What’s the TAM Chasm?

How one entrepreneur’s mountain looks like a VC’s molehill

The apocryphal story of a newbie B2B founder, with deep domain knowledge, but no experience as an entrepreneur or in a startup. Note that while this example is not based on a single entrepreneur, it’s a composite to highlight the extremes.

Amita was a deep domain expert, with 15 years of experience in Wicro’s manufacturing services vertical. She identified a specific problem that a few of her customers had, costing them millions every year, which would get solved with a software product she dreamed about building. Being bitten by the entrepreneurial bug (her classmate founded FlipDeal), she decided to work together with a few old friends and colleagues, and start a business attacking the problem, with a couple of trusting old customers agreeing to do a paid pilot when she had the product ready.

As Amita and her team built the product, they initially used their own savings. Friends advised her to go to VCs, since this was exactly the kind of high-tech manufacturing software product that many VCs said they would fund. Amita was excited, she had seen FlipDeal raise a few Billion $, and felt that though her startup didn’t need as much, it would be good to raise a few million to hasten the pace.

The first VC meeting was a disaster, she was asked for their TAM (Total Addressable Market). And she was hardly able to define it well enough on the fly. The VC also said that manufacturing software was passe, IoT was the future.

What’s my TAM?” she wondered on the ride back to the office.

What’s our TAM?” the team asked her.

On the one hand, the specific problem they were solving was only for manufacturers in the auto ancillary business. This was a big sized market they thought, 60 odd large customers and a few hundred smaller ones spread over US, EU. The problem their product solved cost the large companies a few million dollars a year, and cost the smaller companies a hundred thousand dollars a year. Overall solving this problem would save the industry $300M. Of this, they estimated, they could charge $75M for the product.

The team was happy. There were few competitors and they felt they could become a good solid $25M business.

The next meeting with another VC was even worse than the first one.

$75M TAM for an IoT product? For someone as experienced as you, and with the stellar team you’ve got, why are you taking so much risk — 8/10 startups fail you know — for such a small market?” advised the VC, running a $100M fund. “We will only fund you if you’re looking at a $1 billion market, and can make $100M annual revenue, otherwise the risk/reward doesn’t work out”.

Amita was baffled at how easily she and her team had been about to step into such a bad risk/reward tradeoff, even though they were smart, thorough professionals, who should have known better.

She decided to attack a much larger market, that was nearly the same as what they were trying to solve a problem for. Of course she didn’t know any customer in that area, but they were manufacturers too. Wouldn’t they have the same problems? No one in her team had done sales to the new segment, but how hard could it be to sell to a new vertical?

Back in the office, the team brainstormed the new market, $3 Billion wide, IoT for manufacturing across different verticals. Now the product roadmap had to change, since they needed to address different problems for different verticals, and they needed to make the product more generic. They had to drop some of the more intricate features for the auto-ancillary features too. That market was only a small drop in their overall bucket. So they obviously couldn’t do everything the small little market needed.

Miraculously the next VC agreed to fund Amita’s IoT product startup in a $3B market, and the team was now flush with cash, $2.5M to be exact. “Off to the races, let’s hire more people, build the product, get some more early customers” Amita thought.

But soon things weren’t rosy any more. Building the generic product that spanned multiple markets took much longer than expected.

Their early believers in the auto-ancillary turned sour, the product they were building was now not solving the specific point problem they had.

Their small initial pipeline ran dry, but they had a large pipeline of new prospects who they had never met before, who were all looking good to start engaging. But the sales cycles turned out to be much longer than expected outside of auto-ancillary. Perhaps the problem wasn’t as serious for others?

Their money was running out too, the $2.5M was designed to run for 18 months. Now at 12 months, staring at 6m of runway, with no product launched, no pilots won, and increasingly long sales cycles, Amita was at a loss.

Where had they gone wrong?

Wasn’t it supposed to be less risky to go after a large market?

Shouldn’t they get a great pipeline from the new sales guy they hired for a lot of $?

When their product built for a $75M TAM generated solid early paid pilots, why were they struggling to get any engagement in a $3B market?

Wasn’t it validation that they had a world class VC on board?


This is the story of some of the most capable founders with deep domain expertise, that I meet every month. While they have tons of deep experience, product ability, and network, it’s typically in a small specific domain, and not in a large, deep market.

In the process of building their startup, IF they move from small markets they know like the back of their palms, to large markets where they don’t know as much, the risk they are taking explodes.

On the other hand, if they are domain experts in the larger market, or end up creating a new large market, out of the small market they start in, then they have a great chance of building a true $1B+ business. Deep domain experts with 20+ yrs of expertise, selling and building for F500 — are best off hunting Whales, or Brontosaurus as Christoph Janz writes.

Typical VC fund economics

VCs with $100M funds need to return $300M to their investors. That’s the promise they make to their investors, 4X gross returns in 10 years as Fred Wilson shows, from a portfolio of top notch startups. And as Tomer Dean points out 95% of VCs fail to deliver sufficient returns to their investors!

So with 8/10 funded startups failing, a VC needs each startup in the portfolio to shoot for a $100M cash return to the fund. With a 20% ownership at exit, the startup must be worth $500M at exit, in 7–10 years from funding.

A startup seeking VC funds, therefore needs to rocket from $5M-$500M market cap in 10 years or less to be a success for a VC. To do this you have to build a $100M revenue business. This demands a market size well in excess of $1B.

At this return rate, the VC is ok if 90% of their startups fail the test, and fall short of returning $100M cash to the fund. That’s the risk/reward the VC is talking about.

At the other end, for a founder who has initial customers, has solved similar problems in the past, has a strong team, there’s actually little risk in making the first $1M revenue. Factor in a small market where no one else is solving the particular problem really well, they have little competition, and may win customers through referrals quickly. They have a good chance at building a $10M revenue startup, which might be valued at $40M.

Computing the risk/reward expected outcomes

In the VC model, going after a large market, the founders/employees end up owning 20% of the company at exit, with a 10% chance of getting there.

20% x $500M x 10% = $10M expected outcome.

In the bootstrapped model, going after a small market, the founders/employees own 80% at exit, with a 40% chance of getting there.

80% x $40M x 40% = $12.8M expected outcome.

Very similar expected outcomes, but very different risk profiles.

On the one hand, VC money is like strapping a nuclear fuel powered jet packon your back. When it works you get to orbit, but 8/10 times when you’re not ready for it, you’ll die.

On the other hand a longer slower more arduous climb up Mt. Everest, the rate of death is still high, but substantially more manageable risk wise.

Which path you choose as a founder, should depend on the size of the market you’re chasing, the cost of acquiring customers in that market, whether there are network effects that aid early movers, how much it will cost to build the product out to the quality the market demands, your own affordable loss, and more. And as Clement Vouillon says both paths are fine, but do know which path you’re on!

Too many founders are going to VCs with sub-scale markets (< $1B), and blaming them for not taking risks. A VC is NOT in the job of taking risks. They’re in job of building a high reward portfolio, and a small market can’t give a high enough reward.

Many founders think this is a one-time decision. Absolutely not! As Atlassian, Github and others have shown, it’s totally possible to bootstrap to find the right market-fit, and then take growth capital when you’re truly ready.

If you’re an early stage SaaS founder, and want to do this better, stay tuned for some hands-on assistance to grow past this choice.

Thanks to Manoj Menon for reading an early draft.

8 Personal Finance tips for Bootstrapping Entrepreneurs

Starting up is hard, make no mistake about it, while media romanticizes startups and mostly talks about the glorious success stories, what goes behind is months and years of toil, frustration, fighting all kinds of odds. Cliched as it might sound but overnight success is the culmination of years of hard work.


