Bootstrapping:
Bootstrapping is the process of starting a company with only personal finances or savings, including funds from family or friends, as well as from the operating revenue of the newly formed company. The startups who start these do not seek any external help to provide the money. This strategy is in contrast to bringing investors onboard to fund a business expansion.
Companies like Zerodha, ZOHO and Thinkpot are some of the successful bootstrapped companies in India.
Advantages:
Sole ownership - Founders are the ones who will be calling the shots because equity and control over the company are not diluted.
Focus on Product - Bootstrapped business owners frequently spend more time concentrating on the product and adding value for customers rather than focussing on fundraising.
Creative Freedom - You can act and seize chances when they arise without waiting to have your decisions reviewed by investors.
Disadvantages:
Personal Risk - Bootstrapping involves taking the most obvious financial risk by investing your own money in the business, especially when your business takes a hit.
Slow Growth - Rate of growth of bootstrapped companies typically tends to be slower as compared to other companies. Without much capital, there are limited resources and staff to operate, hence slower growth.
Lack of Networking - You run the risk of passing up partnership opportunities that could expand your market reach or improve your visibility. Additionally, you may miss out on the connections, network, professional advice and assistance of investors.
Funding:
Raising funding, on the other hand, is when you seek out investors and get them to invest money in exchange for equity or ownership of the company.
You got to funding rounds once you have done the valuation of your company (by your analysts which depends on a lot of factors) and raise money by giving corresponding equity to the investor. Let's say, the valuation of your company is 100 crores. You wanted an investor to fund 10 crores, so in exchange, you need to give him 10% equity of your company.
Seed Funding:
Seed Funding is the first official financing of a firm at the very beginning of its life cycle, typically during the idea stage when it has simply a plan or prototype and almost negligible customers. It is also known as seed money or seed capital. It is referred to as "Seed" because the fund is raised by the company in its early stages.
Series Funding:
After the seed round, companies usually go through a series of rounds of funding at different stages. Mostly Series A, B and C rounds of funding.
Series-A:
In a Series, A round, companies should have a plan for developing a business model that would generate revenue with the money raised during this funding round. Investors here don't just look at great ideas but the ones which have a good strategy for money-making business.
Series-B:
Once the company found its market fit, developed a substantial user base and now wants to scale up to the next level, will be going for Series B round funding. It is used to grow the company so that it can meet the demands of its growing customer base.
Series-C:
Companies which are quite successful and want to enter new markets or develop new products will go for the Series C round for additional funding. Companies seeking Series C funding may be looking to expand their business into international markets or hoping to raise their valuation before launching an initial public offering (IPO).
Series C is frequently the final round that a firm raises. However, some companies go on to raise Series D, Series E, or even further rounds of funding to expand and grow.
Bootstrapping and Series funding are more relevant in today's startup world
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