Do you want to do it alone and bootstrap, save and work several jobs to invest in your idea? Or ,do you knock on the door of your family and friends and ask for their help? Or, do you want to pitch to angels and venture capitalists?
The wider entrepreneurial community has different views. TV Mohan Das Pai said that “Creating a Bootstrapped company is possible but its painful.”
In this Blog Post, I will start with how getting an Initial Investment is helpful for your Business.
Initial Investment Phase:
Investment is the start of your idea. You must have a strong belief on your thought process and then confidently present your case to investors.
But there are 3 things you need to build a BUSINESS and these are the fundamental to any business:
Capital (Money), People (Talent) and Customers
Capital: Raising Capital and Utilising it, are 2 very different concepts. The important thing to understand here is that, unless you value money you will not be able to earn money. There are some basics to consider while utilizing money. If you have raised money use it with caution as if it is yours. For example use economy class for traveling, stay at 2 or 3 stars hotels, decrease the expenditure spent on retaining and acquiring customers.
People: People like founders and entrepreneurs are more focused on creation, they start from ZERO and cultivate and give shape to a concept. But there are other who start from where the founders left and take the BUSINESS to a Ten. The later have more perseverance and hence are more tolerant than the founders. Every Startup needs such a committed workforce, which can take the business to its rightful place.
Customers: Get some Beta Customers in via Beta launches, where your core purpose should be to gain the trust of your customer. Do this via flaunting Founder and Investor profiles. Involve these customers in your product development process and get some early insights from them to avoid larger disappointment or blunders before the final launch.
How Startups utilise money and move forward for the 2nd round of investment?
Tracking the Plan, Meeting the Plan and Beating the Plan
You should know, that you have taken the money to build the next structure or phase of your plan. Build a plan, show it to investor and tell them that this will take the organization to the next step. Of course this will take a time but have conviction in your thought process and business plan.
The sole purpose of Investment is to get the investor some returns in lieu of the risk they take with you.
To quantify what I am saying:
Jugnoo’s per GMP burn is 20 times less than both Uber or Ola. The reason is, that they are efficient on everything.
Having cash has its own Advantages and Disadvantages.
Advantage, you can grow faster, build a monopoly faster which is definitely a good point. Disadvantage is, that lot of money can make you forget some of the things which are important, for example: decrease User Acquisition Cost. Foreign companies like some of the Chinese companies or for e.g. amazon, don’t burn lot of money like Indian Companies do. Frugality is very much needed. Genuinely ask a question what every rupee or dollar is being spent on. Will it get us recurring customers or not.
Bootstrapping is one of most effective and inexpensive ways to ensure a business’ positive cash flow. Having strong business plan, firm Faith and Conviction in your concept can help you bootstrap your organization faster.
As it has already been said by TV Mohan Das Pai that “Creating a Bootstrapped company is possible but its painful.” But having a firm conviction in your Thesis and building a strong Prototype will never let you realize that this was your painful journey.
Following is necessary for successful Bootstrapped Company:
Lowering Expectations: A company is considered to be successful on its execution of a business idea, rather than the idea itself. It is best to break the idea into small but well thought through phases to improve the efficiency of each phase.
Focus on Profit: A very different mindset must be employed for bootstrapped startups compared to the management mindset in a Funded Scaling. Profits reinvested in the business will fund the Business.
Development of Skills: People starting a business must develop a wide variety of skills, as well as passion, resilience, perseverance and courage, are usually required to make a bootstrapped company workable.
Becoming a Better Business Person: Improving one’s core values matters alot, including being resourceful, accountable and careful, as well as enthusiastic and passionate, for the growth of the company.
Some of the Bootstrapped Companies are: Dell Computers, Facebook Inc., Apple Inc., Oracle Corp.,