Bootstrap in Bangalore

Bootstrapping, by definition, means that you are not raising any funding. Apart from the traditional view of bootstrapping in point 6, I am lenient enough to include 5 more. I am planning a write up on cash flow management but thought lets just list all the sources of funds at our disposal right now

1. Savings – This is an obvious one. The only insight I have is that don’t use all of it. I think one should keep at least 3 months of running expense in a separate buffer which is not invested in risky instruments. I used the 3 month formula keeping the existing job conditions in the IT market in mind. I was pretty confident of landing a job in 1 month if started looking and simply multiplied that by a safety factor of 3. You will need to do the risk analysis yourself but I would say if you are keeping a buffer greater than 6 months, you are not taking enough risk.
2. Rich uncle – or Dad or Brother is definitely one of the good things that can happen to you. Not only do you get money but also advise which I hope is coming from their own experience in becoming rich. In case its just inherited wealth coming your way, be wary of the advise. When borrowing from relatives make sure they know this is going into a risky venture and that money may not come back any time soon.
3. Working Spouse – This can be a mixed blessing. It can lull you into a feeling that you have infinite buffer and the sense of urgency may get lost. But if you are a nuclear powered individual this can make things really easy. As a bootstrapper you will have enough worries and not thinking about whether you will be able to pay the phone bill next month is one less worry.
4. Personal loan – If you have been getting too many calls of people wanting to give you a personal loan, do evaluate the offer if you are planning to bootstrap anytime soon. Never take more liability than you can handle after failing in the venture and going back to a full time job.
5. Credit card – Same principles as the personal loan. The main purpose in the listing both is because we usually avoid looking at credit card for credit and only as a spending convenience.
6. Part time work, consulting and training – Bootstrapping is a lot about having a constant source of revenue to fund your other venture which requires that money. The balance required between the other activities and your real motive needs another post. It suffices here to say that these days Bangalore has enough opportunities to do quality work part time and make money. If you are good at your craft there will be many companies looking for quality trainers (can make as much as Rs 10,000 a day as a trainer) or negotiate a part time work deal with a company freeing up your time for something you want. The thumb rule should be too charge on a temporary job at least twice as much as you would make in a regular salary in that job. It proves cost effective for the company too, so there are no losers really. The company saves on many fixed costs of owning an employee and you can take those savings. The real trick is to also halve your expenses and then work just quarter of the time you would really work. Since as a bootstrapper you would also be working at least twice as hard as normal employees, you will be able to invest 1.75 equivalent of your normal employee productivity in your venture for sure while sustaining it with regular inflow of money! I like Paul Graham’s idea that starting a company is about compressing your working life in a few years and generating enough wealth for a lifetime.

Working on a post on cash flow management, might take some time.

Found another bootstrapping case study posted here and here by DropSend – started by a 2 people husband-wife team.

In the part I of this guide we discussed the externalities of starting the office – location, rents, surroundings. Now that you may have found the right place, lets see what goes in and what you need to get it running.

Go to Shivajinagar/Infantry Road for great deals on furniture. Instead of buying consider renting it. You could get a stuff for as low as Rs 50 a month for a table and chair. Do get a white board with a stand (so that you can move it around). PAN furnitures on Langford road has nice white boards in different sizes apart from other office furniture like chairs etc (no I don’t get a commission from them).

Moving to the electronic infrastructure. While trying to be frugal, be rational and invest in productivity – time is your enemy so don’t let it slip by you. Take the best internet connection for your needs. If you add up all the delays in downloads, it becomes really huge. The worst part is usually you cannot do anything productive in the wait time. Cheap availability of broadband is an important factor in making bootstrapping possible much more easily compared to earlier times.

Buy laptops and wifi. This is the best mode to be connected. No wires, more productivity. Let your budget guide you in case all your seed money is just going into just buying those cool laptops. We started our office with desktop computer parts bought separately from computer warehouse (the website has an updated excel sheet where you can check prices of peripherals. The shop is on M G Road) which I assembled at home with the help of a friend (just assembling on my own saved me 500 bucks! plus we could choose the cheapest alternative for every component). For an earlier startup we bargain hunted on S P Road, you can surely get the best deal in bangalore there if you negotiate well.

It helped that I had worked in a start up earlier where I had to play sysad for sometime and I set up the home office network with a cheap 800 rupee hub and ethernet wires that we borrowed from friends. During my college time I used to troubleshoot Linux setup issues for friends and that came really handy allowing us to save on windows license costs. We were very clear from day 1 that pirated software was a big no. Its just not worth risking your budding company’s reputation on these trivial things. Hidden lesson that we will reiterate later: do many things even before you start up. In your own company, you will find some use for the most obscure talent you have.

Buy a hosted server to keep your source code (learn version control ), web server. I recommend buying a virtual private server at rimu and if you find something better, do let me know. This allows you or your friends to access files from anywhere, almost 100% uptime and no worries about losing your data if your local machine goes down. You may sometimes want to host a demo or a tool when this server will come handy. For your email definitely buy a domain name and use hosted gmail. Communicating with people using you@example.com makes a much better impression than gmail.com.

Many people ask how do I open a company as opposed to how do I start up. For a bootstrapper used to a bottom up way of thinking, this is not a question at this point in time. Other pressing things like your product or service should be occupying all your time. Sometimes the mechanics of starting a new legal entity, opening an office themselves give some kind of satisfaction of having made a step forward. It is usually a waste of time and money and might give a false sense of accomplishment.

