The pros and cons of bootstrapping your startup.
kohactive often acts as the first contact to startup founders that are looking to build a business. Sometimes these startup founders come in with a well-defined business plan and the backing of an infusion of capital by venture capitalists. Other founders have the business plan, but not the benefit of a flush checking account to play with. There are a number of avenues that can be pursued to rectify this situation, but one that seems to bring a lot of pride to founders is bootstrapping your startup.
First off, let’s explain just what bootstrapping is.
Basically, bootstrapping means you’re building your company by yourself, with your own money, and with little to no help. This means different things to different people. For instance, someone who is independently wealthy and can work on a startup full-time without having to worry about personal finances is bootstrapping in a very different way than someone who finds oneself in the “side-hustle” game of working on different projects to pay the bills, allowing them to stay focused on their startup. In other words, most bootstrapping founders rely on savings, credit, and sweat.
Bootstrapping comes with a unique set of positives and negatives. Here are the top 5 positives and negatives of bootstrapping:
Top 5 Positives
- You’re in control. You own everything. You choose your mission. You choose your voice. You choose your team. You control your timeline. In other words, you only answer to you.
- You will be forced to consider expenditures more carefully. If a venture capitalist throws $55,000 into a marketing budget for you, you’ll certainly be a bit more carefree than if you’re forced to use only $5,500.
- You will have time to work. Having/seeking/placating investors takes time. This is time that could be spent building with your team instead of going to pitch meeting after pitch meeting that will, more often than not, lead nowhere.
- You will be motivated to succeed. Having skin in the game dictates that you’ll drive harder, think more creatively, and work longer to achieve your goals.
- Your bootstrapped success will be a more enticing investment for investors down the line. They’ll be investing in a proven product and a proven founder that has shown the aptitude for creating success.
Top 5 Negatives
- Resources. Venture capitalists have deep pockets. People with deep pockets tend to also have deep and far-reaching roots in various communities, almost certainly in the community that you’re seeking to impact.
- Advice. Venture capitalists have built businesses and tend to know just a liiiiiitle bit about the arena.
- Time. If your idea is truly unique, you should get to market as soon as possible to validate it. If you need a lot of capital to do it, you run the risk of getting there after competitors get to market and gain an advantage on you.
- Lack of Street Cred. If you’re strolling around networking events, telling people that Google Ventures invested in you, that’s going to raise a different set of eyebrows than if you bootstrap.
- Focus: Most people who find themselves bootstrapping a startup are usually freelancing in some capacity. What makes this so difficult at times is that the work paying the bills takes priority over the work building the company.
Bootstrapping may or may not be financially feasible for your newly formed startup company. Angel investment would be an alternative to bootstrapping. If you would like to learn more about what investors look for, or what other successful startups have pitched at the bootstrapping stage (and beyond,) check out our post on Startup Investment.
If you have questions about bootstrapping, please let us know. Contact us to start a conversation.