An Investment Prep Consultant’s Advice — Bootstrap If You Could
More people on the table usually results in more chaos.
If you have an option in your upcoming startup adventure to bootstrap your business, then by all means this is what you should do. Don't ever think of raising funds if you have the option of bootstrapping, and you're hearing this from an investment preparation consultant.
I get clients on a weekly basis looking for funding to accelerate their product's growth. I help them by creating pitch decks, financial models, and so on. So in this sense you should hear me when I say raise only when necessary.
According to my experience, adding more people to the cap table, which always happens when you raise funding, brings complications. I'm not talking about crowdfunding. I'm more talking about VC or angel fundraising that could occur in this sense.
More people are added to the table or to the equation in general, and the more people that are added, the more problems occur. It's as simple as that, and the only thing or the only entity that will be harmed in the process is your business.
When Fundraising Makes Sense
Now, there are reasons why you should definitely fundraise. Companies like OpenAI could not exist without fundraising.
So it kind of makes sense that they would fundraise in order to be able to grow to where they are right now in a short amount of time. If not, they would have been swallowed by companies like Google or Microsoft. So in this sense, fundraising is sometimes important.
But in the majority of cases, you're trying to build a startup business to grow an idea, and for the majority of people that does not involve selling the business in the upcoming two years.
Since that is the case, then the rush of speed is not necessary. Fundraising gets you to where you are in a shorter duration of time, given that you know what you're doing.
The Reality For Most Founders
A huge percentage of startup founders out there don't know what they're getting into, and I'm not referring to unexperienced founders. I'm referring to people starting a product in a product-market fit that they're not sure of, starting a blockchain company, for example, in a market that you're not sure whether it's going to work or not. There is a lot of uncertainty in most startup projects.
So if there was a chance to build without going bankrupt ASAP, then by all means think of that as your main option.
The True Value of Bootstrapping
Bootstrapping takes time, that is true, and it would take a company six years instead of three years to get where they could have gotten with funding. But it also facilitates a better growth in the sense of the founder's mentality, the company's team dynamics and several other factors.
The more people or companies are rushed, the less the quality of the product or the quality of the experience is.
Companies come and go, but experiences are the ones that really stay for the long term.