Bootstrapping a startup is even tougher, apart from challenges of building right product, right team, right marketing plans and dealing with daily operational chaos, you additionally need to worry about money and  cash flows and hence constantly innovate to compete, there are no easy paths, what you need is undivided focus and continued perseverance.

Now with all these challenges last thing a bootstrapping entrepreneur needs are fresh challenges on personal finance front. It can be distracting to least and can even have a debilitating impact on your business, when all your energy and time should be focused on getting your business to move to the next orbit, unforeseen issues on personal finance side can sap your precious energy.

While we cannot mitigate all risks in business, but with a better financial planner you can reduce distractions and also some legitimate business risks, here are few tips that can help you manage your personal finances better.

1. Keep your personal fixed expenses low

As you bootstrap, start with a review of your personal expenses see if you can lower your expenses especially the fixed ones, there are always expenses which can be cut, like a costly dish TV subscription with all the channels you never watch or suboptimal phone bill plans when you can get a better offer or the weekly outings where you splurge or non-healthy junk food, or the gym membership where you never go, maybe a jog in nearby park can be better. Cut expenses wherever you can and migrate to a leaner personal expense structure.

2. Track your expenses and do active budgeting

Last thing you want when you are running a startup is surprises every month on your expenses which can be due to faulty planning. Plan your expenses to the last tee, do active budgeting. If required, use budgeting software. If not, pick up a simple excel sheet. There are a lot of pre-formatted excel workbooks available which can help you plan your budget.

You can use the following sheet for expense planning.

Screen Shot 2016-09-05 at 2.37.32 pm

3. Before you bootstrap plan for the worst

Create multiple cash flow scenarios. A lot of assumptions go bad when you are starting up as there are too many unknowns in a startup environment. Slipping product timelines, fundraising plans going awry, growth not taking off as you expected there are simply too many moving parts. So for any plan you create do a thorough analysis. Hope for the best but always have a plan ready for the worst.

4. Get a good health Insurance for you and your family

One of the major unplanned expense that can hit you is unforeseen health. Cost of health in general has skyrocketed in India. So before you bootstrap, ensure that you have a good health insurance cover for you and your family, the cover should be adequate and should reflect your lifestyle.

5. Do not park money in savings account, Invest in liquid funds

Your day to day money requirements should be parked in instruments which give higher returns. Every additional rupee matters. Therefore, do not keep your money in savings account but invest in short-term liquid funds. They provide 2-3 % higher returns than saving accounts and are almost as liquid as savings account, so you can use your money anytime and also earn higher from your savings.

Let’s say you maintain 5 lakhs rupees balance in your liquid account, this is an account for your emergency funds. Below chart explains what will be your account balance at the end of 3 years, if you see liquid funds will give you 4.3 % and 8.3 % higher return vis-à-vis Fixed deposits and savings accounts respectively.


6. Avoid speculative investments like daily stock trading

As an entrepreneur, you are already grappling with ambiguities and surprises. The last thing you would want is surprises on your personal finance front. So start avoiding any risky investment you are making and stay away from stuff like daily stock trading or other speculative investments in the stock market or otherwise.

The below infographic explains why day trading is not a good idea 🙂


(Source: Zerohedge)

7. Create a personal financial plan

You must have created a proper business plan for your startup but what is also equally important is that you create a financial plan for yourself. Look at how your cash flows are going to be like what are your projected expense, both recurring and non-recurring, sources of income, how much savings you have, short term and long term liabilities. Finance planning helps you create a detailed view of what to expect on money front in next few years, here is a simple step by step guide to create a financial plan


8. Ensure your loan liabilities are taken care off.

Having large loan (personal or home loan ) commitments is not a good idea if you are planning to bootstrap. If you have such commitments relook at them and figure out a way to manage risks arising out of these liabilities. Set up a viable payment plan for all of these liabilities.

Article Credit : Sarabdeep Singh, co-founder of Bodhik.


Bootstrapping – Imagining the possible new with evolving means

“Pulling oneself up by one’s bootstraps” refers to 19th century high-top boots that were pulled on by tugging at the ankle strap. It generally means doing something on your own, without any outside help. In the present day context, bootstrapping is a commonly used term used to describe startups that rather than seeking help from external investors, an entrepreneur fund the development of their company through their own money or  internal cash flow.

At a time when funding has become more a norm in the startup world than a necessity, it is common to see startups go investor-hunting even when the ‘brilliant idea’ is still at a concept stage. They have nothing to substantiate their claims before investors – no product, no customer, no traction. For some this is a new job category.

It is startups like these that need to understand that funding is not the only way forward. Bootstrapping, can be a very powerful alternative to create a more impactful company. Sometimes, a hybrid model might be more effective, where the entrepreneur could bootstrap for an initial period of time and only take external funds when the business is ready to scale. We wonder then, why most entrepreneurs these days fear to tread this path and settle for the seemingly easy route of seeking angel investors and VCs!


Someone has very rightly said, “Raising capital is not equal to success, not raising is not equal to failure.” One should understand that funding does NOT guarantee success. Also, it is important to realize that when growth occurs faster than the business model that supports it, the result is an increased likelihood of ending up in that disappointing majority.

There are many successful bootstrapped companies across the globe, including India. According to iSPIRT – the Indian ‘Think Tank’ that is actively helping and promoting Indian product companies to make India a product nation, 73% of the Indian software product companies are bootstrapped. It recently came out with an interesting Index – India Software Products Industry Index – B2B (iSPIxB2B) to highlight some surprising facts about the Indian B2B software product companies. According to the data collected, the enterprise value of the top 30 companies dealing in the B2B software product space is $6.2 bn (₹37,500 crores) and about 37% of these companies are bootstrapped.

As a matter of fact, even VCs prefer to back bootstrapped companies to those with early angel investment. They would much rather invest in a startup where the entrepreneur’s own money is at stake as well, since it shows the amount of confidence he/she has in the product or idea. There’s no denying that while it is easy to play with someone else’s money, no one wants to play with their own money unless they truly believe that they can make it work.

Bootstrapping forces entrepreneurs to constantly think about cash flow, which in turn forces them to become customer focused and create value. It forces entrepreneurs to become effectual, where the entrepreneurs navigate their journey to co-create the future that does not exist today.

Fundraising is a time-taking process and especially for early stage startups it can be a dangerous thing to dedicate so much time on meeting investors or preparing pitches, so much so, that you lose focus on your product and your customers. If you are self- funded in the initial days, you won’t have to make rapid decisions that you repent later. You can always raise funds in the future, once the foundation of the business is stable and you are ready to scale up.

Sometimes, growing slow is better. Specifically when there is a lot that is unknown; but once you find a direction, it will become easier to run faster; and then the need for external funds becomes more appropriate.

Once you have something more concrete to show to the investors after you have developed the product; tested it; and generated substantial traction – chances of getting valued will certainly be more. Moreover, you will be in a better position to bargain and negotiate the deal on your terms.

The decision to go down the road of bootstrapping and create a self-funding business has been known to provide rewards that can be both immediate and lasting. Many of the successful companies that we see today – Dell Computers, Facebook, Apple and eBay to name a few, had humble beginnings as bootstrapped enterprises. It clearly reiterates that funding is not a norm for success and as far as you can go solo, you should. Remember – customer money is the cheapest money that you get.

There is no right or wrong way; the fact remains you need funds to run a business and as an entrepreneur, the funding orientation is a choice that you will have to make. One should understand that every business is unique and demands different resources to build and operate it. Do a quick assessment for your reasons in seeking funding from an investor – big or small, angel or first/ second round of funding. You need to look at many other factors such as the industry type/ business you are into, the kind of working capital required, competition, opportunities of scaling up etc. Carefully analyze the pros and cons and then choose the path that is suitable for your business.

Remember not to be lured by the halo attached to the big funding news that is generating headlines in all the pinkies. You can go solo, yet achieve the same ‘stardom’ while retaining full control of your dream venture. However, simply put – ask for funding when you are ready to scale big time.

