Startup Series: What are some of the smart ways of running a start-up? To run it frugal is a good start.

By Mahesh Bhalla There has been a spate of articles recently on Unicorns vs Roaches. Investors are beginning to appreciate start-ups that are scrappy, survive on meagre budgets and are therefore able to weather downswings with minimal damage. Clearly, thrift goes a long way; there is definitely value in scrounging for everything that an entrepreneur can get at little or no cost. This includes resources, advice, connects, networking, access, etc. One of my friends who is actively involved with the Start-up space, uses the term ‘shameless’ in her recommended approach when asking for resources. Her philosophy is that there is no harm in asking for the world, for free. After all, the worst that will happen to you is you will have to hear ‘No’! As a start-up (usually with limited capital), it makes sense to try and get what you need without shelling out any money. One simple way to do this is to offer to be a pilot or reference case. “If you provide my start-up with your professional services for free, I would be happy to recommend you to other potential customers who will pay you for your services. You can even use my name in your promotional material.” It is quite common to see these kind of ‘quid-pro-quo’ or barter deals take place in the entrepreneurial eco-system. Then there are a number of Clubs, Networks and Forums which offer expertise for free or a modest sum of money. The larger Start-up support organizations will usually have tie-ups with professionals (like legal, accounting, marketing, trademarks, etc.), who understand the start-up space, and offer ‘packages’ which are aimed at start-ups. They will help you with the basics (e.g. get your company registered or file the statutory paperwork) for a very modest sum of money. They price these services aggressively for two reasons. One is that the effort from their side to provide basic ‘modular’ services is low and two, by casting their net wide, they hope that as some of the start-ups grow successfully, they will need more specialized services at a later date, for which they will pay more money. As a young start-up you want to keep costs as low as possible till you have a MVP (Minimal Viable product) to test in the market. And even after that you would want to minimize the costs of pilots and testing the concept. See how far you can bootstrap the entire operation. While renting a small office in the early stages is considered acceptable, do you have the ability to work out of your home, or garage, or a friends’ office for a while? Any money saved on rent is money that can ploughed back into getting your product right and growing the team. Can you save money on hardware? Instead of buying new computers, can you use your old one? These days, people prefer to host their applications on the Cloud instead of investing in Servers themselves. Even basic PC’s may be rented if you want to avoid investing in Capex upfront. There are also companies that will support your website/app development, and instead of charging you a fee, they will take some equity in your venture instead. While this method does reduce your cash flow, you will end up giving out valuable equity. We know that equity is the most expensive form of raising capital, and therefore this should be avoided unless you have no other option, and the equity ask (in lieu of services provided) is modest. The author is an angel investor. He is actively involved in the start-up space and serves on the Advisory Board of Innoventure Partners LLC. This is the fourth part in a series on the startup ecosystem in India. Follow this space for more.