For some startups, VC cash is route to crash and burn

Sky-high valuations and millions in funding aren't draws for some startups who'd rather go it alone and build their companies organically. These entrepreneurs work the old-fashioned way in the new economy. They tell Anand J and Shilpa Phadnis that the price of VC money is loss of control
When bad times come, VCs don't come to help
Provides an integrated suite of operating systems and apps for businesses
Sridhar Vembu | founder, Zoho
I want to stay out of the bubble, because we have gone through these cycles.There was the 2000 burst and the 2008, 2009 bigger burst. There's probably another burst coming, it is not too far. There is too much noise around the business right now, too much hype.
Steve Jobs had disdain for Wall Street. He was compelled to go public because Apple took venture capital. If Apple, Google and Microsoft were to do it today, they would probably not take the venture capital route. When bad times come, VCs don't come to your help. Besides, software is not capital intensive.
We don't have any outside investors. If there is an outside investor, we have to provide liquidity to them. We believe in real engineering and not financial engineering.I don't care about the pecking order of net worth. We are here because we have fun.
Also there is long-term growth. The technology industry is stuck in short-term growth. Someone gets an idea, goes to a VC, develops it, makes a lot of noise, gets some users and exits. How many times have we seen this story playing out? The sooner they exit, the more successful they are considered. This is our 18th year in business. If we had this mentality, we would not have lasted this long. There should be companies with longer term goals. We want to create good products that our customers love.
Paying customers are validation of your biz model
Online broking firm with lowest brokerage rates, services include option trading, commodity brokerage and futures trading
Nithin Kamath | founder, Zerodha
When I started Zerodha in 2010, a seasoned broker tried to put me down saying `You don't get vada pav for Rs 20 and you're charging Rs 20 for executing every trade'. Ours was the lowest broker age fee in the industry -a flat Rs 20 for every order executed, irrespective of volume of shares traded. I had to face flak from the industry for charging the lowest brokerage fee, while venture capitalists were quite amused with my business model. Peers in the industry were charging a brokerage of Rs 10,000 for trade worth Rs 5 lakh executed. People thought brokerage business was resource-intensive.
I proved them wrong by having zilch real estate and marketing costs, a lean team, and a robust tech platform that uses artificial intelligence, real-time trade signals from automated expert advisors and does pattern recognition of customers' trading history. Today, Zerodha is one of the top three retail brokers and volume contributors on NSE, BSE, MCX-SX and MCX with average daily turnovers of over Rs 7,000 crore. I was not in favour of debt or equity when I started. You're obliged to someone else to run the business. If you're growing your business organically and have paying customers, that's enough validation that you're on the right track. You don't have someone breathing down your neck.
Nobody's got a gun to my head
Builds products to create interactive and animated charts
Pallav Nadhani |founder, Fusioncharts
When I started FusionCharts in 2002, there were no venture funds or angel investors in India. We continue to believe in bootstrapping. We are profitable and our capital could not have been deployed more efficiently. There's nobody holding a gun to my head.
Michael Dell's decision to take his once path-breaking and innovative company private two years ago stands testimony to our belief. He wanted to focus on innovation without the scrutiny of public investors quarter after quarter. Dell had stopped innovating, and that was affecting them adversely.Once you take money from others, you chase profits, your focus is growth and not product. Once a startup raises VC money, it has to keep on raising money as organic growth will not give VCs the returns they are looking for. Increased valuation is what the startup has to give them. It is like riding a tiger. Ultimately, it depends on the DNA of the founder -whether heshe would like to have faster growth or keep the focus on building innovative products.
Bootstrapping has made me complacent
Develops cloud-based software for customer support
Varun Shoor | founder, Kayako
I started my company when I was 18.
This was in 2001 and there were no angel investors and VCs. Who would have trusted an 18-year-old kid from Ja landhar? Even the company name is a domain name I got for free. Earlier, 0 I had a meeting with investors, who were investment bankers, and found that they don't under stand what we do. I did not find an ideal match for our values.
The problem today is many companies focus on raising money. The focus should be on getting the product right, realizing the product-market fit and gaining traction. Even the initial customer acquisition is done just to attract potential investors. It is better if you are profitable initially and raise funds only when you are ready to grow big and raise only the amount you need.
But then, bootstrapping also made me complacent and led to a leisurely lifestyle. I enjoyed the comfort and process of building a company slowly. If I had investors, they might have pushed me further. As long as you are not looking at investment to burn cash, it could be transformative.
Taking capital means ceding decision-making
Makes affordable, easy-to-use tools to help people optimize websites to ensure more clicks and earnings
Paras Chopra | co-founder, Wingify
Enterprise software products are not capital intensive and the adoption is rather organic. I don't believe my competitor can build a better product just because he's got $100 million.
Besides, VC money is like the home loan calls we get from banks. When you need it, nobody will offer you. VC money is also expensive capital and you need to return it. It involves ceding decision-making power.VCs want unreasonable growth rates, and when they put so much pressure on you, you end up doing something you don't want to do as a founder.
Not taking money would probably mean slower growth, but you learn on the way, something that fast growth won't often let you do.
I have always been focused on the product. In fact, my first three products failed because I did not focus on the market opportunity. Wingify succeeded because I looked also at the market opportunity. But the product has always been and continues to remain the focus.Wingify is growing at 40% to 50% per annum, and I invest all the surplus money back into the venture.
I'm happy with a steady growth. Companies like Google and Microsoft took many years to build. In Silicon Valley, it is difficult to bootstrap because costs are high and they have to compete with Indian companies.
We went bankrupt twice but came back strongly
Free online scheduling software to help businesses grow
Nemesh Singh | founder, Appointy
We have a base of 80,000 customers across 170 countries, built since 2001, without taking any external funding.We are profitable and know how to be frugal as well. Now there's also a network effect, with more customers adopting us because our large base of existing customers are talking about us. We went bankrupt twice but came back strongly. Now all of us have big houses and cars. What next? We may raise money now to realize our valuation. The team has invested more than 14 years of their lives in this, and that effort is not fully reflected in what we have. A money raising exercise will help towards that. We know how to put the money to good use in terms of new strategies for accelerated growth. We own the company fully and even if we raise external money, we will still control the company. Several people are eager to invest in us.
No incentive for entrepreneurs to stay on with VCs
A platform to help urban, educated singles find life partners by curating special events
Siddharth Mangharam | co-founder, Floh.in
I'm not principally opposed to venture funding, but we were not compelled to go after venture capital money when we started in 2011.When you raise money from a VC, you're a limited partner who has to return the money. But if you raise money from friends and family, you're not tied down by obligationsof any kind. If VCs dilute the entrepreneur, there's hardly any incentive for the entrepreneur to stay back. A case in point is Rahul Yadav of housing.com The biggest comfort factor is to have paying customers.That is enough validation that you are on the right track and growing well.That's the logical way of running a business and it goes to prove that you have a market. In our business we have a 90% referral rate and our cost of customer acquisition is zero. It's all word of mouth.
Floh has grown organically just as it was born naturally out of conversations with single friends.