‪To me, entrepreneurship‬ is a dynamic manifestation of creating connected values with compassion; so focus on creating connected values regardless of your funding orientation.

How to Bootstrap in India

I am bootstrapping AeroLeads and InBoundio, 2 product based startups and strongly feels before raising money, everyone should bootstrap as you want to learn how to manage resources and money before you actually raise money to have more resources.

Here is what I can suggest from my learning, experience and what I have seen from other bootstrapped startups

1. Start from your own home – some of India’s biggest product startups started from founders bedroom (directi, fusioncharts). Working from your own house gives you huge advantage of working distraction free and without thinking about growth, expenses and profit. Once you takes an office, have few people around you and with hundreds of thing to worry about, you will not be able to think freely and do things fast. Starting from home often gives you extreme leverage to try all what you can and want to.

2. Do as much as you can including coding, sales and marketing – Every successful product startup founder I have met, there was this pattern. They understand technology stack as well as how to get users and customers. Before building a team and raising money, they completed the full cycle of product development and sales.

They know because they did initial programming, user onboarding, marketing, selling and support, something which is very important. I strongly feels even if you are not a great developer (I am also not a really good developer and often copy/paste code) still learn and understand the technology stack as it will help you a lot to make the right decisions. Similarly, understanding sales and marketing is equally important too. If you are bootstrapping, make sure the core team of co-founders do all this by themselves. It doesn’t matter how small and trivial the task is, do it once and then you can delegate to others.

3. Find Free and Cheap Resources instead of Paying full – Before paying, I always try to find if can I get that for free. There are so many startup resources available that there are good chances you can get everything for free (at least for few months). For example, through TheMorpheus and f6s startup site, I got 12 months free rackspace hosting worth $1000 and oLark premium for 3 months.

Search for startup deals and offers in Google and you should be able to find plenty. Do search for coupons and discount too as most of the SaaS companies do extend trials through coupons. I had also hired a freelancer from philippines in 2013 for well below the market price and he helped me a lot in testing the product, so keep using freelancers too if you can get the work done fast and cheap.

4. Look for Free Marketing – Nothing will burn your finances faster then you starting to spend money on marketing when your product is not finished. This I learnt the hard way as i foolishly lost money on marketing when the product sucked and wasn’t even complete. Contrary, by luck I got covered at TheHindu newspaper which eventually got us lot of signups (the product eventually didn’t took off). It was a pretty good experience in importance of free marketing. Even right now, my post How I got 1100+ SaaS user is the most linked and talked about blog post which brings lot of traffic and has helped me to network with lot of startup people.

The Bootstrap Ride

There are many paths to successfully bootstrapping a start-up. The trick is finding the way that works best for you. Now more than two years into my journey, I want to share a few lessons I wish I had learned earlier.

I would like to share a few tips from my experiences of bootstrapping an international startup. I want to speak the reality I experienced, my personal opinions, and I do not intend to contradict what others from the industry have said. I only mean to share what I have learnt from my B2B start-up experience within my business context.

Starting-up: Find a problem that exist in a considerably large scale and is solvable. Ideate solutions that could make lives easier. A problem could exist anywhere — in your current job or existing business models. People may or may not know about it. Develop a market need. Don’t build a start-up in view of a million dollar exit. Be obsessive about what you do, aim higher, execute mid-long term plans and take it higher.

Office: You don’t need a flashy office to start with. Work from home, Starbucks & co-working spaces. It’s alright to work from anywhere as long you have a seat, decent connectivity and fewer interruptions. When you set up the office, design it with bright colours and lots of natural light. Adopt a hybrid infrastructure of open workspace & cubicles. At some point in time, when you turn profitable with adequate cash balance and have a strong cash flow — consider owning an office instead of renting. It helps to save significant dollars in the long run and build company assets.

Team building: If you have an idea that you believe in and you have the skills, get started immediately. A few dont’s:

  • Don’t wait on a perfect team and plan to get going; such a thing does not exist.
  • Don’t be fascinated about rank holders, high percentile college degrees and flattery resumes.
  • Don’t do meaningless interview rounds and tests.

A co-founder is not a must-have. Look for freelancers & part time workers to help you get on the road. What matters the most is if the candidate can do your job, whether has the right attitude that fits within your company culture and goals. Give part-time work; engage to get more comfortable before offering the job. Look for skilled human capital available at low cost economies and build your teams internationally. Communicate efficiently, be transparent and set the expectations clearly.

Product: Build products that could be desirable and likeable for large, yet targeted audience. There is nothing wrong with taking a legacy business model, apply modern science and improvise it to create a new business. Change is inevitable; there is always a market for disruptive solutions. Once started, run faster and not ever stop innovating it more.

Go-to-Market: Know your buyers. Short-list them, study their potential business needs corresponding to your products and prioritize accordingly. Approach them with tailored messaging. Focus on showcasing customer benefits, NOT product features. Buyers only care how you can solve their problems not your badges in the sales pitch deck. Plan to be global from day-1. Build your products and company culture for global scale. Gaining market traction should be top priority. Constantly engage with prospective buyers, form a customer council to validate your products and gather market feedbacks regularly to improve your product road map.

PR: Winning new customers is the biggest award and growing your business profitably is the best coverage for startups. Don’t waste your time on pitching into media and investing with PR agencies. Instead, use your website and social media channels to shamelessly self-promote your company, products, case studies and thought leadership. Your prospects won’t buy from you because media covers you and you are popular — they will invest in you if you have a good product with proven benefits and referencable customers. Your company will become popular if your products are useful. Grow your company with disruptive products, global customers and an innovative team. Create newer jobs and give back to the society — let journalists bump into you.

Fund raising: Think of external capital only if you need it. Be sure about why you need the money, investment plan and projected outcome. Do your homework on who you want to partner with. Convince yourself with realistic valuation of your company and practical terms you want to work with; stick to it. Be honest in your pitch deck and fund raising approach. Investors are expected to do their home work too, so don’t be afraid to correct them. If they say ‘Grand ma should understand your business’, and you don’t sell into such audience, tell them openly. Avoid investors looking for start-up lottery. Instead, find backers who promote innovation and entrepreneurship. You can’t do an enterprise startup investor pitch in 3 minutes. Stay away from 3 minutes pitching gimmicks, it’s a ticket selling tactics for startup media events. You can easily find the VC communities from Google search. Pick up the phone and call them or send them an email. Use LinkedIn & leverage reference contacts. It’s at the best, if you build your company with market traction and proven products to be in a position to choose from whom you wanted to take money, if and when you need it.

Networking: Start-up events are trendy and fashionable these days. There is a lot of noise and smoke out there. Be smart to rise above the noise. Don’t compare yours with other startups. Don’t be too excited about showy startup media. Be selective in networking events and look for agendas that can give you key take-away for your business. Remember, your ultimate goal is not to build a worldwide network of know-who, but to know those few who can complement to build your company. Invest your networking time wisely. Not all great companies are built out of startup accelerators. Many successful companies are bootstrapped, built from garages and bedrooms. Startup media publications make most of their money from their event tickets, hackathons etc. It’s severely hyped up. Be practical and selective.

Mentors: Surround yourself with like-minded people who can inspire you and give guidance; people who can introduce you to customers, partners and investors. Build an advisory board that could help you establish your network & connect with right people and open doors to money. Advisers should be fluid, review and make changes at different stages of your start-up journey.

Social: Associate yourself with entrepreneur community. Share your experience and learning with aspiring start-up entrepreneurs. Volunteer in community development projects in small ways you can. Creating new jobs through your start-up is the best contribution you can offer to the prosperity of humanity. Build a company culture to help others and give back.

