Bootstrapping your business

FusionCharts @ Startup Saturday, Bangalore

Bootstrapping your business

Pallav Nadhani
Co-founder & CEO


Disclosure
#1. Views are personal and biased towards products
#2. There is no one-size-fits-all startup strategy


About Me
Started FusionCharts when I was 17. It wasn’t actually meant
to be a product. It was originally a way to make pocket money

Have offices in Bangalore and Kolkata, with 60+ members

Totally bootstrapped company with over $5M in revenues. No
external funding till date

Today we’ve 20,000 customers and 450,000 users across 118
countries, including 80% of Fortune 500 companies

Power over 1 Billion charts per month


Why we never raised money?
In the early days, no VC would have funded a 17-year old guy with
plans for world domination

VCs wouldn’t have perceived charting as a viable business at all

Would have taken focus away from developing better products to
getting funded and building hypothetical financial metrics

Raising money could hurt us, as we would then have always waited
for the "perfect" product, when the "good enough" version got us
customers and more importantly feedback

Money from VC doesn’t guarantee increased business

We love cash from customers way more. Gives us operating
freedom.


And why I suggest not to raise $$$ before validation
Getting funded by a VC is NOT a market validation of your idea

If you do not have a validated idea, you do not have any
leverage against the investor. And hence you might be giving
out equity for cheap.

Getting funded takes time, much more than you think.

You may find it easier to raise capital once your business has
further developed its technology and has a sales track record.

Starting a start-up is so much more cheaper now. So why not
give it a shot?


“The odds of raising venture capital are equal to the
odds of getting struck by lightning while standing on
the bottom of a swimming pool on a sunny day.”
~Bill Reichert, Garage Technology Ventures


Bootstrapping
a self-sustaining process that proceeds without
external help


“a common sense approach to building a business by
spending all the available resources as frugally as
possible at the launch and using your own personal
assets to fund the early stages.”


Reasons you would bootstrap
You want to run the show

You want to validate the idea, before raising money

You have not been to able to raise money, but still believe in
the idea


What personal assets would it take to do so?
Personal Savings

Credit Cards

FFFs

Or, if you have a service business or consultancy by the side to
fund the product


Specific areas where bootstrapping works better
Niche areas, where larger players wouldn't have interest owing
to small market size

Research oriented field, where you have made a significant
discovery and monetize it

Where demand is pull based, rather than you having to
educate the market, create a need and subsequently fulfill the
need

When pitching against an existing larger player with existing
market share, by being better in a specific area


3 phases of bootstrapping

Finding product-user fit

What product to build?

Finding product-market fit

How/whom to sell?

Scaling

How to keep growing?


Phase 1: Finding the product-user fit
What you have at this stage: a vision and a set of untested
guesses

Objective: to find a problem worth solving

How to do it: formulating a set of hypotheses and then talking
to prospects, surveys, landing pages, reading competitor's
forums/blogs

How long does it take: Few weeks to a couple months,
normally


Is there a need for such a product?
Is your product a pain-killer capsule or a vitamin capsule?

Is the customer's pain beyond his tolerance level that he'll
need to fix it?

Do enough people have this pain, to classify as a market?

Is the pain long temporary or long-lasting?

What are the current ways to fix it and how effective?

Will people pay for the fix?

Will they pay up-front, or near the closure of the deal, and not
ages after (think government projects)?


How can you reach such prospects?
If you want it to reach a global audience, the distribution has to be
through Internet. Costs nearly nothing and helps you become
global. But, what if your audience doesn’t buy online?

If local, how local? How many people can your founding team reach
out each single day, after doing all other activities?

Is there an existing demand (pull based), or will you have to create
a demand (push based)?

Do you have to invest in and wait to acquire a large audience,
before you start monetizing (think Twitter, Facebook)?

Will you need to change the habits or culture of your target
audience, for your product to be adopted (think iPad)?


What internal capabilities does founding team have?
Can the founding team design and build the product, or would
it take a very large team to build the first version?

Would it take a lot of capital in terms of machinery, real estate
or other assets?

Would it need a large sales team to get early meaningful
revenue?


Everything starts small
Build MVP for everything - marketing, website, internal tools
etc.

