Bootstrapped
vs
Funding
Bootstrapped
Startup
Bootstrapping is the process of building a
business from scratch with no external
investment or minimal outside capital.
This is a way to finance small businesses by
borrowing resources at the owner's
expense, without sharing equity or
borrowing huge sums of money from
banks.
Pros
Freedom in decision making
Bigger Ownership
Lesser risk of debt
More focus on product
Cons
Limited Capital
Risk of failure can be high
Personal stress
Bootstrapping continues to be an attractive
option for startup entrepreneurs. It can
bring a lot of benefits and be aware of the
risks.
"Entrepreneurs should understand that
bootstrapping business is not about
chasing valuation, instead focusing on
making one's business sustainable and
profitable"
Bootstrapped Startups
Bootstrapped
In FY20, Zerodha witnessed a profit of INR 424 crore,
which more than doubled, becoming INR 1,122 crore in
FY21. In FY22, Zerodha recorded a profit of INR 2,094
crore ($255.98 million), which is an 86.6% increase from
the previous year. In FY23 , profit is about 2907 crore.
Funded Startups
Wealthy individuals who invest their personal
funds into startups,usually in exchange for
equity or convertible debt. They often invest
in early-stage companies. Advantages of
funded companies include accelerated
growth, access to networks and expertise,
and the ability to scale quickly. However,
taking on external funding often means
giving up some degree of control and
ownership, as investors typically expect
equity and influence in decision-making.
Pros
Excess to Capital
Experienced Investors
validation
Cons
Loss of Control
Equity Dilution
Investor Expectations
Some sources of startup funding include:
Angel investors
Wealthy private investors who provide money for startups in
exchange for a stake in the business. They are usually the
first investors in a startup and are driven by personal beliefs.
Venture capitalists
Individuals or firms that invest in high-risk, high-reward
businesses, typically in their early stages of development.
Crowdfunding
A way for people to finance a new business venture by
donating small amounts of capital.
Startup grants
An award, usually financial, given by an entity to a company
to facilitate a goal or incentivize performance.
Funded Startups
Funded
In January 2019, Groww raised $6.2mn,In September
2019, Groww raised $21.4m,In September 2020, Groww
raised $30m,In April 2021, Groww raised $83m in various
rounds
Key Takeaways
if you believe that slow and steady wins the race,
then go for bootstrap startup otherwise choose
funded startup
go for bootstrap startup if you want full control over
your business
funded startup would include more financial risks as
a lot of money would be invested in your startup but
always remember more risk, more gain
if you want flexibility and no repayment issues, go for
bootstrap startups
if you want to invest a lot of capital in your startup at
a time, then go for funded startups
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