Most believed that without committed funding by a venture capitalist (VC), they cannot start, or will not succeed. Most entrepreneurs believed it’s great to raise venture capital at the start. But is it really?

Many successful companies raised venture capital early in their life cycle—and there are many more that did not. Microsoft Corp., Hewlett-Packard Co. and Dell Inc. are three examples. Closer home, Infosys Technologies Ltd, HCL Technologies Ltd and Reliance Industries Ltd and many other first-generation successes were bootstrapped and built the hard way. Most successful companies and entrepreneurs reached where they have without raising venture capital.

In the company where I work, we managed to get external funding after we had bootstrapped for 10 years. We were delighted to raise capital when we did. In hindsight, it was the bootstrapping experience that taught us lessons that saw us through later years. Bootstrapping is a test of commitment. If you are really committed to your idea, you will muster up the courage to quit your salaried job, put in whatever little capital you have, or can raise from friends and relatives, tighten your belt and somehow execute your idea.

If you aren’t willing to bootstrap, then question your entrepreneurial skills. VCs understand this and prefer to support good teams that are bootstrapping rather than professional managers who are still in secure jobs, but have a nifty PowerPoint presentation.

Bootstrapping helps you to validate your concept for yourself, your team and prospective investors. Validation would mean the start-up team is in place, the product is ready and there are paying customers who are happy with it and willing to buy again.

Once your concept is validated, investors come in with much greater confidence and give you a much higher valuation than they would have at an earlier stage. In other words, you get to keep a larger share of your company for the same money. Most entrepreneurs don’t realize the importance of this until afterwards, should the company go on to become valuable.

Bootstrapping makes you stretch 24x7. It makes you think about survival, how to break even, where the next rupee is going to come from and where it should be going, or not going. You innovate more, prioritize and focus on essentials. You manage your cash flows better, go out into the field and sell to customers yourself and put in 20-hour workdays if required. It instils a culture of frugality in the company.

This is a priceless asset.

At, when we were bootstrapping, we had to break even to survive. We found ways of doing that somehow. So, by the time we raised money, what we had to do was to scale up and enhance a validated business model. The fiscal discipline that bootstrapping enforced on us is now a part of our DNA. It ensured we went through the meltdown and became profitable with 40% of the capital still in fixed deposits in the bank.

Bootstrapping ensures that you recruit missionaries, not mercenaries; after all, you won’t have the money to pay high salaries. You will pay in stock rather than cash and non-believers will simply not join you. This core group of believers will be the people who will see you through tough times that every early-stage enterprise must go through.

It takes a lot of time and effort to raise money—preparing the pitch and plan, doing the rounds of investors and meeting interested ones several times, negotiating and signing the term sheet, dealing with lawyers, going through due diligence, negotiating and signing the final agreement. It takes six months if you are lucky. This is precious time you can instead spend on building the product, putting together a team and finding paying customers.

And then, after you raise the money, you have to manage the investor; and that too takes time. When you raise money, you don’t just get the capital; you also get the capitalist. He will be on your board and have ideas and suggestions to give; it’s called value-addition.

But you might want to do things your way. It might be a good idea to take the business forward till you have something concrete to show and then raise capital.

So, commit yourself, validate an idea, build a team and be an entrepreneur. Bootstrap now, raise money a little later.

To read Sanjeev Bikhchandani’s earlier column, go to

The author is co-founder and chief executive officer, InfoEdge (India) Ltd, which runs the Web portal He writes a monthly column on careers and enterprise.

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