For startup founders, money is close to the first thing on your mind. While it is important to properly manage your financials, it isn’t a good idea to pursue early — stage funding. Venture capitalists and angel investors are often turned off by those companies barely off the ground that are seeking significant financing. Still, you need funds. What else can you do to build your business properly?
VC’s Reject 98-99% of Pitches!
Emerging ventures without a proven product demonstrated sales patterns, and limited overall market share are high risk at best. Venture capitalists may seem willing to spend money, but they are not likely to take on unproven companies.
In fact, they accept and finance only 1 or 2 out of every 100 pitches they see. According to the Small Business Administration, out of the 600,000 new businesses launched annually, only about 300 are funded by VCs.
Consider for a moment that a funding round wasn’t the only option available to grow your company. Would you pursue other methods to build your business? For example, bootstrapping your company may mean a slower growth and far more hard work on your part.
However, it also ensures nearly all of your profit remains in your pocket, not an investor’s. It also means you remain in complete control of your company’s future. You don’t have to sell away equity in your business for investor compensation.
Why Should You Bootstrap Your Company?
Yes, it seems easier to turn to an investor who will hand over millions of dollars to help you fund your business. However, this rarely occurs, and you’ll likely waste your time (and money on that pitch development) in the process. Instead, bootstrapping your company affords far more opportunities:
- You’ll stay passionate about your company and discover key talents you didn’t know you had.
- Companies that bootstrap are likely to attract the right talent. You’ll bring in people who can actually push your company forward because you’ll have better insight into who you need.
- As previously noted, you retain control of your company — including who will work with you every step of the way.
Most importantly, without investor financing, you’ll grow a better company that’s less dependent on pleasing investors and more likely to develop the type of product or service your customers need and want.
Without Funding, How Can You Build & Grow a Startup?
Can you develop a very successful, well-known company with bootstrapping? I did it at GetVoIP, and in just 4 years, we made it to Inc.’s 5000 fastest growing companies in 2016. In fact, many companies have done just that. They didn’t seek investor funding early on. Instead, they skipped early-stage funding altogether and grew their company without.
You’ve heard of companies such as TechCrunch (launched in 2005, bought by AOL for $30 million in 2010), Braintree (founded in 2007, bootstrapped until 2011 then received $34 million from Accel), and Indeed (raised $5 million after several years and founders excited for an estimated $750 million).
Bootstrapping means reducing any (or possibly all) outside debt and equity financing for your company from any type of investor, a third-party company, or bank. Instead, you’ll focus on building through other strategic means, including:
- Don’t be…