[Startup Bharat] Small-town startups go the bootstrapping route, show VC funding isn’t the norm for success

While metro-based startups are chasing VC funds and focusing on products, their counterparts from Tier II and III cities are chasing customer satisfaction, solving for Bharat, and clocking steady growth.

[Startup Bharat] Small-town startups go the bootstrapping route, show VC funding isn’t the norm for success

Wednesday January 01, 2020,

6 min Read

Rajeev Tamhankar is the Founder of TBS Planet, a content studio that also sells comic books online. Hailing from Jabalpur, Madhya Pradesh, he went to IIT Roorkee for his under-graduation and put in the hard work to earn a silver medal.

While working with the likes of Flipkart and Xiaomi, he lived in Bengaluru, a very expensive city for a young founder with a fledgling entrepreneurial effort on his hands. The cost-of-living situation is pretty much the same in any other big city or metro in India.

Expenses and lifestyle choices are inevitable, and Rajeev noted that he spent a sizable amount on rent, groceries, food, transport, and other personal spends every month.

Startup Bharat

Taking stock of the mounting bills and what was turning out to be an unsustainable beginning for a new startup, Rajeev made the bold decision to move to his hometown Jabalpur and bootstrap his startup.

We call the move bold as he did what most of his peers didn’t: take the hard decision to move away from Bengaluru, the startup mecca that has entrepreneur hopefuls making a pilgrimage to the land that holds great promises of resources, capital, talent, mentorship, and networking opportunities.

The move paid off. Rajeev now spends Rs 5,000 on office rent, instead of an easy 6x more amount at a swanky location in Bengaluru. A medical checkup for a simple cough or cold now costs him Rs 50, which would be Rs 300 in metro.

Rajeev said, “Who will spend Rs 10,000 on a round-trip flight just to get a 100-book deal from a bookstore chain in Delhi? When I moved to Jabalpur, I could travel to Delhi, Mumbai, Pune, Bhopal, Indore, and Nagpur to tie up with over 120 bookstores in 10 cities, in just three months.”

Solving for small towns

There is also a trend that has an interesting intersection with the popular phrase ‘If you build for India, you can build for the world’.

Many startups have given overcrowded cities teeming with competition a pass and homed in on gaps in smaller towns that have not received much tech intervention.

Sangita Dey, a 25-year-old MCA student from Tripura, built a student accommodation startup Dealz Expert, out of Phagwara in Punjab. An alumnus of Lovely Professional University in Phagwara, she did not have to do much apart from building a marketplace to accommodate students and faculty members near the university campus after she graduated.

Today, Dealz Expert has on-boarded 22 paying guest accommodations with 1,200 rooms, and clocks an annual revenue of Rs 2 crore.

“I am looking to expand into the markets of Delhi, Chandigarh, and Kolkata in the coming months, and into my hometown in Tripura in the next two years,” she says.

Shivram Choudhary, an MIT graduate and Founder of Euro International School and Fanusta Global, started Codevidhya out of Jaipur in 2016. Codevidhya is a bootstrapped edtech startup. His aim? To convert classrooms in Indian schools into programming powerhouses. Since 2017, Codevidhya has onboarded over 25 schools, leading to a growth in revenue from Rs 36 lakh to Rs 1 crore.

Smita and Sandesh Gawande of Nagpur run Torana Inc., which builds an agile rules engine, named ‘iCEDQ’, to automate ETL testing, data migration testing, and big data testing. The problem statement? He found that there was no way to ensure the success rate for data migrations within large databases, nor did there exist a platform that automated testing for extract, transform, and load (ETL), and data migration.

Torana now has 63 employees in Nagpur and 18 in Connecticut, with clientele including the likes of the New York Stock Exchange, IBM, Lockheed Martin, Nomura, and Great American Insurance Group. Bootstrapped since day one, the startup now clocks $5 million in annual revenue.

Bootstrapped all the way

Ankit Dudhwewala, Founder of Ahmedabad-based CallHippo, found inspiration to go the bootstrapping route from none other than Sridhar Vembu, the Founder of the bootstrapping success story Zoho Corp. What started as Vembu Software out of a small Chennai apartment is now a SaaS company with a multi-billion-dollar valuation.

Ankit’s bootstrapped SaaS startup wants to be a Zoho for cloud telephony. Though it is premature to assume that CallHippo is taking on the likes of Zoho, Salesforce, and Freshworks, it does clock monthly usage from companies like Infosys, Airtel, and IndiaMart.

Despite operating out of Gujarat, a state that has seen a lot of VC activity in recent times, Ankit is stubborn that he will never take outside funding.

“We knew early on that we needed customers, and not VCs, to fund our business,” Ankit tells YourStory.

According to YourStory’s nine-month funding report, homegrown Indian startups raised $7.67 billion in the nine months ended September 30, 2019, down by about four percent from the comparable period in 2018. As far as the number of deals go, startup funding deals were just three deals short of the total 606 deals seen in the comparable period last year.

In 2019, startups outside major startup hubs have had a great run, having raised $165 million across 18 deals. 

But bootstrapping is increasingly becoming a pattern, with customer focus taking the front seat, while VC-funded startups both in metros and outside focus on product and user acquisition.

The tenacity to make it

Padmaja Ruparel, President and Co-founder of Indian Angel Network (IAN), believes that startup founders from smaller cities tend to be more tenacious, and have the drive to make things work. She’s certain that these startups have the potential to serve the global market, and not necessarily just the US.

“A global market isn’t restricted to one or two places. A lot of these startups can test and try out markets in Africa, Southeast Asia, parts of Europe, and South America. They also have an understanding of the market that possibly an entrepreneur from Bengaluru, Delhi, or Mumbai wouldn’t.”

Typically, many small-town startups are building SaaS products on the premise of localised problems that also find addressable markets outside of India.

Coimbatore-based RFPIO automates requests for proposals (RFPs) and conventional tenders to ease the bidding processes for enterprises by reducing tedious manual documentation. In 2019, RFPIO claims to have had 40,000 users using the platform from 100 countries. With an office in Oregon, the startup now serves the likes of Google, Microsoft, Adobe, and Siemens.

Barring SaaS, entrepreneurs from small towns are largely venturing into sectors like edtech (Jaipur-based Standyou), mobility (Ahmedabad-based Mybyk), agritech (Alwar-based Tractor Junction), and multiple marketplace models, just like any other metro-based ecosystem.

The diversity also goes to show that these startups are not just confined to agritech but spread across major sectors ripe for disruption.

(Edited by Evelyn Ratnakumar)