The following article takes a Founders look at the decision to go it alone as far as financing goes. No angels, no VCs… simple (or not so simple) funding by way of customer growth. What do you have to focus on to grow organically? That would be the customer. So, one of the major advantages of bootstrapping can be that it keeps the focus on the correct aspect of the business. Does that lack of cash also mean critically missed opportunities? It can. Take a look at what Jesse Pujji and his team are learning in their bootstrapped company.
The Good and Bad of Bootstrapping
By Jesse Pujji for Young Entrepreneur Council (YEC)
When you start a business, there are many financing options to consider — friends and family, small business loans, angel investment, VCs — but there is no textbook solution for getting a new business off the ground.
One option that entrepreneurs, investors, and average Joes love to love is bootstrapping. Rather than seeking external funding, entrepreneurs who bootstrap their companies rely on savings, early cash flow and conservative money management. The age-old concept of the American dream lives on in the world of startups — we have pulled ourselves up by our bootstraps.
My co-founders and I have confronted the good, the bad, and the ugly of choosing not to use outside capital in the inception and growth of Ampush. Here’s my take on the double-edged sword known as bootstrapping:
Retaining Full Control
Without a board to impose its ideas, timelines or limits, we are able to be opportunistic, nimble and adaptive. We determine which strategic vision to follow. Since we don’t have to wait for approval, we can execute that vision or make changes at our own speed. We also learn at our own pace; we make mistakes but keep going. By retaining full control of the company, my co-founders — the people who understand the business best and run it day to day — and I are in control of its future.
For every pro of retaining full control, there is also a con. As an independent, we are responsible for making decisions that might be unpopular with clients, employees or partners, but that are right for the business. We are also unable to tap into the valuable networks of board members because — guess what! — we are the board. Because no one is looking over our collective shoulder, it can take much longer to figure out that we have made a mistake. These are not impossible hurdles to overcome, but it requires a little extra work and reaching out to mentors in the industry to lend their expertise.
Clients Take Center Stage
We often see other entrepreneurs build businesses that their VCs or boards want them to build, rather than ones their customers want. We don’t have that problem; we know who butters our bread (our clients) and we keep …