D2C x Funding vs bootstrap

Hey readers,

Welcome to the sixth edition of D2C Cents!

This edition? We talk about:

• The funding vs bootstrap dilemma keeping founders up at 3 AM

• The sharpest D2C news that matters

Milestone moment - we just onboarded our 600th D2C brand on Merito!

Feels surreal helping founders grow, and honestly, it's given us a front-row seat to one of the biggest dilemmas for a founder.

Let's dive right into it.

"Should I bootstrap or raise funding?"

The usual advice is split. Some VCs swear by funding for speed. Others preach how bootstrapping builds discipline. 

Here's what they both miss: 90% of Indian startups fail within five years (primarily from running out of cash), while 60% of funded startups never reach Series A.

It’s safe to say that both the camps (bootstrapped or funded) clearly miss a deeper underlying question.

"Have I mastered capital efficiency well enough that funding becomes a strategic choice, not a survival necessity?"

And that’s what we aim to break down today.

The Capital Efficiency Litmus Test

Looking at 100+ D2C journeys (both success and failures), the winners have clear answers to these 4 questions:

1. Are Your Gross Margins Bulletproof?

2. What's Your Growth Vision?

Different for every founder (based on industry and risk appetite)

The Reality Check: Only 24 of 170+ D2C companies were profitable in FY23

3. Is Your Growth Genuinely Organic?

The Test: Are you pulling customers in or pushing products out?

If you are growing sustainably, don't dilute unnecessarily.

4. Are You Treating Equity Like Gold?

The Test: Would debt or revenue-reinvestment solve this better?

Once you've mastered these 4 questions, the next step is understanding how to deploy capital strategically. Think of it like a pyramid-like hierarchy...

The Smart Capital Utilisation

For Example: Bombay Shaving Company raised ₹24 crore from Alteria Capital as venture debt for growth, without diluting equity.

And now that you understand the capital hierarchy, here's a framework to help you make the right decision…

Your Decision Framework (Bootstrapping or Funding)

Bootstrap First If:

• Gross margins above 40% and improving

• Market allows organic 20-30% annual growth

• Cash flow positive or clear path to profitability

• You value control and long-term wealth building

Action: Focus on capital efficiency, optimize unit economics, build sustainable systems

Consider Strategic Funding If:

• Market opportunity larger than bootstrap can capture

• Winner-takes-all dynamics require speed

• Clear path to 10x investor returns demonstrated

• Ready for board governance and external pressure

Action: Ensure healthy gross margins and raise for strategic expansion only

Action: Fix fundamentals through bootstrap discipline before considering external capital

From someone who has led multiple D2C brands to success:

‘Getting unit economics right is key for success and frugality should be in the DNA of a brand’ - Vivek Gambhir (Former CEO, Boat, Board Member, Mama Earth)

Let's see how this actually works. Here are two brands that aced the capital efficiency game...

Case Study: boAt's PMF-First Approach

BoAt's journey from ₹30 lakh bootstrap to unicorn is a masterclass in capital efficiency.

The Bootstrap Foundation (2014-2018)

Aman Gupta and Sameer Mehta started with ₹30 lakh, solving a simple problem: iPhone cables that break easily.

What Bootstrapping Taught Them:

• Product excellence + outstanding marketing

• Strategic positioning: "Zara of electronics" (premium but accessible)

• Direct consumer communication over expensive marketing blitzes

The Discipline: "While others have burn rate, we have earn rate." - Aman Gupta

And as a result, boAt now sells 4 products every minute

The Numbers: boAt has raised a total of $171M over 9 funding rounds: 3 Seed, 2 Early-Stage, 1 Late-Stage and 3 Debt rounds

Key Lesson: Funding accelerated their success…it didn't create it.

Case Study: Bewakoof's 10-Year Patience

Bewakoof shows why patience in the bootstrap phase builds unshakeable foundations.

The Long Bootstrap Journey (2012-2022)

Started with ₹30,000 by IIT Bombay students, Prabhkiran and Siddharth, from their dorm room.

Why They Stayed Bootstrapped:

Focus on creative, distinctive fashion with humor for millennials

High margins and customer loyalty through differentiated products

"Diving into the startup world can be as simple (or as difficult) as a deep-sea dive. It requires careful planning" - Prabhkiran Singh

Their first office was in a Mumbai slum for ₹6,000/month: tin roof, plastic chairs, extreme heat. This forced operational efficiency and customer obsession.

And before you make your decision, there's one more thing...

The Pressure Reality: What Changes Post-Funding

Here's what actually happens when you take institutional money:

Pre-Funding: Bootstrap Autonomy

• Decision Making: Founder-driven, fast pivots

• Growth Expectations: Sustainable 20-30% annually

• Success Metrics: Profitability and customer satisfaction

• Time Horizon: Patient capital, long-term thinking

Post-Funding: Investor Alignment

• Decision Making: Board approvals, committee decisions

• Growth Expectations: 100%+ year-over-year targets

• Success Metrics: User acquisition and market share focus

• Time Horizon: 3-5 year exit pressure, quarterly reviews

Rohit Chawla (Founder, The Man Company) says ‘Every founder has to decide what kind of investors they want’

Getting funds is just one aspect of building a brand. Another aspect is getting funds from the right investor.(more on that in a future edition)

To sum up…the right funding strategy is the key to join the 10% startups that succeed.

And talking about strategic plays, let’s look at what’s new in the D2C world this week.

The brands winning today aren't the ones with the biggest war chests but the ones who squeezed every rupee, optimized cash flow and had a strategic roadmap for funding.

Capital efficiency beats capital access. Plan (and raise) accordingly!

See you next edition - same time, sharper insights.

Until then, keep building.
Abhishek