Ship early versions of your product and test with customers in
the field, rather than perfecting the product before shipping
the first release. Cash flows only start when you ship.

Test the market. Ask them how they would use it, what
features they might like to see and how much they would
consider paying for it.

Keep reiterating. Measure what works and kill what doesn’t.

Don't focus too much on competition. Know your "whys" fully
and consistently work towards the same.


For the early versions, if you launch without feeling
slightly embarrassed, you're probably too late.
Customers will tell you what they want!


It’s ok to suck initially. Everyone does.


It’s not the big that eat the small.
It’s the fast who eat the slow.

So, do not be scared of competition!


Be efficient with $$$
Start your business at home or share an office
Barter for services and products with others
Use sweat equity with your initial team, instead of high salaries
Buy used, cheap equipment for internal use
Avoid travel as much you can. Use web conferencing
When traveling, stay at friend's place
Get free passes for networking events by being volunteer
Hire young, cheap and hungry people. Most other biggies won't hire
them. So they'll be more loyal to you
Use interns, cost effective. Once you have money flowing in, hire
adult supervision to manage them


Phase 2: Finding the product-market fit
What you have at this stage: a product that solves a pain point
for a set of users

Objective: validate business model in search of a scalable
business model

How to do it: figure the right pricing, distribution channels,
marketing approach

How long does it take: Few months to an year


Figure the initial business model to get enough money
Charge your customers

Create emotional lock-ins for your customers in your product

Focus on cash-flow, not just profit. Try to be get short sales
cycles and short payment terms

Forecast bottom up, not top down. How many people can I
reach today to tell about my products?

Keep tweaking the business model to enhance output


Pricing is crucial
Do not price too low. People tend to believe you get what you
pay for

Give multiple pricing options to customers to see which one
sticks the most. Keep experimenting with these options to get
an optimal value

If in a commoditized market, could use competition’s pricing
as a benchmark. Figure out how to project a lower 3 year-TCO

If highly differentiated product, then use value minus pricing
model

Build quality of revenue in form of annuities


Focus on marketing, not just sales
“On the Internet no one knows you're small”. So, leave a big
impression.

Use all the free marketing channels you can - guest blog posts,
articles, social media, PR, podcasts, videos, whitepapers etc.

Figure out creative ways to build credibility, when small.

Create a personality around your product to differentiate it
from rest

Positioning against the leader is a good way to get your word
out, without educating the users


Give people more reasons to remember you than just
the product
Product is just a part of the equation


Phase 3: Expanding on what you did right
What you have at this stage: a validated product and model to
scale

Objective: getting the product to as many customers as
possible, building internal processes, automate as much as you
can, forming an advisory board

How to do it: expanding internal teams, implementation of
scalable processes, strengthening your team, hiring business
unit heads

How long does it take: As long as you want to keep growing,
keeping it independent


If you’ve reached Phase 3, you don’t need to listen to
my advice!
Go ahead and grow your business!


Just ensure
You’ve a process that’s scalable enough to handle business that
doubles every month.

You’re screaming out loud to the world about your success!
Success begets success!

Automate processes as much as you can, to stay lean.

Be very choosy about your employees!

Cut down on products or efforts that are not working. Don’t be
emotional!

Don’t try and do everything!

Be very focused!


What next?
If you're happy doing what you're doing, have a great team, are
making money, and happy with the lifestyle business, keep
continuing. There's nothing wrong with it. Not every business
has to be a billion $ business.

Raise funding only if you clearly know where you can use it
post product-user and product-market fit has been discovered,
and that putting in $1 will yield more than $1.


Overall
Bootstrapping is a roller coaster ride. You will experience the
highest highs and the lowest lows, possibly both in the same
hour

Cultivate a hobby that can ride you through the lows

Have a support group of friends, family, other entrepreneurs
and mentors who understand what you are doing.

Fix mistakes early. When you're small, you know almost
everything about your business. So detection is quick, and so
should fixes be.

Whatever you do, ENJOY the ride! You got into it by choice.


Funding doesn’t guarantee success…
but success almost always guarantees funding!


Thank you
Questions?

I can be reached at pnadhani@gmail.com or @pallavn

Bootstrapping your business

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