To bootstrap or not to bootstrap?

• One benefit is that founders can make decisions without investors’ influence
• Just because a company is tight on finances, does not mean it has to behave like it

FOR startups, minimal financial resources are a common challenge to work through while growing its business. At Catcha Group’s Wild Digital 2018 conference, a panel session titled ‘Bootstrapped but Bankable’ was held to discuss the difficulties some recognisable startups faced in its early days.

Sharing their experiences and insights were Fred Chong, founder and group CEO of WebTVAsia; Chan Kee Siak, CEO of Exabytes; Michael Lints, partner at Golden Gate Ventures; Leow Wee Jonn, CEO of Photobook Worldwide and moderated by Low Ngai Yuen, the CEO of eFM.live and executive director of Global Entrepreneurship Movement (GEM).

Diving straight into the topic, Chong took the lead by sharing how he started his company about five years ago with a team of six and only two YouTube channels. With the earnings from his movie Nasi Lemak 2.0, Chong says, “I invested RM2 million and the goal at the time was to grow the company 500 times over.”

Chong continues, “Unexpectedly, we used up the RM2 million in the first year.” Today, WebTVAsia has 320 employees spanning ten countries and over 2,500 YouTube channels.

The founder of Exabytes started small 18 years ago by borrowing his cousin’s credit card for US$25 to start a US reseller account. As for Photobook, it was founded in 2005 by Mark Koay in his living room with a team of five and an initial investment of about RM1 million.

“About 80% of this initial investment was spent on a printer that was installed in the founder’s living room,” Leow shares.

Fast forward to today, and Exabytes serves about 100,000 paying customers while Photobook has successfully grown to about 250 employees with four offices in Manila, Toronto, Melbourne and Kuala Lumpur.

Deciding to bootstrap

During the session, one of the questions Low posed to the panellists were, “If you had to go back and do it all over again, would you still choose to bootstrap your company?”

Addressing the question, Chong affirms he would and that he believes founders must be able to make crucial decisions. “We work at internet speed. If we were to wait for decisions from different investors, we would not have been able to take advantage of the timing and opportunity that I saw in the market five years ago.”

With the concern of investors taking away the decision-making autonomy of founders, Lints shares his perspective, “As a venture capitalist, we don’t take away decision-making powers from the founders. The reason we invest in a company is because we believe in how the company is being managed and executed.

“But there is an added layer in terms of investors providing expertise and connections. So in that sense, it is not taking away their say but more about helping the company grow,” Lints says.

As representative of Koay, Leow believes the Photobook founder would choose to take funding in the early stages if he had to do it all over again. “This is simple because the vision that we see for Photobook today is much larger than what he saw when it was first founded.”

Leow explains that as the ambitions of a company grows, so does the need for capital. “In the initial stages of business, we would celebrate receiving one order a day. But right now, we get 10,000 orders a day and we’re still not satisfied.”

On whether bootstrapping makes a company favourable to investors, Lints says, “It is always commendable when a company works without external funds. It’s a positive sign of managing funds conservatively which is a trait we look for.”

Bootstrapping is not as glamorous as it sounds

For WebTVAsia, the company bootstrapped throughout the ‘proof of concept’ period but faced struggles in terms of fundraising when it wanted to try new things.

Chong’s business idea came about when he received a US$1,000 cheque when his YouTube video went viral. “The idea at the time was to start 100 channels to make US$100,000. Once I achieved my proof of concept, I realised there was a bigger play that I wanted to be a part of,” Chong says.

By rebranding his traditional media company into an internet company, Chong managed to break into markets outside of Malaysia like Thailand, Taiwan and China. “Being an internet company, we didn’t need to get the permissions that traditional companies needed to enter a foreign market.”

“As a media and content company, we then needed to forgo our bootstrapping approach to grow bigger and faster,” Chong shares. Nonetheless, raising funds proved to be a challenge.

He says, “Although we hear of an abundance of funds within the Southeast Asian (SEA) market, I have to disagree. Those funds are only made available to unicorns with an exit plan and not bootstrappers like us.”

However, Lints rebuts saying that VCs are in it for the long-term. “We have a ten-year lifecycle because we understand how long it takes to grow a business.”

Addressing a question from the floor on whether there is a correlation between bootstrapping and exiting faster, Chan says there is none. “No one should start a business with the thought of exiting quickly. Being an entrepreneur is not solely about raising funds.”

Leow adds “There is a misconception that bootstrapping is done by choice. Often, it is because there are no investors.”

He explains that there are two main categories of people that bootstrap “There are those that are successful enough and don’t need outside funding. But there are also those who are not attractive enough to draw investments.”

Advice to bootstrappers

While it is a common belief that prudent spending is very important for bootstrapping businesses, Leow suggests a more daring approach to making a company’s economics work. “You don’t always have to behave like a bootstrapped business just because you are.”

Although Photobook never used the service of headhunters in the past, the company was advised to do so by investors. “We were reluctant to do so at first because it was expensive but it has really helped us accelerate the business.”

Sharing his experience from the viewpoint of a Malaysian founder, Chong believes that Malaysians have an edge in entering other SEA markets. “Make use of being multilingual and cultural-savvy. You can do it and perform better than other startups across the region.”

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