September 10, 2010

Top 9 Reasons Bootstrapping Beats Raising Capital

  1. You get to keep all or most of the equity!
  2. Spending all your time in pitch mode draws attention away from overseeing the health of your business.
  3. Being capital constrained forces you to be more creative, focused, and disciplined. Bootstrappers get more mileage out of every dollar they spend.
  4. You'll never be forced out simply because the investors decided one day they needed to bring in a CEO with more "credibility" (read fancier résumé).
  5. You don't have to worry about getting diluted or "crammed down" in a future investment round.
  6. Bootstrapping forces you to develop a compelling value proposition and a forgiving business model right out of the chute, instead of "Our plan is to spend a lot of money today to attract eyeballs, then figure out how to monetize or sell it down the road."
  7. The care and feeding of investors is an ongoing distraction for you and your team.
  8. By necessity, bootstrapping puts you out in front of customers almost immediately. The faster your offering is in the hands of customers, the faster you generate revenue and the faster you refine the product specs to really nail the market. This may put you several iterations ahead of the competition that's developing version 1.0 internally using seed capital.
  9. Anyone can bootstrap. Your ability to launch is not contingent upon getting approval from someone else.

Here's the bonus: Bootstrapping a startup in no way prevents you from having investors later on, preferably once your business is profitable and growing. If you can eliminate the biggest risks before seeking funding, you'll raise money with less hassle and on better terms.

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