In the present fundraising climate set against the backdrop of a tech market slowdown, founders across Asia are under increased pressure to secure investments.
Startup fundraising across Asia’s key markets — Southeast Asia, India, and greater China — all fell in the second quarter of this year, compared with a year ago, according to recent data.
Amidst 2022’s decline in investments across Asia, startups found themselves navigating rough waters, resulting in significant layoffs. In response, banks like HSBC have been supportive, offering dedicated credit lines to top tech firms in the region, including Singapore-based superapp operator Grab.
Yet, as investors become increasingly results-driven, demanding rapid deliverables, a significant number of startups are exploring alternative paths to early-stage growth.
Bootstrapping, characterised by starting a business with personal savings, borrowed funds, and self-generated revenue, can provide a strong foundation for startups in Asia’s challenging market conditions.
Bootstrapping: A compelling choice for Asian startups
Bootstrapping is not just a funding choice — it’s a strategic one.
India, a global startup hub, boasts successful bootstrapped companies like SocialPilot, a social media marketing tool launched in 2014, and HappyFox, a customer support software solution founded in 2011.
Meanwhile, Singapore’s edutech firm KodeKloud reported an annual recurring revenue of US$5 million in the first half of 2022. Just recently, Maneuver Marketing made headlines in the tech scene after announcing US$340 million in sales since bootstrapping in 2018.
Also Read: Bootstrapping allows Inmagine flexibility to respond to changing market conditions, client needs
Bootstrapping offers a unique appeal to startups in Asia because of the region’s distinct market characteristics, cultural nuances, and entrepreneurial spirit.
It’s no secret that external funding can come with strings attached, including set milestones, specific growth targets, or particular strategic directions. In uncertain times, this can be restrictive.
Bootstrapping, on the other hand, grants founders the autonomy to dictate the financial trajectory of their startups, at least during the starting phase. With full control, they can pivot strategies and eventually explore innovative approaches like turning their customers into investors. This focus on generating real revenue from satisfied customers can be an asset when investor money is hard to come by.
Without the pressure to achieve rapid growth at all costs, bootstrapping gives startups the opportunity to focus on sustainable and organic growth, ensuring they remain profitable or at least have a clear path to profitability. This focus can provide stability during market downturns.
Bootstrapping during these periods allows founders to avoid diluting their shares prematurely. Moreover, when external investments are scarce, there’s a risk of startups accepting unfavourable valuations just to secure funds. Such overvaluations or “down rounds” can harm the startup’s reputation, morale, and future fundraising prospects.
Bootstrapping allows founders to preserve their equity, which can be beneficial in the long run. So, when the time bootstrapped startups do seek external funding, they’re often in a better position to choose partners who align with their vision and values rather than being forced into a partnership due to financial desperation.
While the short-term challenges of 2023 loom large, the choices made during this period can shape the long-term future of Asia’s startup ecosystem. In the end, if a business can survive and even thrive while bootstrapping during this funding winter, it’s a testament to its viability. This resilience can be a powerful narrative when seeking future investments, partnerships, or even during acquisition talks.
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