Going bootstrapped is never a sexy option, but it might just be the right one. Having a strong focus on unit economics can drive a lot of 'correct' business decisions. Of course the growth is bound to be slow—we've managed to do a 20-percent month-on-month on an average except during rough patches—but it is going to be reliable, real value growth.
We started in 2011 with exactly Rs one lakh of personal capital invested in the company. We picked the vertical 'jewellery' and went deep into that category. After a year of growth in a single category, we did a natural extension to sarees, salwars and other ethnic-related categories focussed on the same consumer. Returns from the sales were used as marketing fodder for the next month. Positive returns from marketing and guerrilla efforts boosted our growth and has kept it going steady for four years now. Right now, we will close the financial year at a Rs 100+-crore mark in total revenue.
Not sure how right or wrong we are, but this is what worked for us.
This is the single biggest and most difficult thing to achieve. In the initial days, it meant doing a lot of things yourself, sitting in small cramped spaces and working two shifts. Being developers ourselves, we didn't have to pay for a developing team for at least the first year. All paid service options disappear and you end up digging for all freebies, open source alternatives and you make it work. It's funny to realise how much of that paid stuff you don't actually need or you can easily replace with a free option.
A stage comes when you must get paid services. For us that stage came when we were actually getting X number of customers and that service was required to improve it. We would justify the actual need for a service by offsetting it with actual revenue. For example, paid hiring database is worth it when we had the need to hire about 50 people in six months. In a funded mode of operation, you can fall victim to impulse shopping ('We should get all the hiring databases out there, after all we need the best talent to become a unicorn' line of thought).
That being said, investing in people is very important for a startup. But you should also be able to find real value for money in each employee.
ROI-focussed marketing, no branding
A lot of paid marketing options up as you keep growing. You can do print ads, TV/radio ads, sponsorships, exhibitions, you name it. People are out there to convince you that putting up one hoarding will make you the next Amazon. Branding has huge value, but for us it has always been hard to measure. So we have stayed away from hard-to-measure quantities as much as possible. We measure every aspect of our marketing efforts, and branding did not fit into the equation in the early days. Every penny spent was recovered twice or more. This forced us to optimise our marketing campaigns as opposed to random scaling without a view on conversion factor.
Not having spare money to throw around makes you whet every decision thoroughly. We run a lot of small experiments, pick what's working and then power that up. We do spend money now on branding but only after due diligence.
Focus on product
When you can't find extra money to scale the next month, you have no option but to improve your product.
You figure out new use cases that the customer will like to have, new channels/options that are yet unexplored, new product categories to add to your inventory. Understanding user behaviour using hardcore data analysis can lead to huge wins. The progress would come after a slow 100 fixes and not after changing the colour of a magic button.
The objective is to build some real value for the customer. When you have 1,000 visitors on your site and you have five customers from that, you are faced with two choices for scale. You can boost your marketing to get 2,000 visitors and thereby increase to 10 customers, or you can try and understand what the 1,000 visitors want and fix your product to increase to 10 customers. The second option is harder, more time-consuming, but definitely more cost-effective and long-term.
We approached several marketing agencies for paid marketing campaigns, and none of them could deliver the ROI that our team delivers. They have all been spoiled by the market with their big budgets.
The team that we ended up building is a strong cost-conscious team that believes in structured, cost-optimised growth. Getting the right people on board is a key part of this strategy. Frankly, we find people more excited about the fact that we have a profitable growth as compared to just GMV. Every member of the team thinks of simple solutions/cheap alternatives to easy, expensive ones.
Does this mean we don't believe in funded growth? Absolutely not. Funding is required to scale a business fast. Our vision is to build a billion-dollar business and that will not happen without funding. Before you seek funding you must ask what you need it for. Having bootstrapped it so far, we know exactly where we are going to channel our funds, how we are going to measure its returns, what choices will lead to real business growth.
Build a business first, get real customers, show traction and if you are able to keep growing at 20-30 percent month over month, continue doing so. Self-sustained growth is a real value add for the business.
I wrote this specially for two reasons:
- To break e-commerce startup myths like one can't start an e-com business without funding
- To inspire aspiring entrepreneurs to take the plunge and focus on the customer first!
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