Many people believe VC funds determine life & death for a startup. These entrepreneurs have shown that Passion, Patience & Focus are more important than money in determining the success of a startup.
Hi Everyone today we will talk about How Several Startups Succeeded Without VC Funds.
As VC funds slows down, early stage Entrepreneurs and those looking to do something on their own are likely to turn away. But anybody who studies entrepreneurship will likely find that passion and patience have inevitably trumped money in determining the success of a Startup. Money is often a catalyst. But there are also some who think venture funding is a bane that ultimately, success is more about you and the problem you are trying to solve.
Tackling the Odds
Here we will discuss about the Fascinating Journey of 7 Startups that succeeded without VC Funds. There might be some ups and downs that the Entrepreneurs have to face in their struggle days but ultimately they believe in them and in their startups and bounce back with flying colors without taking any Angel or VC Funds.
Zoho is probably the most storied bootstrapped Indian tech Startup. Founded in 1996, the company had acquisition offers 2-3 years into the business. Zoho too went through several pivots, before it settled on what it is today well-known for a suite of online productivity tools and enterprise IT management software, products that are giving stiff competition to the likes of Microsoft and Google.
Vembu of Zoho believes the culture of the company changes when VCs enter. “There is a ‘Clock is Ticking’ mindset and the need to reach a destination. On the contrary, for us, it is a journey,” Vembu says. Wouldn’t Zoho have grown faster with external funding? Vembu says it’s difficult to answer that question. “What I know for sure is that we would have been a very different company and I wouldn’t have liked that company.”
“The fact that VCs or PEs make an Offer means they See Potential in the Business. But our Answer then and Forever was No”
– Sridhar Vembu, Co-founder, ZOHO
Most of Zoho’s ads and designs are also internally developed. Vembu believes every employee needs to be given the opportunity to unleash their creativity, something that a bootstrapped company can afford to do. “When a VC invests in your company, you are part of a portfolio. They would like you to stick to one thing and wouldn’t want a conflict (with other portfolio firms) if you choose to diversify. We have had the freedom to reinvent,” Vembu says.
ExportersIndia.com started in 1997 doing several web-based activities, including an online platform for businesses to find other businesses. It faced everything from connectivity and technology hiccups to the dotcom bust in its early years. Yet, 20 years on, without taking any external money, the company is still in business, it’s one of India’s largest searchable B2B marketplaces and exporters’ directory, it’s profitable, and boasts 25,000 paid clients.
Gupta of ExportersIndia.com says startups need experienced hands and patience to grow evenly and profitably. ExportersIndia was profitable almost right through, even before its course correction post the dotcom bust.
ExportersIndia.com founder Sunil Gupta agrees. He says he got the elbow room to change track when things got tough because he did not have external funding. “We moved out of several areas. VC funding is attractive but investors tend to dictate policy making,” says Gupta.
Passion & Focus on the Product is the Bible for Most STARTUPS.
Shalin Jain set up Tenmiles in 2000, when he was just 18. He says every time they built a product, it became profitable in 6-12 Months. “It took us 2 Weeks to build our first product and it gave us revenues for the next 9 Years. I was approached by several well-known VCs, but I was clear that I wanted full control of the product,” says Jain, who has rebranded his company to HappyFox, his flagship product.
Eco Rent A Car
Aditya Loomba, joint MD of luxury car rental company Eco Rent A Car, says VCs also focus on acquiring customers instead of acquiring profitable customers. “The startup world is living in hope that they can acquire customers by spending big and showcase that to sell the company at a higher valuation to other investors.” Loomba says he never discounted to acquire customers. Started in 1996, Eco Rent A Car has gone from a fleet of Maruti, Contessa and Ambassador cars to Mercedes Benzs, Audis and BMWs and a network spread across the country.
Pallav Nadhani was bored with Microsoft Excel and his passion to build interactive charts when he was just 16 has helped him build a company, FusionCharts that now delivers gross margins of over 75%. He hasn’t taken a rupee from VCs.
Planning the VC Funds
Some Startups took funding many years after their Inception, and when they felt the money would help them address a particular business opportunity quickly or they think VC Funds will help them in Expanding Quickly in the Competitive Market Scenario.
IndiaMart, the online marketplace that assists manufacturers, suppliers & exporters to trade with each other, did so when it found the domestic market growing rapidly. The company, founded in April 1996, was for a long time focused on the export market. “In the late 1990s and early 2000s, net penetration in India was not great. But from 2008, the domestic business started to outgrow the export business,” says founder & CEO Dinesh Agarwal. At that point, IndiaMart raised VC funds after 12 Years of its Inception from Intel Capital and later from others.
Suresh Sambandam says when he started Orangescape, a platform-as-a-service for building applications, in 2005, he did not even know what venture funding was. “We knew only 2 ways to fund a business First is put your own money and Secondly Borrow from the Bank,” he says. But 7 years later, he did raise VC funds from Indian Angel Network when he found an older product failing and was launching a new tool. “Since we had angel investment, it was easy to pivot. Had we been VC funded, we may have been acqui-hired,” Sambandam says.
Sambandam’s advice for New Startups : “Startups must figure out unit economics and prove the model at a small scale before considering VC funding. I have a simple formula, when in doubt, bootstrap.”