Some start-ups shun funding in bid to retain independence - Livemint

Hundreds of new companies in India “bootstrap” themselves with such funding because they don’t have a choice. But Wingify is among a cohort of brash, young technology start-ups that intentionally remain unfunded, to maintain independence both in the work they do and their financials.

Scoring investment, for most entrepreneurs, is the holy grail—a sudden cash inflow and a permanent stamp of approval. But Chopra derided chasing investors as pure “hype”.

Wingify specializes in tools for A/B testing, a tactic that allows companies to subtly tweak their website design to find one that maximizes clicks and profits.

“Right now, we have enough cash in the bank that the whole company can survive for 18 months even if our customers drop to zero,” Chopra said. For the team of 20, an influx of capital is not necessarily desirable. “What would we do with additional cash? I don’t know.”

For some entrepreneurs who have struck out on their own, having investors can be needlessly restricting.

“I actually considered funding at one stage, but then I realized it is much more fun to work as an unfunded start-up,” Shetty said. “I became an entrepreneur because I wanted freedom.”

He said a prominent angel investor group had offered a term sheet with growth targets in last November. “We actually have been reaching those milestones without raising money,” he said.

Experts said institutional investment might allow companies to scale up and hit their milestones more quickly and easily.

However, through its investors, Optimizely is close to some substantial Internet companies. In India, start-ups say they can now tap advantages such as this without having to sell stakes.

“I personally believe that a team of five, six engineers should be able to build a $1 million revenue business,” he said. “And only probably then look for money.”

Still, Khanna admitted that the presence of entrepreneurs who may ignore calls from investors such as Canaan is also a sign of market maturity. Recently, he participated in a New Delhi “reverse pitch”, at which investors canvassed entrepreneurs in an attempt to overturn the traditional model.

“In the past, people didn’t have a choice. It was—take money where you get it,” he said. “Now you have a spectrum of friends, families, accelerators, seed money and VCs. And I think it’s perfectly fair for the entrepreneur to think about what is the colour of money, what stage does he want to get it.”

“Very soon, we realized that we don’t really need VC money,” he recalled. The founders began investing profit from the sales of one product into creating the next, a process they repeated more than 100 times.

This strategy also gave them the latitude to experiment with new products, including the Zoho applications that eventually became the firm’s flagship wares, including its namesake. Investors, Vegesna said, would likely have balked at products that don’t yield immediate revenue.

“If we had taken VC funding initially, I don’t think Zoho itself it would have been born,” he said. “If a company can do without VC money, they certainly should.”

By now, Zoho is a large enough brand to attract customers without the patronage of an established investor. But for new companies competing in crowded fields, formal backing can lend credibility.

“We’ve had certain reservations from some people,” said Dayal. “Basically, the only reason they wouldn’t use our products is because we’re not funded by a big name VC.”

Investor cachet may have helped Wingify at its onset, but not any longer, argued Gupta, who said current clients now make the type of introductions to networks an investor might offer. And with low operating costs, the monetary appeal of investors does not loom large.

The founders of Wingify began the company with their own laptops, paid for cheap servers and coded the first product versions themselves. Although they don’t rule out seeking investment backing in the future, they plan to stay on their current course for some time. As Chopra said: “Why take a home loan when you’re able to buy the home by yourself?”