Personal: Be prepared to sacrifice, compromise and tolerate. Improve your patience level as much as possible. Don’t bring emotional sentiments in customer situations. Make friends with clients. Engage in some sports. Fall in love with everything around you. Never shut down. Travel the world, it makes you richer. Stay humble.

I am the Founder and Chief Executive of Corporate360, a global leader in B2B sales intelligence data solutions. We bootstrapped and turned our business profitable with multi million dollars in revenue. C360 now has a global footprint with over 300 clients, and a successful team of 30 full-time employees and 9 contractors in five countries. I want to share what I have learned from my B2B start-up experience within my business context in the hopes that it will help others on their own journey.


Post Contributed by Varun Chandran, Corporate360

My Learning while building a Bootstrap Startup in India

I had written a post How I built a 1100+ users SaaS business as a Single Founder with Zero Marketing Budget some time back which got covered at YourStory. Since then I have got lot of mails asking many questions, I did tried my best (and will always be) to answer to everyone but it is not possible to reply to everyone so I thought I should write down a post putting down all my learning.

I feels most of the failed startup owners quietly disappear instead of sharing their learning and unfortunately what all I learnt, learn through failures after paying big price so I thought to share my knowledge and learning to other startup founders and entrepreneur so they can learn from it. I am writing it the way as I feel it, take it with pinch of salt.

  1. There is nothing great about building a startup – You will start a startup with lot of excitement, want to make lot of money, change the world etc but the kicks will be temporary. Starting a startup, running a startup and making money from a startup are three totally different and often separate things.  Fun is in the first part but that has shortest life. Lot of people get sucked into thinking that there is something great about startups, there really isn’t. If you want kicks or wants to make money, there are less risky options available. Startups have very poor success rate, so you better understand the risk/reward and have solid reason behind doing it
  2. India doesn’t have a startup ecosystem – There is lot of noise in India specially in bangalore about startups but really there is very little signal. Way too many people get sucked into this “startup” way of building business losing time and money both. There are plenty of startup trolls, advisors, accelerators, investors, has been wannabes in Balgoare who know nothing about building business and are just there for kicks, greed, ego and entertainment. If you are a startup founder, be careful. you are the only one who is taking risk, never forget this.
  3. It is very difficult to build a good team – Every seasoned entrepreneur can vouch for this, it is extremely difficult to hire and retain good talent, building a strong team is even more difficult. You will not find co-founders from startup events. Indians are also very emotional people, which often causes problem in building strong team and specially between co-founders who don’t know each other before partnering.
  4. Exponential growth is a myth – Very few startups grow exponentially, don’t get fooled by those who are saying they are growing exponentially. Those who say numbers openly have a reason behind it. Most of the startup and startup founders also lies a lot.
  5. Never compare your startup and yourself with anyone – I never read Indian startup blogs, techcrunch, HN etc, as it is waste of time. I am least interested in knowing who has got thousands of users or who got millions of funding, as you will never know the underneath reality. There is way too much going on with every startup and startup founders which you will never know. So don’t waste time following other startups unless you can learn something from them.
  6. Bootstrapping is not easy – I have found bootstrapping to be difficult specially since I am doing it from Bangalore with no local support. I do know what I am doing and understand how to manage money and expenses and have a profitable startup but still, if you are first timer, expect lot of things to go wrong. Your expenses will be 2X-3X then what you think. I have learnt to manage expenses but only by failing and losing lot of money which hurts, or at least it used to.
  7. Deadlines are meaningless – I have missed all my deadlines till now. Earlier it used to bother me, now I just don’t care. I have found it very difficult to set deadlines as there are way too many unknown variables so it makes sense to not set too many deadlines and sleep well in night.
  8. You need help from all corners – This is something which I have seen with all successful startups. They always have some support system in terms of family, friends or some network. There is always brother, father, close friend, spouse etc as well as office space, logistics support system with successful startups. These things often happen at background and people never realizes this or acknowledge this but this local support system plays huge role in success of startups.
  9. Single founders have limited bandwidth and fast burn rate – No one talks about founder burn rate but they have limited bandwidth. There is huge difference between single founder, two founders and three founder teams. A single guy can at max manage 2-3 people, any more and things will start falling apart. I had made a huge mistake earlier when I tried to manage 5 people which I couldn’t and it became ugly. Do not chew more than what you can swallow.
  10. Don’t micromanage or use metrics – using KPIs, metrics, media mentions, traffic and even earnings are often deceptive in early stage startups. As startup founder, you are anyway will always be bias and will only look at things which you want to see so don’t waste too much time on these vanity metrics. They are not as important as you think they are.
  11. People are not making as much money as you think they are – Earlier i used to think all these VC funded companies who have raised millions of dollars and people who are running the startups/companies makes lot of money. In reality, very few are making that kind of money. Founders become employees the moment you form a private limited company and raise funding and are not in full control irrespective of what they say publicly. Things never look what they are anyway, so if you think are thinking that there are tons of people making tons of money doing startups, you are wrong. Contrary, I have seen lot of people doing self owned services/development business or running small online businesses are doing fairly well. So if you can successfully build a small business, do it instead of building a big failed business.
  12. There is nothing great about product companies nor anything bad about services companies – I had met someone in 2012 who proudly said they are a product based company focussing on Indian SaaS B2B market. They had 80 employees and with about 8 lakh rupees in revenue. I don’t think product companies need that many people, unfortunately in India, there is no such thing as product company, every product or services or B2C or B2B company eventually becomes an Operations company. Don’t get sucked into these definitions of product or service company, there is lot of overlapping between them when you are building India focussed business.

Guest Post by Pushkar Gaikwad, InBoundio

“Bootstrapping is tough. Most of the time things take three times longer than what we think. The only way to enjoy this journey is to absolutely love what you do. That is what sustains you.” – Rushabh, ERPNext

Continuing our journey to bring to limelight bootstrapped entrepreneurs from India, we got a chance to speak with Rushabh Mehta, Founder of Web Notes Technologies, a software product company that publishes a free and open source web based ERP called ERPNext for small and medium businesses. Built by a small team of 8 people, ERPNext has more than 250 paying customers and has also been included in Winners List of BOSSIE (World’s best Open Source Applications of 2013) Awards. Here is the transcript from the interview:

Tell us more about the journey of starting ERPNext. 

I have been a software hobbyist, coding and developing software for fun since my school days. I graduated with a Masters in Industrial Engineering from Penn State University, US in 2004 and soon joined our family business. At that time the business was undergoing a transformation and we were trying to set up a custom ERP system to integrate Sales, Purchasing, Inventory and Accounting. I took ownership of the implementation and that experience gave me the first taste of ERP platforms.

Soon after that experience, I started a services company with a friend and delivered multiple software projects for clients but that journey didn’t continue for long as my heart was in building products. I shut down the venture and moved on to start Web Notes Technologies in 2008 to build a free and open source web based ERP product.

How did you fund the business while bootstrapping? Did you ever consider raising capital from investors? 

During the time when I was starting Web Notes, my family exited our family business and had some funds in hand. I borrowed some of those funds and that gave us the initial breathing space. We also delivered services for few initial years to keep us going.

Once we decided to focus only on building products, we took many measures to sustain ourselves financially. We brought our team size down from 18 to 5. It was a difficult move but was essential to ensure we don’t burn out quickly. We also removed sales and marketing and instead focused all our efforts on product development. We hired fresher graduates to keep the salary expenses under control.

I did try raising funds but due to the nature of business, was not very successful. ERPNext is a specific mission critical product and it was not that easy to find a good market fit in the start. Also there weren’t many companies in the same space to compare us with. All this made the business not seem that attractive to investors.

How did you build your team at a stage when revenues had not started flowing in yet? What motivated those people to join you? 