Having said that, here is what you need to know about the legal tangle. Mind you for many things getting in touch with a chartered accountant will be necessary and this will only prepare you to have a more intelligent conversation with him. In case you are starting out on your own just think of a name and start off! As with so many things, there is no barrier to starting for a single person. Of all the forms of organizations allowed sole proprietorship is the most common and easiest. When the business is small you could even continue with your savings account. Its better to open a new account though so that personal and business expenses can be segregated. You won’t have to visit a chartered accountant (CA) for assistance unless you have to cut TDS (tax deduction at source) for which a TAN number is needed. I case you want to portray as if you are a business and not an individual, create a website XYZ.com and a current account with the proprietorship name as XYZ, then you can accept cheques in XYZ. For the uninitiated a current account is an account with a bank meant for businesses. Normally, if you have been an employee you would only be having a savings account. Businesses keep working capital in their account unlike individuals who keep savings. At least that is the theory, there is no reason an individual should not be running his personal expenses like a business. Anyhow suffices to say be prepared to open a current account if you want to accept cheques which are not personal.

Most likely you would be starting with friends. In that case go for a partnership which is the cheapest way to make sure all of you have a share in the business. In case of a partnership you definitely will open a current account in the name of the partnership. The CA will help you register the partnership. You can be as many partners and when the CA suggests that insert a clause that requires important things like withdrawing money to be done only by consent of all partners, firmly refuse. Allow any of the partners to make the decision and sign cheques. CAs are typically conservative finance people and even if the advise is to safeguard cheating between partners, bootstrappers can simply not afford this extra friction in the system. If you can’t trust your partners, don’t do a startup with them.

The most important reason to start a private limited company for a bootstrapper would be to safeguard the name. Once a company is registered, no other company can use the same name. You can check the availability of names on the MCA website (IE only). Opening a private limited company is costlier and I would recommend it only after a certain size. Usually, what you will be interested in is a brand name for yourself for which block the domain name and not the company name. The company name can be XYZ technology solutions where as the brand you push could be called ABC. Opening a company also removes your personal liability. So in case your company goes bankrupt, your personal assets will be protected. Because of huge fraud, no bank today lends you money without the personal guarantee of the directors so this limited liability is notional. This does save you from vendors or clients though since they will not insist on any personal guarantee. In case of proprietorship or partnership you are personally responsible.

Another advantage of starting a company is the date. The more calendar months that your company has been in existence, usually the better it is. Some clients want to know when your company started, just having been around gives them comfort. Banks with whom you will open an account will also start offering you debt or overdraft services after a minimum of 6-12 months since you start business with them.

As you can imagine, getting a good CA is extremely important. Best case would be if you have a CA friend. It is also very useful to know some of the things yourself so that you can make the best use of CAs services. Typically, CAs in Bangalore would be expensive. The posher the location, the more expensive the person. If all you need initially is to register a company or a partnership it might be much cheaper to find a CA in Tumkur or Yelhanka and save a few thousand rupees. Once you start making money, you can pick someone you need to consult on a more regular basis.

Guy Kawasaki has nicely given the numbers for his new venture with break ups. I will try to develop some case study like this in the Indian context also.

Now that you have finally overcome the inertia of being in a job and have adopted the think local, look around principle, its time to look for a place to set up shop. If your idea is at a stage where you are working on it on your laptop, the guide is pretty short for you: just continue at home. If you are starting out with friends move in to a single apartment, it saves cost and adds to the productivity. If possible, try to partition the apartment into a work area and create an office feel to it.

In case you want a dedicated office where friends would like to come over to get into the discipline of working everyday or maybe you have hired a few people who need to come, then the above strategy of continuing at home doesn’t work. Now you need to go looking out. You can still simply try finding a home but keep a few things in mind. For a business today reliable internet and power are most important. Try finding a place closer to the typical VIP areas where power cuts are minimal. In your current MNC office, you do not notice it but the power backups is often in use. In a small apartment you cannot install a generator and a UPS with truck batteries will give you 2-4 hours back up. Keep in mind that the truck batteries give off poisonous fumes so don’t install them inside the workplace. Dry batteries are maintainence and poison free but a little expensive. I stuck to the truck one’s but installed them in the balcony so that the fumes don’t accumulate. Since batteries are expensive and one way to manage costs is to weigh the cost of UPS with laptops (since they come with internal batteries). Then all you need is a small UPS to make sure your internet modem and wifi router is up (both of which drain very little power). This is easy to overlook initially but when you have a deadline to complete work, not being able to do anything due to a power outage will seem like the stupidest excuse and believe me you will be willing to pay insane amounts for resumption of work at that point of emergency. Something that saved us at times was that accidentally our own houses were in different areas in the city and all of us had good internet at home. Outages seldom happen in the whole city, so if there was an important check-in, deployment or skype call we would just pick the laptops drive over to the other house and we kind of had redundancy this way.

When you zero in to a place evaluate it from some more angles than just space and location. Reducing commute time is important but having ample parking for employees and visitors is too. In case you are looking at a flat make sure that the association is not going to crib about business being conducted in the society (typically no one does). Check noise levels during the weekdays/weekends and day/nigh since you will typically work all the time. It usually is great to have an independent house or a first floor in a house since that makes it possible to put up a board and visitors/prospective hires have typically a better impression of the place.

You may find a place with reasonable rent but what breaks your heart is the 10 month deposit that needs to be paid in Bangalore. Negotiate hard, usually you may be able to achieve one of the two things – reduced deposit or the deposit itself paid over a longer period of time. When cash is so crucial having a huge amount stuck as deposit is the last thing you want, so minimize this damage.

Now that we have found the office – the next post will delve in the stuff inside the office.