What is a bootstrapped startup?

Startups raise multiple rounds of funding to survive and find the path to profitability. We have seen several companies that have millions of revenues but still reporting losses. In the same era, there are a few companies that are profitable without the help of any external investor. These companies are called Bootstrapped companies that operate without the help of any external investors. Some of these Bootstrap companies also became big and tasted success. In this article, I will explain Bootstrapping. What are Bootstrapped startups, pros and cons of Bootstrapping, and how Bootstrapped companies manage their expenses?

Bootstrapped Company

A bootstrapped company refers to a company that has been started and is being run without the support of external investors. The term “bootstrapped” comes from the phrase “pulling oneself up by one’s bootstraps,” which means to achieve something through one’s own efforts and resources.

In a bootstrapped company, the founders typically use their own savings or personal credit to finance the startup, rather than seeking funding from venture capitalists or angel investors. This often means that the company may have to operate on a smaller budget and make do with fewer resources than a company that has been funded by outside investors.

Bootstrapping can also refer to a company that has grown significantly without having raised significant venture capital, or that is self-funded through the cash flow of the business.

Bootstrapped companies often have to be more creative and resourceful in order to succeed, as they don’t have the same level of financial resources as companies that have raised significant amounts of funding. This can also make them more agile and flexible, as they are not beholden to outside investors.

Benefits of bootstrapping a company

There are several benefits to bootstrapping a company. If a company is bootstrapped, the founders retain full control over the business. With a higher percentage of ownership in the company, they get better incentives and motivation to make the company successful.

In a bootstrapped company, founders don’t have to answer to outside investors. This allows them to make decisions based on what they believe is best for the business. When founders do not have to answer outside investors or take approval from them, they can make decisions quickly and take action.

As the founders have invested their own money in the business, they are more likely to be committed to making it succeed. This can also make it less likely that the company will fail, as the founders have a vested interest in its success.

Bootstrapped companies have more flexibility in terms of their business model and growth strategy. This can make it easier for the company to pivot or make other changes as needed.

Overall, bootstrapping a company can be a great way for entrepreneurs to get their business off the ground, but it can also be challenging, as it requires a lot of hard work and dedication.

Risks Of Bootstrapping

While bootstrapping a company can have many benefits, it also comes with a number of risks. Without outside funding, a bootstrapped company may have limited resources to invest in growth and development. This can make it difficult for the company to compete with larger, better-funded companies. You may also face issues in scaling your company if you do not have significant funds. A bootstrapped company may also face difficulty hiring top talent.

External investors not just invest funds but also bring expertise. You also get mentorship to face upcoming challenges in growing your business. Investors also provide access to networks that lead to more customers and potential partners. If you are Bootstrapping, you don’t get this opportunity.

How to manage funds while Bootstrapping a company

If you are bootstrapping, you need to invest your own money and manage funds to keep the company running. Founders of Bootstrapped companies invest their personal savings or borrow money from family and friends. Sometimes they also take loans from banks or other financial institutions to fund their products.

Founders also need to keep overhead costs low by reducing expenses. Most founders work from a home office and limit unnecessary expenses. They also take advantage of low-cost resources such as open-source software, online marketing tools, and community resources.

You need to hire top-notch talent. If you do not have a budget to pay for their high salary, you can offer them equity in the company to motivate them. A bootstrapped company should have a strong base, so the initial team is really important.

For a successful bootstrapped company, revenue generation is really important. They need to earn money to keep paying salaries to their employees and fund the expenses. This is the reason, you need to prioritize revenue generation if you want to be successful as a Bootstrapped company.

You should also be aware of the scalability of your business and be prepared for unexpected costs.

Successful bootstrapped companies in India

Most startups raise funds from outside investors to scale options, but there are also a few companies that scaled and became successful without raising funds from external investors. Here’s a list of 5 successful bootstrapped companies in India.

• Zoho
• Zerodha
• Kaleyra
• Wingify
• Kayako