Most of our initial team joined us because of the work we were doing. We were building an open source product and that attracted people to join us as there weren’t many such opportunities available elsewhere. On a funny note, one person we interviewed also said that he checked our website and got an impression that we are a large firm! Probably having a good face online helped. Ha ha .

The initial years were quite difficult. We didn’t have any mentors and were not sure what to do next. We got all our feedback from customers and learnt how to build quality software. As Malcolm Gladwell says, success in any field comes when one invests 10,000 hours on it. As a team, we are walking through that journey of 10,000 hours and falling down and learning in the process. This journey is what keeps us together. Our initial 5 hires are still with us and that says a lot.

Marketing is another area that requires a lot of investment. You have reached 250+ paid customers with zero marketing and no sales team. Tell us more about how you managed marketing.

Information asymmetry is reducing fast. Now, there is no need to take the help of traditional media. If the product is good, word does go out. “Viral” is the new buzz word.

As a bootstrapping company, the marketing options are very less. In the initial days, we set up stalls and booths in different exhibitions and events to reach out to customers. We received our initial feedback from there and reworked on the product. It has been a slow and organic growth for us. But we were clear that we never wanted to push our products to customers. Once we gained some initial customers and delivered quality products, we got referred to new customers and the chain continued.

The open source aspect of our product also attracted many customers as there were not many open source ERP products in the market. Our competitive pricing was another attractive factor. ERPNext is available at 30,000 INR/ year and most customers usually have a budget 10 times that amount. Since we are focused on quantity i.e acquiring large number of customers, this low price strategy really helps us get the foot in the door.

Another advantage VCs bring in is the guidance on building the business. As a bootstrapped company, how did you make up for these? 

As a bootstrapped company, we are left on our own. Not having mentors was an issue. I do feel we lost a few years. However, I have been trying to learn from each and every source I get my hands on. I read blogs, hacker news and also learn from other companies. For example, we are highly inspired by the design, philosophy and writing of 37signals, not to mention their products which are just amazing. We think that they, and not SalesForce, are the true pioneers of web applications. We love the quality, reliability and technology of GitHub, which has re-invented the way Open Source software is written and shared on the Internet. We try to learn from the design, quality and vision of Apple. They have set the benchmark of engineering and we hope we can understand and use some of their focus and attention to detail. And last but not the least, WordPress (and Automattic, the company behind wordpress) has provided us with a template of how an Open Source business should be built. Whenever we are in doubt in terms of taking business decisions, we find asking ourselves, what WordPress would do. There is no dearth of inspiration. One just needs to look around. These and many such companies have been our mentors indirectly.

Looking back do you think you should have raised angel or VC capital instead of bootstrapping? In what way has bootstrapping worked in your favor and what opportunities do you think you missed out on because of not raising external capital? 

There is no right way to answer this. Both bootstrapping and raising external funds have their own advantages.

Because we followed a bootstrapped journey, our confidence is very high. We have gone through the whole process of transforming into a matured business. We are able to judge things better as we have seen the extremes. And we still have our independence.

On the other side, we do fell that as a bootstrapped business, we often miss out on the glitz and glamour that surrounds the well funded businesses. We also miss the whole package that comes with investors – the funds, contacts and advisory.

But at the end of it I feel that in the current world there is so much a single person can do without any external help. Take the example of Salman Khan of Khan Academy. It is so inspiring to see the way he has built his business single handedly. He did not employ an army of people to make his videos. He created close to 3000 videos, using his own personal skills and technology. Nowadays there are so many tools available that eventually capital driven growth might become irrelevant.

We are proud to say that over the last 3 years, we have been growing 100% every year in terms of revenue and we have reached this stage purely bootstrapping our way up.

ERPNextFrom your own experience, what advice do you have for start-ups who are currently bootstrapping? 

The key question one needs to ask themselves is how they are going to sustain themselves as they are clocking their 10,000 hours towards building their product.  It could take 3 years or could also take 7-8 years. Most of the time things take three times longer than what we think.  There is no magic bullet and one is not going to get discovered on their own. They need to take one step at a time.

The only way to enjoy this journey is to absolutely love what you do. That is what sustains you.


As I spoke to Rushabh, I could sense his enthusiasm and passion towards his product. Their team sure is deriving their inspiration and learning from other companies but it is not very far when they are going to inspire others on how to bootstrap and build a successful business from scratch. ProductNation wishes Rushabh and his team a successful journey ahead.


9 Things that I learnt while bootstrapping in India

Bootstrapping is hard especially in India! It takes a toll on founders as well as people around them. No fancy corporate trips, no room for slack, myriad things that can go wrong and on top of it, no wiggle room financially. Here is what I learnt during past 3.5 years of bootstrapping SocialAppsHQ and now, Shimply.com

1)     Cash flow is the only thing that matters – I have people who tell me that their ventures are extremely profitable and then few months later, I find that they are closing down. Mostly, it’s their customers not paying their bills on time. Everyone who has ever run a business experiences this! Don’t book the amount as profit until it’s in your bank (note – I hate service tax because we have to pay it when an invoice is created even when money has not been paid to us). Another rule – if you are in services business, ask for some money upfront no matter how urgent that work is.

2)     Keep 3 months reserve ALWAYS – Most internet businesses are becoming more and more dependent on one of the larger businesses like Google, Facebook, Apple and others for survival. Even if they snooze, your revenues will take a nose dive. I will suggest you to keep 6 month reserves but if you really want to live on edge, keep 3 month reserves. It’s crucial for two reasons –

  • Most of the employees depend on their salary to pay their rents, buy food etc. It’s a disservice to them as well as your company, if you fail to pay your team on time.
  • No matter how agile your team is, any major shift in direction/building a completely new product and bringing it to market takes time.

3)     Beware of vultures – As you start a company in India with seemingly bright future, you will realize that you will soon get accosted by wannabes – people who are sitting at high positions in various companies and want to leave their jobs for starting on their own. Nothing is wrong with that  but there are two types of people you definitely want to avoid –

  • People who want to act as commission agents to broker an agreement with their and few other companies. I consider it unethical although I know few who don’t.
  • People who want to provide gyan and want to charge a retainer fee for it. I was introduced to a consultant who wanted to charge Rs. 1.25 lakh per month as retainer.

4)     Murphy’s law applies in startups more than anywhere else in life – Something that you least expect will always go wrong –

  • You decided to take a flight to Mumbai for work, your server will go down exactly at the time when you on board the flight so that you find about it 2.5 hours later!
  • You are in front on 50 army officers giving presentation on social media monitoring and standing on stage, well – server gods know that too (log files filled up space on one of the six front end servers and haproxy kept directing traffic to that server as it was set on leastconn)!
  • You don’t have money in bank and you are waiting for a wire transfer to pay your bills on time (typically, it comes in 3-4 days) – well, too bad it’s going to be late this time for some reason.

5)     Surround yourself with positive people – over past 3.5 years, I have surrounded myself with people of high caliber and utmost integrity. People with whom I can share what we are up to and struggles/successes we are having. I have tried to remain truly transparent on success and failures and sharing our learning with everyone who is willing to hear J. Your journey will be a lot easier with such people on your side.

Many folks however tend not to share and hoard the knowledge as if they are traders in subj mandi (I am sure they will make a lot of money by selling it like tomatoes at the right time). People don’t realize that in knowledge economy, it’s valuable only till someone decides to blog about it!

6)     Fancy offices don’t matter – if you predict that your revenue is going to take a hit, build a contingency plan and act on it.

  • Start downsizing – move to a flat from an office. Your typical saving in 2 years is 50% – rent is Rs. 35 vs 100 per square feet. There is a higher upfront cost if you have to furnish a flat (1.5 -2 lakh for 15 ppl office) but over 2 years, you will end up saving over 50% (figures are relevant to Delhi).
  • Delhi is far better than other regions nearby in terms of electricity and transportation. You can save quite a bit on generator cost and your staff can travel through metro.
  • Get rid of staff that you can do without – keep people who are essential to achieving your vision. Focus on builders, not maintainers. Maintainers can help you sustain your business but not grow it/get out of dungeon.

