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Bangalore: Over $40 million-a-year revenue business that sends more than $1 million to the bank every month in profits, AdventNet, that owns Zoho, was founded by Sridhar Vembu, is a 100 percent bootstrapped company. There was no investment money of any kind but only some family and friends. He along with Tony Thomas, who took a buyout from his job, developed software and started selling it to companies in Silicon Valley. Later, the business expanded to Japanese companies, who would buy the software, customize it and ship it with their equipment. Today, Zoho is a division of Zoho Corp, a privately held and profitable company, and is a comprehensive suite of award-winning online productivity, collaboration and business applications for small and medium-sized businesses with over four million direct users relying on it for their business, productivity and collaboration needs.
It solely depends on the founder of the company, whether to completely bootstrap it or raise fund from angel investors and venture capitalists. Each business and each entrepreneur is unique. It is important for the business owner to understand the risk that he or she can withstand. But why do most start-ups bootstrap instead of going for funding from the angel investors and venture capitalists? What is the pros and cons of getting funded?
The venture capitalists and angel investors invest in a start-up by acquiring certain amount of stake in the company. They control the various business decisions regarding hiring, product development, investments and many other aspects. This sometimes restricts the founder, as the founder is an innovator who better knows how to grow his business. May it be investment on R&D or hiring the kind of people or deciding upon the product to pursue and the market to enter, and others.
Independency gives them a flow to work accordingly and carry forward without having constrain of pressure on his dreams. But bootstrapping is not an easy task, rather it is fragile to be handled carefully. In the initial stages, instead of focusing on making profit, he should rather focus on getting the working capital, which is the most important element of any business, as they have a lot to look upon. Understanding personal economics upfront will make future decisions easier.
They can take advantage of the benefits provided by various government and non-government agencies, like incubation centers, for research and development of the product and understanding the market. A market strategy made prior to entering the market will surely help them to establish their business comfortably or rather with less pain.
But the most important factor is believing on self and the idea on which they want to work on. If one doesn't believe himself and his ideas, then who else will believe in the world. With proper planning, knowledge and implementation skills, the start-ups can surely forego the bootstrapping phase and enter into a broader business sphere where the size and potential of the business will attract the angel investors and venture capitalists.
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