Are Seed Investors in India More Curious About Bootstrapped Startups?

A bootstrapped startup is where funding for the company involves personal savings, money borrowed from or invested by family and friends, refinancing from the company’s cash flows, etc. A bootstrapped startup does not rely on bank loans, seed investors, or crowdfunding.

Bootstrapping a company involves a lot of patience with the process and confidence in the product. The rush and frenzy of startup investing in India are slowly rendering bootstrapping a lost art, with companies as young as a month old looking for seed funding.

The values behind bootstrapping a company - freedom, creativity, financial discipline, sustainability, resourcefulness, and dedicated efforts towards profitability - deter entrepreneurs who are looking for quick success with seed investors. However, these are the same values that are attracting seed investors in India to bootstrapped startups.

Why are Seed Investors in India Interested in Bootstrapped Startups?

Seed fund investors invest in any business for 3 primary reasons:

• They genuinely believe in the idea or the model
• They want to contribute to the economy/sector/market and uplift it
• They want to earn a high return on their investment

No matter the reason, seed investors in India rely on and follow market trends when investing. The current attraction of initial investors (angel investors, venture capitalists, etc.) is bootstrapped or self-funded startups. One of the primary reasons for this is that bootstrapped startups have survived the ‘Valley of Death’ - the no revenue phase - where most startups falter.

Certain domains like technology services, app development, digital marketing firms, etc., can be easily bootstrapped. They have a shallow valley of death and can get through with personal financing and some help from friends and family, especially if they have higher margins and can generate revenue reasonably quickly. Such companies attract seed investors as the entrepreneurs have already de-risked the startup by bringing the company out of the valley of death, ensuring some revenue flow, and establishing a good product-market fit.

Another reason for seed investors in India as well as globally preferring bootstrapped startups is the level of originality, creativity, and confidence displayed by the entrepreneurs. With no investment capital cushion, bootstrapped entrepreneurs develop higher self-confidence to paint outside the lines and develop creative ideas. They are more willing to make the necessary trade-offs and implement creatively unique solutions. Such a model is perfect for seed investors looking for innovative, out-of-the-box ideas to invest in.

Further, bootstrapped startups are more careful with overhead spending, focussing on deliberate resourcefulness by hiring the right talent, employing limited resources, and managing the outsourcing costs. This thrifty and frugal approach attracts seed investors looking for startups with well-managed revenue and sustainable, long-term growth.

Aligning Bootstrapped Startups and Seed Fund Investors

Investments help both the investor and the business. Bootstrapped businesses can benefit from deficit funding and focus on considerable growth and faster expansion. Seed fund investors can put their money in the businesses they believe in, help deserving entrepreneurs, get partial ownership, and earn a high ROI.

However, all these benefits require the right combination of seed fund investors and businesses. This is where integrated incubators like Venture Catalysts come in. With curated investments, expert investor networks, and the guidance of established entrepreneurs, Venture Catalysts has set up a 360-degree ecosystem that nurtures businesses and guides investors for a win-win setup.