7)     One bad apple can spoil the entire basket – It’s true for startup as well. If a team member does not act as part of a team, does not help further our shared vision and goals, we need to let him go. I have regretted the decision where I continue to let people stay in the company with a hope that they will focus on learning and understand that they will grow over time with the company. If people are negative, they will stay negative whether it’s in your company or, some other company. It’s not your fault – let them go.

8)     Spend where revenue is directly proportional to your expense  – it’s easier said than done –

  • Be extremely ROI conscious on advertising spends – they can easily get out of control and drive you in negative cash flow territory
  • Don’t take high salaries – You can’t take more than Rs. 50000 as salary if your revenue is 1 crore. 1 crore revenue with 20-30% margin leaves enough for 3-4 people at that salary level and then some for investment in future growth. Don’t compare it to corporate job – if you find yourself doing it repetitively, consider shutting your company and joining it. You deserve to be happy J.
  • Hire only those experienced people who will deliver from day 1, but be ready to invest in training high energy fresher.

9)     Say NO – When you are drowning in a flash flood, it’s easy to get tempted to hold anything that you can lay your hands on. For a startup, you have limited resources and it takes atleast 2-3 years of sustained efforts before customers start to know your company/brand. If you are building a product and a service job comes along, you have to learn to say NO. It’s hard – I know! Here you are selling $25 per month product and then you are getting offered $2500 for 3 week job. Realize that it will distract your entire team and cost of distracting your entire team is probably higher than what you will earn! All said and done, cash flow is still king! Go figure J

Best of luck and bootstrap away!

If you are bootstrapping, you are not alone here – Sridhar Vembu(@svembu), @Zoho #BootUpINDIA

Sridhar Vembu is a simple person, and most of what he says are tweet sized bits of wisdom. He inspires you almost instantly when you start conversing with him.

That was the first impression when I spoke to him for the first time.

He wanted to get into action as fast as possible. Before we recorded this video I was trying to make him comfortable with what I am going to ask but then he almost immediately started talking about super-interesting things. It was fascinating to hear from him directly. I could almost feel the vibe even when it was virtual. Since I am also focusing on Indian SME and am bootstrapped, I loved this advice: “Go out and learn from the best of the best in the world and then apply them to the local context”. This very much resembles what I wanted to do and my thinking was validated.

We spoke about Zoho’s early days and his remarks will help any young entrepreneurs starting out now. When we start up, a lot of us don’t even know what is the destination and how to navigate the path and what we want to become. In such cases we need a little bit of time and freedom to figure out things along the way. Instead of being forced to adhere to fixed format, setups and rules, bootstrapping is an excellent choice. With bootstrapping there is no sandbox we have to look at.

When I asked him about his hardship to acquire his first 100 customers, he stressed that getting the 1st paying customer is particularly hard. I completely agree; its key to be able to sell to the 1st ever paying customer for any entrepreneur. And the focus here is to find the fit and area where the market leaders are unable to penetrate for some reason. So identifying what is the right place for the current time will become instrumental to get the first one, ten or hundred customers.

At this point I did not want to miss the opportunity to ask a question that I was mulling over for some time. In our first OEQ Hangout on bootstrapping, Shekhar Kirani had said it won’t be possible to build Zoho without funding in today’s times. I did not agree completely with Shekhar at that time. So I asked that question directly to Sridhar to hear his viewpoint. It appears that he somewhat agrees with Shekhar about Zoho. However he said it is possible to build a sizable company now and even after 50 years without external funding. Its just that the entrepreneur must look hard whether the opportunity exists in the current market situation.

So its fair to say that there is nothing wrong in either path. The founders need to evaluate current opportunities and choose the best path that they are comfortable with. Success or failure both can come regardless of the path you choose. So the real focus should be the business and the value the business is creating than the way they are funding their growth. The ecosystem must celebrate both pathways.

Finally, if you are bootstrapping, you are not alone here, this #BootUpINDIA program is for you, come and apply today.

Pallav Nadhani @FusionCharts on Bootstrapping your Startup the right way, all the way #BootUpINDIA

Success is often measured by how much limelight you managed to get. Real success however, belongs to those who dig in and chart the fabled hockey stick growth path. Companies like Fusioncharts, Rategain and Wingify are but a few examples of globe scale bootstrapped Startups from India. Does Bootstrapping happen out of accident or by choice? Is it a long term bet or a compulsion? What are the other myths behind Bootstrapped vs Funded startups?

Pallav shares the secret sauce of successful Bootstrapping in this heart-to-heart chat with Sandeep Todi, iSPIRT volunteer and himself a bootstrapped entrepreneur. Listen to him talk about the challenges he faced and how iSPIRT #BootUpINDIA will help you as a Bootstrapped startup. You can view the video and post a question to Pallav right here.

Bootstrapping, not an excuse for being cheap #BootUpINDIA

I witness the scenario on both sides of the table.  A startup provides a solution to a problem; solves it elegantly. And makes it seamless for its users. They use a few other products too – that solves some of their non-core functions elegantly. They grow out of its free usage, but they don’t pay.

And they sit and break their heads, day in and day out as to why on earth,  many of its heavy users not converting. I too do wonder why.

Karma, is a bitch.

We don’t negotiate with the entity that provides the electricity, nor the ISP who provides the pipeline, nor the bank who keeps our accounts, or the lawyer who manages our legalities, or the accountant who keeps our day sane. Why then are we being partial to teams solving our operational headaches with tools they built, burning midnight oil? Especially if its a tool that does its job and is a revenue expense for you.

We don’t bicker about the sunk costs, but are cutting corners on the revenue expenses. You understand how that makes no sense whatsoever right?

If you really want to throw around bootstrapping as an excuse, take a lower bandwidth plan and save costs. Buy a Dell or a Lenova and not a Macbook Pro (or one with a retina display). Keep a feature phone, nor a smart phone. Work out of your bedroom, and not a fancy office. Print your business cards on modest paper, and at your corner print store, rather than throwing around Moo cards; catch the train or the bus instead of flying around or travelling in luxury. After you’ve followed all this, if you still are short, then use a hack – use google docs, notepad, or one of the many free tools out there which do the job, will make you put in twice in amount of work and time – because it looks like time is the only currency you have. If your time is precious and you value it, and you are a growing business, then you have no excuse to be a cheapo.

You can spot a good team, by their ability to differentiate, what’s their core competency, where they can make a difference, and what is non-core and can rely on dependable tools, and pay for it.

Next time, you look at the conversion funnel and ponder why your customers are not converting, make sure you are not looking at a version of you on the other side. Bootstrapping, and being a cheapo, are two very different things.

Bootstrapping – What To Do When You Get Rejected #BootUpINDIA

Very few product companies make it big without taking external funding. The stories that are shared in the industry are all about companies that have targeted large markets, hit a phase of extremely high growth and have taken external capital to fund that growth. There are very few large (in terms of size / impact) companies that have bootstrapped their way to a product company. This is because products are notoriously hard and take a long time to build and become profitable.

Assume that you have spent a year or so building a prototype for a product and got some initial customers and realised that you need more resources to complete your product. For whatever reasons, assume your proposal gets rejected by Angel or Venture investors you approach. This comes a huge setback to you. Not able get the resources you hoped for means that you have to go back to the drawing board and rethink your plans. What should you do now? Here is a basic outline to help you rethink. None of this advice is new, but it would still help to put it in the context.

Understand Why

The first question to ask is, are you planning to be a large company? A large company does not mean a profitable or successful company in a niche market. A large company is a company that addresses a large market and needs to reach a sizable revenue, say $50 million in 5 years. If you are not targeting a large market, you are probably not looking to become a large company.

