I have excerpted this from a series I first wrote in 2005.
Bootstrapping a Business – 1
A friend recently asked me a question: How does a product-focused start-up bootstrap itself? How does it not get caught into the services trap? This seemingly innocuous question made me think back to my career as an entrepreneur and reflect on a challenge facing a large number of early-stage companies with ambitions of building products out of India.
I have faced two different challenges in my life when starting up. The first was when I returned from the US in 1992 with a colleague with a dream of building one of India’s premier software companies in five years. We never got too far. We tried to do products (first, a multimedia database, and then, an image processing software) and balance that with taking up projects from the US and India to get the cash flows going. This split personality didn’t help. As the product sales didn’t happen, we got more and more into taking up local projects to make ends meet. A couple years after our return to India, we realised that we weren’t going to make it. This was not the dream company we had wanted to create. It was time for a reboot.
That was when IndiaWorld was born. This time, I wanted to make sure we focused on one thing (the Internet) and also ensure that we kept the money coming in. I did need a small initial investment to get things going. The business model on the Internet wasn’t very clear then (in 1995). I tried subscriptions to a content site, and then eventually made it free eighteen months later. Advertising had not yet taken off. What got the money coming in was services to corporates in the form of website development. As we built and hosted the websites, we managed to persuade companies to start investing in advertising and we had our portals to provide them with an end-to-end solution (and good margins for us). Over time, the website development business got increasingly competitive, but by then the high-margin advertising business had taken off.
So that is the story of two different businesses with two different strategies for bootstrapping. In entrepreneurial ventures, every company is different and that’s what is so fascinating. Building things from scratch where none existed is what excites me. I see the future as an instantiation of someone’s vision. So, why can’t it be ours? And to create tomorrow’s world, bootstrapping a business right is very important.