4 Ways Southeast Asian Start-ups Can Bootstrap Their Way to Glory
No investors? No problem
PHOTO CREDIT: Getty Images
Million-dollar exits and massive venture funding may make headlines, but we think those start-ups that have the guts to say, “Hey, we’re gonna go ahead and do this ourselves,” deserve just as much attention.
Going it alone has several advantages.
For one, your equity stake won’t be diluted. Think of it as owning most, if not the whole, of a smaller pie – via bootstrapping – versus owning a smaller piece of a bigger pie – with investors on board.
You also get to run the company as you please. Pieter Levels, an entrepreneur who has bootstrapped several start-ups and is writing a book on the topic, says this independence is one of the biggest upsides. “You can work faster without having the distraction of getting funding and maintaining it,” he says.
Bootstrapping also means you get to focus on your product. Says Aditya Herlambang, co-founder of Indonesia-based social commerce start-up Shopious, “We don't have any VC to deal with. We only have customers to work with. Hence, most of our time is spent talking to customers and making the product better everyday.” Unfortunately, Shopious – which was bootstrapped the first year and received angel investment the second year – couldn’t compete with VC-funded rivals and had to shut down operations this month. Still, Herlambang says, it was difficult but definitely rewarding. “I learned a lot more from my two years of start-up experience than from my two years of master's degree, to be honest,” he says.
The case of Shopious may be a reminder that bootstrapped companies may be more vulnerable to external forces – for instance, your industry’s landscape, market maturity, nature of competitors – but if you're dead set on going down the arduous yet fulfilling path of bootstrapping, here are 4 tips to keep in mind.
1. Be diligent with money
Proper management of your limited resources goes a long way.
Xurpas, one of the biggest tech companies in the Philippines, was started in 2001 with just $1,500. “What’s fascinating is that, all the way to our IPO in December 2014, we had no investors, no external funding, no venture capital, zero debt,” says president and co-founder Raymond Racaza. Today, Xurpas has a market capitalization of over $600 million. “So it shows the type of diligence my team has,” he says.
Be prepared to make some sacrifices to keep your company afloat, too. The founders of Shopious, for the first year and a half, did not take any salary. The money Xurpas earned in the beginning, the founders chose to invest back into their start-up. “You can dividend it out and enjoy the fruits of your labor,” says Racaza, “but our dreams and aspirations were big. So the money we earned, we put back into the company.”
Says Herlambang, “We monitor cash really, really tightly. Most of [the money] was [our own] or from friends and family, so we had to be really careful about it. We don't want to screw up the only asset we have in our arsenal.”
2. Be prepared to do mundane tasks
It's not uncommon for people in start-ups to assume different roles as needed. This may include doing menial tasks and running errands.
“We did things ourselves,” Racaza says. “I would roll up my sleeves and be the messenger. I would present during the mornings, pitch with my partners, then in the afternoon, if there's a collection, I'd be the messenger.”
3. Push your creativity to the limit
Resourcefulness and creativity are vital. Says Herlambang, “Since you aren't blessed with a lot of money in your pocket, you can't spend like crazy on stuff that non-bootstrapped start-ups spend on. Most of the time you really have to pick your brain on finding new and creative ways in marketing, engineering, hiring, etc.”
4. Build a stellar product
Says Levels, “You have to make a product that people actually want or you simply won't survive.”
This is important for early-stage bootstrapped start-ups like Shopious, says Herlambang. “...We wanted to have a good product that users like, so we can operate just from our customers’ money.” Bootstrapping Shopious meant slower growth compared to venture-backed start-ups, but that was a sacrifice happily made, he says.
“If we were to secure funding with VC, pretty much the game, most of the time at least to me, is to blow up the company valuations and aim for an exit – either IPO or [sell to] another company,” he says. “I do not really like to go that route. Our mission [was to build] a company that stays true to its customers and product. If we were able to find venture capital that aligns with our belief then we will consider, but thus far along our journey we [hadn’t found] one.” Here, Herlambang looks to Jack Ma for wisdom: “Customers first, employees second, and investors third. That's how I like to run things.”