My new Forbes column Bootstrap Yourself highlights Silicon Valley’s hottest new trend, Bootstrapping. Indian entrepreneurs, you need to embrace this trend, given that the early stage venture capital industry doesn’t quite have its act together yet.
Great bootstrapping case studies I have covered are Sridhar Vembu, Frank Levinson and Jerry Rawls, Cree Lawson, and Beatrice Tarka. Sridhar, Frank and Jerry did it almost without any outside money, while Cree and Beatrice have done it with very small rounds of Angel funding. Aspiring entrepreneurs, you have much to learn from them.
Also note, in Frank and Jerry’s case, they used services to bootstrap, while Sridhar used a lower profile, but successful product which became a cashcow.
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Nature of capital employed – founders’ personal wealth or from outside investor – I think is not just a question of availability, it’s more a question of suitability.
Projects that are capital intensive and founded by pedigreed founders will be better off with easily available VC money (and distributed risk); It’s not just smart, it frees up founders mindspace for strategic initiatives as they are competent in.
On (the myth) of VCs firing founders for big mistakes – why wait for VCs to do it? If founders make big mistakes, they must bow down and make way for efficient substitutes in the interest of salvaging their own investments. It’s just plain common sense if not prudence. Let’s not play scaremongers here.
Seed capital for a first time entrepreneur is scarce everywhere; not just for “you guys in Indiaâ€! It is because of an investor’s block, not necessarily founders’ ineligibility or unworthy idea.
BTW, which stock exchange is your company listed now? NYSE or Nasdaq?
My request, Sramana, is to not have 7 page articles of three paras each, when I have to click next, and then next, forget the context, come back, forget again, get really miffed and so on. The scroll bar and mouse wheel exist for a reason, and I am happy to use them. Even the New York times and Wall Street Journal have a single page version for their much longer articles.
Coming to the article. I think you have two options: Find grandiose VC for your plan (tough, unless you have blue blood) or bootstrap it. Most people bootstrap it.
The third option, of finding small amounts of risk capital of the order of 5-50 lakhs, has been non-existent. But it’s changing. Two friends have recently closed angel rounds with a cash flow statement and a couple meetings. They did bootstrap for a long time though, built it far enough to justify a cash infusion. Bootstrap, but bootstrap with a vision to grow and get cash in at the right points.
There are a gazillion unknown bootstrappers for every Microsoft, Starbucks, and McDonalds. These were all bootstrapped businesses which grew massively after capital infusions. Bootstrap is a good mantra; but fame and growth seem to come from public equity. For which, a private infusion is probably needed at some point.
I somehow agree with Jaspreet, But We are Copycats. We are good in generating ideas and bad in execution- converting ideas into results.
Bootstrapping is good concept but we need to innovate.
By the way, Jaspreet, if you make big mistakes on VC’s dimes, they fire you. So listen to what I am saying. If you took that 40 Lakhs from a VC and produced nothing in return, you would almost certainly, lose your job, your ownership in the company will get diluted, and you will run around bitter and angry.
Let me answer the qs. as I see them:
Sridhar Vembu, I believe, bootstrapped the cash cow product first.
That means, he chose a smaller idea that was also somewhat less risky, and built THAT into a cashcow business first. That’s most certainly bootstrapping.
The difference between a VC idea and a small idea is that VCs only fund businesses that can become relatively large. What I am pointing you to is that you can bootstrap a smaller business and make it into a cash cow, that can then fund bigger ideas. It’s a method. There are many ways to be successful, but since you guys in India don’t have as much access to early stage capital, all I am trying to point you to are options.
As for taking venture money, as I said, if the market opportunity is large and immediate, and you can get traction with VCs, go ahead and get funding. That’s your choice.
I have personally arrived at the conclusion that “experiments” are not good on VC money. And yes, that is after doing many ventures, advising many others.
And Jaspreet, you are probably right, that once you have been at this game long enough, you have seen the “passion” in plenty, and unless it comes packaged with some business savvy, it doesn’t impress. It doesn’t impress me, anyway.