Bootstrapping vs. Fundraising?

SDS 040: Bootstrapping vs. Fundraising?

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The most enjoyable part of my job is talking with founders.

Many founders in the early stages of their startups are finding that investors are less interested and it takes longer to get funding.

Because of this, these founders are asking: Should we use our own money to grow (bootstrapping) or get money from investors (fundraising)?

This choice can shape your business, so it's important to think carefully about the pros and cons before deciding.

Bootstrapping: Bootstrapping means using your own money or the money your business makes to grow. By doing this, you keep full control over your business and don't have to give away any part of it. This way, you can be flexible and make changes without worrying about investors. Plus, it helps you build a strong business from the start. Look at Mailchimp, an email marketing platform that started with bootstrapping and became very successful. But, there are challenges. Without extra money, growing your business might be slower. You might miss out on growth chances and find it hard to hire top talent without the funds to compete.

Fundraising: Fundraising can give you the money you need to grow quickly. By getting investment, you gain access to the knowledge and connections of investors. This can help you attract top talent, as people might be more interested in joining a well-funded startup. However, raising money means giving up some control and part of your business. Investors will have expectations and might pressure you to meet certain goals. Additionally, the fundraising process can also take a lot of time, taking your focus away from developing your product and serving customers.

So, which is best?: Well, there is no one-size-fits-all answer. It depends on your business, your goals, and what you prefer. Some founders use a mix of both, raising funds at certain stages and bootstrapping at others. If you are thinking about bootstrapping, you can try incremental fundraising. This means getting smaller amounts of money from customers, partners, or other sources. This way, you can keep control while still getting some extra funds.

My two pesewas:

Whether you choose bootstrapping or fundraising, make sure it fits your vision and goals. Think about your resources, how much risk you can handle, and how much you want to grow. Talk to mentors or advisors who have done this before. Trust your instincts and make the choice that feels right for you and your startup.

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If you only read one thing this week, read this...

“So You Wanna be a Great Operator?” by Adia Sowho (ex-CMO of MTN Nigeria)  

Why is it worth your time? This article guide offers crucial insights on adaptability, self-awareness, talent acquisition, and strategic thinking essential for any founder aiming for operational excellence.

That's all for today. As always, thank you for being an engaged reader.

I'll catch up with you in two weeks with more actionable insights.

Jasiel

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