Olark, Wolfram and Lonely Planet as customers.
For Raj Sheth, one of the three co-founders, the decision to stay bootstrapped and not having external board members and investors has its own pros and cons.
He says, “You can experiment with some very long-term solutions to problems that every other company has just pondered over. Instead of short-term fixes to meet closer revenue goals, you can fail a couple of times to see what would work.”
For Recruiterbox, this independence has allowed it to focus on solving bigger problems in hiring.
Secondly, he believes that one can remain independent and be in control of the company’s financial outcomes as one won’t be under pressure to sell the company or take more money at a constant rate.
But there are cons too. Independent founders, many times, become complacent or give up once they hit a plateau since they don’t have external help to scale the company (or the experience).
“External board members (not restricted to just investors) ensure a voice of reason and push the founders to deliver at a growing rate,” he adds.
His take – be careful how you celebrate freedom, it comes with a lot of responsibility!
Indeed, as the nation embarks on its 71st year of independence, upcoming startups have a choice to make, to stay independent of VC money or to go with it. Either way, bootstrapped or funded, startups should always safeguard their freedom to act on their dreams, to experiment and to do the unthinkable once in awhile. Freedom from ordinariness, freedom to be awesome and to go after what you want is probably the best kind of freedom!