If you are not attempting to break into a large market, you are probably not of much interest to investors or you may not even need that much investment. Products built for niche markets are easier to break and sustain and if you survive the initial torrid years, can be very profitable too. The trick is to survive the torrid initial years.

Get Into Hermit Mode

If you are totally committed to be a product company and have no other sources of funding (i.e. services), you have to conserve every bit of cash you can. This means you cannot hire. Now before you think that this will be dreadful, think about the power of one. Gabriel Weinberg of DuckDuckGo was a one man army against Google for many years. His post on not hiring changed my thinking a lot. Evan Williams ran Blogger.com all by himself after he could not pay salaries to the team. Also read blogs that celebrate bootstrapping, like 37Signal’s SignalVsNoise.

Learn All Skills

This means that you will have to learn all the skills yourself. These include:

  1. Web Design
  2. Writing
  3. Software Development
  4. Deployment
  5. Growth Hacking
  6. Web Marketing.

Though it may seem like a long list, it is not that hard. Tools and help are readily available and you will get better as time goes on. Read this very interesting story recently shared on HackerNews of a developer who built a simple product as a side project and that is now earning $50k per year.

Teach and Share

One of the big advantages of our times is that it is very easy to publish something. So keep a blog and keep updating it. If you write honestly and share your learnings, you will start building an audience slowly. Slowly you will get recognized as a thought leader in the space and people will start respecting you. Also by sharing your learnings, you will present a face to your product. People like to buy from real people and feel a human connection, rather than buying from nameless, faceless large companies.

Tune Out From the Ecosystem

This is a tough one, but understand that the goal of the ecosystem is to celebrate funded startups and is stacked in the favour of those who get funded. The reason is simple, it is an existential reason for the ecosystem. If more and more bootstrapped companies start becoming successful, then what is the use of the ecosystem? So don’t waste your time attending networking events or making presentations too often at these places. It is more important that you utilize your mindspace in creating something unique and beautiful.

Stay in The Game

Finally, the most common advice you will get from anywhere is “hang in there”. I know there is this other one that goes like “he who runs away, lives to fight another day”. But in this phase of your life, the most important word for you is grit. You will have to find a way to stay motivated. This means that you will have to slow down and think of this as a marathon. Work reasonable hours, take breaks, do what you like, read books etc. If you are feeling lonely, think about Nelson Mandela who spent years in solitary confinement or if you are feeling under appreciated, think about Vincent Van Gogh, who was never celebrated in his lifetime. Or Galileo who was killed for discovering the truth and challenging conventional wisdom. Progress in this world has never come cheap.

How we funded and developed our products through services (Bootstrapping)

You will find many of the articles on bootstrapping on the web. But today I would like to share with you how we developed our two products Shimbi CMS Budo and ShimBi MyBilling through Bootstrapping.

“The basics of bootstrapping is simple – Earn money, spend less” Jofin Joseph.

When we started ShimBi Labs in 2005;  we had a clear vision that we will develop 4 best products for SMBs (Small and Medium size Businesses). But the situation was that neither we had enough funds to develop our products, nor an idea about products to be developed.

First and foremost challenge before us was to raise funds to build our dream products.


We had decided to opt for Bootstrapping (as no other options were available.  Angel investor or VC will not fund any biz without even a product idea!)  So our first focus was to have sufficient funds for the survival of the startup and then to invest in product developments.  For that,  we chose very unconventional market for Indian software company; we decided to focus on Japan as our primary market. Yes, market with high potential and hardly tapped by Indian software industry.  At the same time, not an easy task to enter the industry if we had not lucky enough to get the industry veteran of Japan as our Mentor, who was courteous and introduced us to potential customers.

With 9 years of rich experience in providing services (software development and consultancy) in Japan, we got better insights into the problems that can later evolve into a product.  We understood and learnt how to achieve the highest quality in any software. All this, later helped us build our own products.

While doing this we never forgot our original vision of building products for SMBs. We had to remain extremely careful to keep the service track completely independent of the product track. Thumb rule was: never use the same developer to be working on the services.

Product Ideas

So how we got ideas about Products?

Honestly we never brainstorm. “Necessity is the mother of invention”  Exactly !!! that is what had happened.

1. Content Management System

As a service company, prime necessity is to have an official website with the ability to update it often. Being all techies in the company, as a founder; I was forced to quit coding and focus on all other activities necessary to run the business, which includes regular website updation. For this, I was in need of a website with easy to use CMS (Content Management System).  Surprisingly, instead of using the existing solutions available, we built our own CMS. That’s how CMS Budo taken birth.

2. Online Invoicing Application

Next, it was essential to have Simple Invoicing Application.

Being all engineer company, we were reluctant to learn any accounting software. So I decided to learn few basic things, about how to write an invoice and started making them in Excel. Wow that was a huge mess, almost every second invoice was with some silly mistakes. Tracking them, save them in folders and send reminders was the big pain in the ass.

I decided to repeated the same idea (as CMS Budo) of having our own online invoicing application, instead of availing the solutions that already exists in the market. Later, it was named as ShimBi MyBilling!  First we sold it as license version to 100s of customers, and now we converted it into SaaS (Software as a Service) model.

We realise that these softwares (Web Applications) are useful for us and making a lot of sense. Creating value, increasing efficiency. Now we can spend more time on our core competency.

We also realised that if these softwares (Web Applications) are useful to us then they can be useful to other SMBs too.

Find customers before you build

To validate our idea we started to communicate with our existing customers, and many of them were readily convinced.  They asked us for demos; it was a great chance for us & we made use of the opportunity without any delay. Right after the demo, several feedbacks and customisations’ requests flooded in our mailbox.  Hence, we decided to make CMS Budo and MyBilling generalize & convert them as a product useful to all. We convinced some of our customers to fund in the customisation and development of the product and in turn offered them a copy of the full product at a nominal price.

As a result, today both the products had crossed several iterations and versions in the market. All by bootstrapping. I strongly believe that the product must create value for small businesses than excite VCs.

  • ShimBi MyBilling is available as SaaS
  • and CMS Budo will be soon available as SaaS

Goal is to build Innovative Solutions … Simple, Powerful yet Affordable

Please share your experience of bootstrapping with us.

Guest Blog Post by Siddharth Deshmukh, Founder and CEO at ShimBi Labs. A passionate about product building. Single minded, manic, in pursuit of quality and excellence … I am an entrepreneur building our product – MyBilling and CMS Budo.

On that age old debate, Bootstrapping Vs Venture Capital

“The best way to do something ‘lean’ is to gather a tight group of people, give them very little money, and very little time.” – Bob Klein, chief engineer of the Grumman F-14 program.

I first came upon this quote on Paul Graham’s website, and it always intrigued me, the small detail about the money – it could be little or a lot, but money is a factor, and a very important factor at that.

Bob Klein’s F-14 program is now legendary in aviation history; the Tomcat was one of the airplanes I was familiar with even in the Indian Air Force circles of the 90’s. Designed to fulfill duties both as a air superiority fighter as well as a naval interceptor, the F-14 Tomcat was easily one of the greatest airplanes ever built then, and Bob Klein did it, as he said, by keeping it fast and cheap.

Bootstrapping or Venture Capital

So is that the blueprint to build something amazing and meaningful? To just sit down, tighten your belt and do it, what we call bootstrapping, or is embracing the stability of venture capital a better way?

It’s an important question in the context of the product startup, and I believe there’s no right and wrong answer to it.

Last week, in a conversation with iSPIRT’s co-founder Sharad Sharma, this topic came up and proceeded to lay claim our entire discussion. When these days a bootstrapped startup is seen as something of an aberration, and scale is seen as validation, Sharad maintained that there’s no formula here; both these paths can lead to success, if followed with caution and perseverance.

