Profitable Bootstrapped Startups: Recipe for Success

At a time of funding crises, mass layoffs and shrinking revenue in the startup ecosystem, bootstrapped startups such as Zerodha, Zoho and Wingify are continuing to earn profits without the help of venture capital. What is the reason for their resilience amid the ongoing global economic slowdown?

By Soumya Duggal


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With bootstrapped stock broking firm Zerodha recently reporting a doubling of its profits to INR 2,094 crore in FY22, there is growing recognition of those startups which are surviving, and even thriving in, the current macro-economic crisis without the helping hand of venture capital.

Launched by brothers Nithin and Nikhil Kamath in 2010, Zerodha offers online trading services in stock, commodities, mutual funds, bonds, and currency. The company's latest profits are up 82 per cent compared to INR 1,112 crore in FY21. According to the company's regulatory filings with the Ministry of Corporate Affairs, its operating revenue rose 82 per cent to INR 4,963 crore in FY22 compared to the previous year's figures.

Business software provider Zoho and SaaS tools provider Wingify are other obvious examples of such bootstrapped profitable companies that have thus far escaped the damage done by the present funding winter. What is the reason behind their resilience?

Unit Economics, Caution, Employee Welfare

Although Zerodha's net profit witnessed a steep rise, its founders aren't swayed away by the achievement as they prepare to keep up the good performance in future, albeit with a realistic outlook. According to a blogpost written by Nithin Kamath last month, while Zerodha is on track to attain similar revenues and profits in FY23 as in FY22, these metrics might not be fully achievable due to a plateauing in their target market and a dip in new account openings as well as bull market momentum.

Similarly, although Chennai-based Zoho announced in November 2022 that the company had crossed $1 billion in annual worldwide revenue, founder Sridhar Vembu warned against a slowing down in growth due to decreasing activity in the global economy at large. Going forward, the company plans to reduce marketing expenditure as a cost-cutting measure. A strong balance sheet and zero net debt are its prime aims as Zoho hopes to avoid mass layoffs, a phenomenon that became all too common among large startups over the last year.

"We understand that times are tough but we have made a commitment to the employees that layoffs would be the absolute last thing we will ever think about because it kind of destroys loyalty," Vembu stated in October, adding, "If we want our employees to be loyal, we have to be loyal to them. Even when times are tough, with a strong balance sheet and strong unit economics, we need to retain our talent here."

Such concerns have led these startups to prioritise unit economics and employee welfare as opposed to burning cash to achieve scale. Both Zerodha and Wingify have observed a spike in employee benefit expenditure, the latter constituting a significant chunk of the overall spending. Wingify, in particular, reported a 13.7 per cent rise in its profits to INR 58 crore in FY22 from Rs 51 crore in FY21.

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