Bootstrapping is the increasingly popular practise of funding your business yourself (or via your startup’s own profits), instead of raising money from investors. Microsoft, Apple, and Dell are popular recent examples of multi-billion companies whose founders exclusively funded by bootstrapping.
The decision to bootstrap or fundraise for your start-up will depend on a few factors that boil down to:
- What your long-term goals and values are
- The expansion or growth strategy of the business
Bootstrapping is the way to go if
- You want to have 100% control over all decisions and operations of your start-up venture. Bootstrapped founders retain full decision making power and don’t have to answer to investors.
- You want all the profit you make for yourself. Bootstrapping means any dividends paid our, or any acquisition deal, goes directly to the founders’ pockets.
- You want to grow gradually and control the process and pace of that growth. Bootstrapping gives you the luxury of growing gradually. There are no external pressures and demands placed on you for rapid results or expansion as would be in a fundraising venture scenario.
- You’re willing to compromise easy growth with learning experiences and hard work. Bootstrapping gives you the chance to be creative as you learn to work with the less that you have. You learn to make creative decisions and improvise when you don’t have the luxury of wide access to large pools of funds.
On the other hand, it’s wise to go the fundraising route if;
- You intend to achieve rapid expansion. You have proven, easy channels to grow your venture with an influx of cash.
- Your business can no longer grow on its own and needs cash and outside expertise to get to the next level.
- You value being accountable for your decisions in the business, and being answerable to other people with a stake in the game.
- You’re ready to make tough decisions like sharing of equity, profit and other specifics in the day to day operations of your startups for the sake of long-term prospects.