Quoting Sharad –

“When you are building something that hinges on a market prediction, that so and so market will be worth so and so in 2025, and you want to be there to fill that gap, then VC funding for the idea and for you is probably the way to go. But if you have no such idea or bet on the future for what you are building; it’s much more experimental (which is ok, that’s how innovation happens), then bootstrapping might make better sense, even if just for the sake of flexibility and more control.”

I could find no reason to disagree.

The Zoho Example

The success of Zoho, the poster child for the bootstrapped product startup, is now quite well known. And all of it with not a penny in external funding. The company is growing, has always been growing, and has just announced a bold move to make one of its flagship products completely free. These are big decisions, made strategically and with a much larger gameplan. Zoho has always stood for something, and its clear, unmuddled decision making has been one of its strengths through the years.

Would Zoho have been able to make such decisions if a member of its board was an investor? Perhaps, but not very likely.

Which I think is significant. What ails the ecosystem these days is a ‘go big or go home’ attitude that typically results in an organization and a product that scales far ahead of its time, resulting in chaos and sometimes even graver problems. Zoho didn’t fall into that trap, it took its own time, and now stands tall as an organization.

Sometimes VC money, though a huge competitive advantage, can come with its own baggage, and the pressure of having to execute something extraordinary all the time can weigh down on doing what actually needs to be done.

But sometimes that baggage is exactly what you want.

The Zomato Story

When Deepinder Goyal started Zomato off, he certainly would not have known that the product he was building, a restaurant review and recommendations site that is today used in 40 cities across the world, would change the entire landscape of eating out. He would have had a vision, but of course he could never have knows what exact shape his business was taking. But he knew he had something; he raised funding. Venture capital stood him up as he expanded hard and fast and cool. It was great to watch.

Would Zomato have been able to scale the way it did without venture capital? The answer is an emphatic no. The awesomeness of the Zomato model rested on its ability to execute, and they did it magnificently well; waiting was something Zomato could not have afforded anyway.

In this case, the VC prerogative to execute fast and hard tied in perfectly with what Zomato itself wanted to do. What resulted is Zomato’s incredible success as a platform, a lovely example of using funding to take an idea big.

“There is no formula”

Again, though, Sharad put in a word of caution – it all depends. This may be a good rule of thumb but there is no formula. Product startups are all different from each other, and what works for one is not at all guaranteed to work for another.

And this is when it struck me that there’s a third category here as well, the perfect example of which is that darling of the younger generation, Instagram.

The Instagram Model

Instagram started out as Burbn, a location sharing app with the option of taking a photo thrown in, but then pivoted to the unbelievably successful photo sharing app we know. And they were funded from the beginning by Andreessen Horowitz and Baseline Ventures.

So here’s a venture funded company, which was trying to build something purely ‘social’ and ‘viral’ in parlance, and the VC’s let them experiment to an extent as to change the focus of the product itself. This is the third kind, the company which adds the no-commitments freedom of bootstrapping to the competitive advantage of venture capital, and becomes a sort of hybrid, absorbing the good in both approaches and ridding itself of the bad.

An important point here is that Instagram never really had a monetization plan in the first place (other companies like this include Tumblr, Twitter, Foursquare, and so on). Positioned for acquisition because of the exponential increase in their user base, they could tread this middle ground with the confidence of knife edged focus.

WhatsApp also did something similar. When Jan Koum and Brian Acton started working full time on WhatsApp, they already had $250000 in funding from friends, which meant that they had the freedom to innovate and at the same time had the stability of capital.

The Last Word

In 1986, Tony Scott’s Top Gun hit the silver screen, in which a young man called Tom Cruise flew a F-14 Tomcat to box office glory and superstardom. The immediate aftermath was that the US Armed Forces were overwhelmed with young people wanting to sign up for service, so much so that the US Navy opened recruitment desks outside cinema halls.

The Tomcat became the symbol of a generation, the high of the air and the allure of uniform combining to give an era its own narrative. And it was exhilarating.

It was a small team that built it. With the entire might of Grumman (later Northrop Grumman) behind them, Bob Klein could have done it in any way he wanted, but he and his team chose the best way for the specific thing they wanted to do, and executed.

And that’s exactly what we can learn from them – that there’s no ‘one size fits all’ answer to this question, and the ecosystem should encourage bootstrapping as as much of a viable pathway to growth as venture capital.

As for the startup, it should choose wisely.

A product company can begin earning revenue only after the product is built.

A product company can begin earning revenue only after the product is built. Significant upfront investment is required in engineering and sales. As revenue picks up, expenses continue to mount for ongoing development and sales, and for establishing a new support team. It may take years before the company’s monthly receipts exceed the outflow. This is known as becoming cash flow positive. Adequate funding is therefore critical for a product company to survive.

As a rough estimate, a product business may have to invest anywhere from Rs. 50 lacs to 2 crores (USD 100K–400K) before they start selling. This is assuming that founders take very little salary. If this money is available somehow, the founders can concentrate on building and selling the product. If not, the company is forced to adopt non-ideal strategies. The previous chapter discussed options such as working on the product part-time, or generating cash by providing training, consulting or services. If founders have to multitask, it delays the product further, creating a higher risk for the viability of the business.

In the bootstrap phase, every rupee counts. Each aspect of the company’s operation must be optimally managed. At the same time, you cannot afford to compromise on product quality or delay the time to market. The two previous statements appear to be contradictory, but building a successful business is often about prioritising and choosing correctly between the conflicting demands.

The First Mile: Forming the Team and Signing Up Clients 75

For example, if cash in hand is an issue, PCs can be leased with conversion to ownership after 12–18 months. This is effectively like a loan (the interest is built into the lease cost). Hardware and software licensing cost can be reduced by using a common server and thin client for each engineer. You can have two servers to avoid single point of failure. Only servers need to be upgraded over time.

Making progress with limited funds is a struggle, but somehow enough money has to be made available through personal or angel funds, or some side business. With the right product, and after market validation with good customers and revenue, VC funding may become possible.

Can it be done differently? Let’s return to the film industry example. There are mega-budget movies in which producers spend enormous money on stars, sets, foreign locations and publicity. The film must attract a large audience, and earn hundreds of crores of rupees to become a super-hit. When that happens, the director is in great demand, and lead actors become superstars. If it is a flop, it is the producers who lose the most. At the other extreme, you have niche films that arrive relatively unnoticed or play in festivals. Made from a lean budget, the film may have an interesting script, excellent acting and good direction. The audience may initially be restricted to those who appreciate such movies, but it may grow by word of mouth publicity, making the movie a success.

Similarly, some entrepreneurs have conservative goals. For them, it is a lifestyle choice of being independent and having their own company. You will find many such businesses that are self-funded, largely debt-free, reasonably profitable and generating only modest revenue after several years. They usually provide a mix of services and one or two products. They keep adjusting their offerings over time to adapt to the changing market and available cash.

However, if your goal is to build a really successful company that gets acquired or goes public, then outside investment is almost a prerequisite. It is rare to achieve a revenue ramp that is steep enough to provide adequate cash.

A website offering advice and networking to entrepreneurs, StartupNation has designed an ‘Odds of Success Calculator’. The online tool rates a business based on eight risk factors. Interestingly, none map directly to the product idea. Two each are linked to the management team’s experience and market potential. But as many as four relate to finances: invested capital, difficulty in obtaining funds, quality of financial management, and degree of business planning. This indicates the importance of finances to achieve mega success.

There is no right or wrong goal—you just need to be sure about what kind of company you want to build and proceed accordingly. If you are ambitious, and are in fast growth mode with revenue exceeding Rs. 1 crore, then it’s time to approach institutional investors.

Reprinted from From Entrepreneurs to Leaders by permission of Tata McGraw-Hill Education Private Limited.