What is Bootstrap Funding?
In a Bootstrapped startup, the capital used is your own. This kind of funding isn’t time-bound. You are flexible and at liberty to do things at your own pace. The growth in a company that has bootstrap funding is slow and steady. The money used in keeping the company going is either the founders’ or what they get from the profits. The founders of a Bootstrap Startup have full control over all the decisions, while in Venture Capital funded startups, the founders have to share the decision-making power with the investors. The word Bootstrap comes from the phrase “pulling oneself up by one's bootstraps”.
There might be a lot of questions as to why one should choose Bootstrap Funding over Capital Funding or Angel investors or Crowdfunding. Why risk our own money when you can get it from elsewhere? It’s after all much easy turning to external sources of funding rather than pinching your own pockets.
Why Bootstrap Funding?
- You are in total control of every decision. There isn’t anyone holding a gun to your head asking you about all the expenditures.
- Since the sources are limited, you are bound to utilize them properly. This is the time when you let the innovation run wild and not the sources.
- When your entire operations run on profits which are generated through user choices, you can’t afford to deviate. So, you learn to prioritize your customers and not waste your resources. This, in turn, generates more users which equals more profits.
- If your startup was built on Bootstrap Funding, you are prepared to face all the different challenges life throws at you. It is okay. If the challenge was easy, it wouldn’t have been successful anyway!
- There might be not as much funding as much it might be required to yield results on a major scale. Sometimes you may have big plans for doing something major that you know is definitely going to work out but you won’t have enough funds to carry it out. You’ll have to make peace with it.
- To get results it might take a long time. The slow and steady part of Bootstrap Funding that was mentioned earlier can be really slow. It can really test your patience. And there will be times when you will feel like giving up and going back to your earlier ventures. In some cases, you might feel like trying something else.
- You’ll have to cover all the overhead and unexpected/hidden charges that are bound to come up while running a company. Even if you have double-checked everything, some costs or charge will always crop up.
- It is a web-based git repository hosting service.
- Founded on: February 29th, 2008
- Founded by: Chris Wanstrath, PJ Hyett, and Tom Preston-Werner
- Industry: Software
- Company Size: 501-1000
- Acquired by: Microsoft at $7.5B
- Total Funding Amount: $350M
- It is an online coupons, offers, and promo code website.
- Founded on: July 15th, 2013
- Founded by: Ashok Reddy
- Industry: Coupons
- Company Size: 11-50
- Total Funding Amount $250K
- It is a multinational business software development company.
- Founded on: September 15th, 1996
- Founded by: Sridhar Vembu
- Industry: Information Technology Solutions
- Company Size: 1001-5000
- Zoho doesn’t disclose its revenue publicly.
- It is a web application development.
- Founded in: January 1999
- Founded by: Ernest Kim, Jason Fried
- Industry: Web Applications
- Company Size: 11-50
- They have Jeff Bezos as their Advisor. It was formerly named as 37signals
- It is a part of Infosoft Global Ltd. It provides data visualization products to other companies
- Founded on: October 22nd, 2002
- Founded by: Pallavi Nadhani
- Industry: Data Visualization
- Company Size: 51-100
- Within the first 6 months, they had their first 1000 customers.
These 5 companies started off as bootstraps, with some of them continuing to be bootstrapped i.e using their own revenue. Others opted for investors later on. Either way, these companies were started with a vision and the limited monetary sources they had. Over time, they all yielded favorable results.
The Venture Funded startups have increasingly outnumbered the Bootstrap startups, but Bootstrap startups are far from shutting down. These companies have slowly established their place on the startup map and are here to stay. They might have had limited funding and have taken quite some time to break even but they are there. They have all broken free from the hand to mouth earning and have entered the bootstrapped yet profitable startups. Some of these companies continue generating their own revenues and some were acquired.
The best thing about life is its uncertainty. Just because you started out as a Bootstrap Startup doesn’t necessarily mean you have to continue that way. If an opportunity comes your way and you really need the helping hand, you can always reach out. There are plenty of Venture Capitalists, Angel Investors and sometimes people with tons of money wanting to invest. With ventures such as Kickstarter, GoFundMe and so on, it has become very tempting for people to opt for other funding sources.
Just like everything else, Bootstrap Funding has the good and the bad, the pros and the cons, the yes and the no. Now it’s your decision whether you want to be the captain of your own ship or a cattle in the herd.
The Author, Afshan Fatima is Content Strategist at GrabOn