Bootstrap Finance

The Art of Startups

Introduction
• ‘Big Money’ Startups and ‘Bootstrapped’ Startups are the two models
of entrepreneurship
• Raising Money has become a disease
• Entrepreneurs are wasting lots of brain power to raise money
• Professionals with MBA are venturing into entrepreneurship. But only
after raising big money first
• But, the greatest challenge is not raising money but managing
without it
A Poor Fit
• Many entrepreneurs with promising plans face rejection from VCs
• Often entrepreneurs fail to qualify as they do not meet their criteria
• VC incur significant costs in investigating, negotiating and monitoring
investments.
• Additionally, they can back only few ventures
• Study by Venture Economic Inc. states that 7% of investments account for
more than 60% profit, while 30% are total loss
• Most startups also begin by pursuing niche markets that are very small
• Entrepreneurs typically in service business follow a ‘me too’ strategy
instead of original concept
• Lastly, many entrepreneurs have energy and enthusiasm but not credential
Hidden Cost of People’s Money
• Getting external funding early compromises on discipline as well as
flexibility
• Bootstrapping reveals hidden problems that has to be forcefully
solved
• Outside investors also hinder entrepreneurs that follow try-it, fix-it
approach that is required in uncertain environments
• Conflicts with investors and managers are a fact till the entrepreneurs
has earned their credibility