Why Bootstrapping is a Better Option for your Start-Up

Securing a huge investment from VCs at an outrageous valuation is the dream of many entrepreneurs. But, is it really the best thing that can happen to you and your start-up? How do you know if VC investment is the best for you? Do you really need VC dollars?

 

While the answer to the first and last questions is both ‘yes’ and ‘no’, it is more ‘no’ than ‘yes’ for most businesses. Most companies who have received VC dollars would have still survived and even thrived without it.

 

Venture capital investment can certainly accelerate your company’s growth and popularity but it can also set you and your team up on the highway to failure.

 

Here are reasons why bootstrapping is a better option for your start-up.

 

More Ownership

While it is better to own a small part of something than to own the entirety of nothing, who says you can’t own the entirety of something?
 
Bootstrapping allows you to keep shares you would otherwise have given up to investors. More ownership means greater control over your company’s product & direction as well as, your time. It also means more money comes to you at the end of the day.

Decreased Pressure

When investors come onboard, it becomes a straight game of numbers. You and your team will be forced to double or even triple your growth rate forcing you to result into taking shortcuts as opposed to taking time to build relationships with your customers and establishing your brand in the market (a process which takes time and cannot be bought).
 
Maybe this is the reason why 75% of venture backed start-ups fail. 

 

While definitely not the fastest route to becoming a big deal, bootstrapping allows you to take all the time you need to build your product and find a place for it in the market. This enables you to build a brand that is relatable and long lasting.

 

Better Focused Decision-Making

From hiring, to product development, to marketing, having little money in your purse forces you to make focused decisions. Knowing you have very little margin for error forces you to weigh options better and make better decisions.

Most VC backed companies are often guilty of having more staff on their payroll than they actually need and opting for buying their way out of problems (example, paying for an expensive TV ad rather than talking to users to figure out why sales are dropping and what they really want).

Conclusion

Bootstrapping is certainly no easy task but it forces the entrepreneur and the team to become more resourceful and creative in the way they think about, approach and solve problems often resulting in a company with a better customer-centered product and/or service and a relationship with their customers than a majority of VC backed businesses can boast of.

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