I have started a few businesses in my time – Articulate Marketing, of course, but also a wine business, a games company and an online SaaS app. I didn’t seek funding for any of them. They were all self-funded. Personally, I think this is healthier – you get to focus on finding customers and keeping them happy rather than ‘financial engineering’. It also leaves you in control of your own destiny. Of course, your mileage may vary!
I personally prefer the bootstrap method of early growth to funding. Bootstrapping forces you to find the most efficient routes to getting things done rather than the most elegant. This is actually a huge benefit as it forces action. Whereas funding can stop or slow you from taking action because there is less urgency to getting things done. I think staying as lean as possible for as long as possible is the greatest thing for the vast majority of entrepreneurs and that’s more easily done by bootstrapping over funding.
One of the most important lessons I have learned (from bitter experience) is that the ownership decisions you make in the early days of your business, will live with you for the duration…however successful or otherwise you become. Business relationships are very much like a marriage, usually much easier to get into than they are to get out of.
Therefore, it’s important not to rush to bring in investors, partners or other finance options unless and until you have considered all of the likely outcomes. No matter how pressing the opportunities or threats to your business may seem, it is easy to become pressurised into doing the wrong thing.
Whatever you do, take a breath, take advice, take a walk around the block, before you take that decision.
Bootstrap yourself as long as you can and only seek funding once you have found product-market fit and are looking to grow.
Delivering revenue means that you know people are willing to pay for what you have to offer, that you can retain them and know how to serve them and that you have a clear view of what your customer’s needs are (even if you are still not fully solving for them).
Seeking funding can become a rat race in itself, especially when there is a lot of it to take from; which means you are postponing key decisions for later.
Also, keep in mind that not all businesses are VC plays, despite of being able to get VC money. Understanding how you make money and the potential for growth will allow you to better inform those decisions.
One of my favourite expressions is “don’t say you’re funny, tell me a joke”. It’s really about proof. Because in today’s impatient world, a brand is what a brand does. In start-upland, this means proving that you have a viable business before asking an investor to risk their return with you. So, for me, bootstrap early is the way to go.
If you need funding to get off the ground i.e. to pay for production, then it’s a must. However, if you can test the market with minimal costs i.e. as a service based business, then maybe think again.
Funding, unless it’s a no strings attached grant, normally comes with stress, pressure and may need to be paid back, so make sure you absolutely need it and that the investment will help you grow.
Ultimately focus on solving a tier one problem really well and the rest will follow. Too many startups focus on raising funding and forget to actually create a business which helps customers. They eventually fail, so focus on the problem, solution and customer first and then see what opportunities arise from this.
For more information on how to pitch and sell your ideas, check out www.storycube.co.uk.
In most cases and learning from experience of going the bootstrap method myself – seeking finance is a great way to give you momentum and accelerate growth. Financing at the early stages can seem daunting but so many options for finance are available to startups now. You often start a business because you have identified a gap or a need that you can fulfil – don’t risk that time passing but being too slow to grow. Leverage the funding available to your advantage. The early stages of a startup can also be frustrating as you wait for the cash to come in organically. Don’t be afraid of financing your growth.
It really depends on the business goal and company vision/mission. I bootstrapped because I wanted to offer a boutique service with impeccable quality, own something and remain in control. Liberty’s clients at early stage tend to seek investment/funding because they want to grow internationally. I chose to remain independently owned and have delivered on our vision. In the technology sector it’s common to seek funding and in successfully doing so provides credibility for startups and early stage firms and helps for future funding rounds.
Initially, it may be sensible to prove the business concept before burdening the new venture with debt.
Once the business is established and moving in the right direction it’s quite possible funding will be required to scale the business
In summary, therefore, I wouldn’t recommend taking on too much debt until the business idea is proven. The downside is this approach may slow growth, but the upside is growth will be achieved with less risk.
Speed of growth is always a challenge in early stage and, whilst trying to bootstrap preserves value it is almost bound to create a capacity compromise. I would say seek funding – it also serves as a good test for the validity of your proposition and an endorsement of the plan. But keep the funding to a minimum level and concentrate on a few investors that can also bring some value rather than a big round that will dilute value more quickly.
As a crypto currency start up, we did have an ICO (Initial Coin Offering) in 2017 – a sort of crowd-funding exercise. Since that initial fund-raising, we have explicitly decided not to raise new funds but live within our ‘means’.
The upside has been that we have been able to single-mindedly focus on delivering what we promised and committed, to our original (individual) investors. We have also not been distracted by all the paper-work, legal work and bureaucracy entailed in new fund raising.
The down-side is that we have not been able to front-end resources to launch products and services as quickly as we might have been able and, as a result, we are not scaling up in the fastest way possible.
Does that matter in a fast growing market, which is still relatively immature and where there is lots of ‘white space’? We think not – and that by systematically launching new products and services that really satisfy our community’s needs, we shall succeed. Time will tell.
Seeking early funding gives you so much more than money: it opens doors to networks, marketing and general expertise which can support formation of strong foundations for your start up – get these rights and you can shape you and your firms future. Funders will want to know you have done your homework – not just looking at the past but horizon scanning to anticipate future need for your venture. With bootstrapping is an option funding partners, in my opinion, are a more viable option.