Not all entrepreneurs are created equally. As founders of the future "next big thing", how you fund your company will determine the success and scale of your business. While some entrepreneurs believe they need VC capital to launch their business, others bootstrap their business by funding it out of your own pocket to get their dream off the ground.
While bootstrapping is an honorable - grassroots way to start a company, it is difficult than it might seem. If you're a first-time entrepreneur, chances are you might have trouble raising capital without first showing some traction and a plan for potential success. While most entrepreneurs might view a lack of funding as a hurdle, bootstrapping might allow you to launch your MVP (minimal viable product), prove your concept, gain traction, and possibly attain a higher valuation when you're ready to raise.
Bootstrapping a business is a lesson in hard work and flexibility, but ultimately it can help accelerate your success. From the companies we've worked with and our experience, here are our top 5 benefits for bootstrapping:
It's always easier to spend other people money. However, when it's your own, we're all more resourceful. Bootstrapping keeps you motivated and honest. By building and launching a lean product will help you rapidly test and gauge your companies product-market fit. This is vital to your long term success. By understanding consumer behavior early on will dramatically increase your chance of success and help build a more sustainable business.
Beware of Noise
Fundraising can be a full time job that attracts a lot of attention. As glamorous as it may seem, raising capital also increases your visibility, especially if your capital raises is press worthy. Remember, not all press is good press. Bootstrapping entrepreneurs that operate under the raider are not distracted by outside influences and have a competitive advantage.
The creative freedom is one of the most over looked benefits of bootstrapping your company. Your company should be built in the vision that you see fit, especially early on. Bootstrapping protects that freedom without an outside voice protecting their investment. When you bootstrap, you are judge and jury of your company's future. Even if you raise capital in the future, bootstrapping early allows for you to build a company a company that serves a need rather than an investors need.
Smaller, Lighter, Swifter
Less is more. With less capital to work with, you will be forced to start small, test your assumptions carefully, and then scale up. Along the way, you will learn about your products, markets and customers more intimately. And if you make mistakes — as all entrepreneurs do — they will almost certainly be smaller in scale and impact. Meanwhile, you will learn to become a scrappier, more vigilant founder.
Capital doesn't mean user growth
A lack of funds doesn't mean a lack of growth. Your goal as an early stage company, especially if you're launching an MVP, is to launch, onboard users, and generate feedback. For those that are monetizing early, if you have a compelling product there is no reason why you can't monetize. Bootstrapped doesn't have to mean unprofitable. Ultimately it boils down to built your company's business plan. Remember that you're create something of value in a market better than what’s out there.
Every entrepreneur is different. However, the one constant is your tolerance to risk. Entrepreneurship is risky business and your success depends on your ability to execute.