VC Funds no more priority in 2024

Is it compulsory for a startup to raise VC funding? Or, is survival possible without it?

According to the Tracxn Geo Annual Report 2023, VC funding in startups plummeted by 72%, recording just $7 billion compared to 2022’s $25 billion. The value of the deals fell by 63%.?

That’s huge!

Another report published by a UK-based analytics firm showed that the number of VC deals fell by 37.9%, from 1,748 to 1,085.

Today, let’s look into these changing dynamics of fundraising in 2024 — why there is no need for new founders to get VC funding.

In 2024, the majority of startups don’t require VC funding. This is because the founders’ focus has shifted more towards building a viable business with a clear revenue model.

So, where are they getting the funds to keep the startup up & running? Bootstrap.

92% of startups in India are bootstrapped or have sources of funding (other than VC funds), claims a report by Hyderabad Angels.?

Bootstrapping, seeking alternative funding sources, or gradually scaling the business without relying on venture capitalists are the go-to options.?

Why? Because it benefits in maintaining control over the startup’s direction and decision-making process.

Also, bootstrapping helps in carefully evaluating business needs, exploring various funding options, and prioritizing long-term sustainability over rapid growth fueled by external capital.?

The evolving landscape ??

For years, venture capitalists (VC) reigned supreme in the Indian startup ecosystem, fueling the meteoric rise of Indian unicorns like Flipkart , Paytm , Zomato , and OYO .

So, what evolved the thought process of startup founders??

VC funding on its last legs ↘?

Founders have realized that VCs often favor later-stage ventures with proven models, leaving early-stage entrepreneurs facing a scarcity of funds. Yet, this scarcity isn't the only ingredient driving the bootstrapping trend.?

A heady mix of other factors is simmering as well.?

1. Innovation doesn’t require ‘only the richest’ - Many Indian startups, particularly SaaS and tech, are realizing they can build their ventures by leveraging local talent, agile processes, and existing networks. They're proving that innovation doesn't always require VC's deep pockets.
2. Good things come to those who wait - Accepting VC funding often means sharing a large chunk of your startup’s equity. However, bootstrapping allows founders to savor themselves, potentially reaping larger rewards down the line.
3. Bootstrap now, scale later - Before scaling the business, it's crucial to ensure the right recipe for the market. Unlike VC funding, bootstrapping provides the time and freedom to experiment, iterate, and find the perfect blend of product and customer needs, all without the pressure of venture capitalists’ expectations bubbling over.

Bootstrapped startups for the win ??

1. Zerodha - This fintech disruptor started with just Rs. 20,000 and a laptop. Founders Nithin Kamath and Nikhil Kamath focused on building a user-friendly, low-cost trading platform, relying on organic user acquisition and word-of-mouth marketing. Today, Zerodha boasts over 14 million users and a valuation exceeding $3 billion.
2. FusionCharts - Pallav Nadhani started FusionCharts at the age of 17 without any external funding. FusionCharts has over 27,000 customers and 700,000 developers.?Although, in March 2020, the company was acquired by Idera, Inc., a U.S.-based software company, its a multimillion dollar company, with the biggest names as its clients including the likes of Google and Apple.?Pallav did all this from India and from within India – from Kolkata.
3. Zoho - Sridhar Vembu & Tony Thomas established the startup that bootstrapped its way to a $1 billion empire with almost zero marketing.?Zoho's profits crossed Rs 2,836 crore during FY23 against Rs 2,749 crore in FY22. Also, Zoho has more than 16,000 employees, more than 8 crore customers and gives consultation to 300 companies among Fortune 500.

Bootstrappers success isn't just a figment of imagination?

Many reports have proved that startups without VC funds are doing better than VC-funded startups.

• A 2023 report by OYO Insights reveals that bootstrapped startups accounted for 37% of all unicorns born in India in the last five years. Companies like GoGo Express - a logistics leader and Zoho - a software manufacturing tech co., demonstrate that bootstrapping can not only lead to success but also foster sustainable, long-term growth.

• Research by Bain & Company shows that bootstrapped Indian startups have a higher average profit margin than VC-backed ventures. This suggests that a focus on organic growth and resourcefulness can lead to healthier financial foundations.

Conclusion

Even though Bootstrapping (instead of VC funding) seems to be the evolving nature of the startup ecosystem, bootstrapping is not a bed full of roses.?

It demands strategic planning, unwavering grit, and the ability to juggle multiple tasks. But for founders who value control, sustainable growth, and staying true to their vision, it can be the perfect recipe for success.

Remember that VC funding is merely one spice in the entrepreneurial pantry.?

The reason why new founders don’t depend on VCs and the rise of bootstrapping in India demonstrates that with ingenuity, resourcefulness, and a dash of local innovation, startup founders can cook up disruptive ventures, even without the backing of venture capitalists.

Want to read our previous article on Disruptive Startups Sectors of 2024? Read Full Article