What are the pros and cons of bootstrapping vs raising capital?
Fundraising, Starting Up Sep 05, 2019
There are some pretty major tradeoffs between bootstrapping and raising capital. Both can be good or bad depending on your business model, personal runway, ability to hire a team, track record, and more. I’ll outline a few pros and cons.
Pros of Bootstrapping
- You retain 100% ownership (and can share/split with the team as you wish)
- Nobody other than your customers and the market can tell you what to do
- You can experiment with different business models and products until you find something that you can scale, without having pressure from investors looking for a return on their investment
- You can run your startup as a lifestyle business and not go crazy trying to grow, grow, grow
- You can shut it down if you fail or get bored
- You can take as long as you need to figure things out
Pros of Raising Capital
- You don’t have to not pay yourself and your team if you can’t drive early revenue
- You may be taken more seriously in the startup ecosystem, so may have an easier time hiring
- You may have enough money to hire good talent early on
- You probably have longer to figure out product/market fit and to get to some sense of scale
- You may have solid investors who really add value to your business
- You’ll be forced to think about exit scenarios, which may help with a sense of urgency
These are just a few things that come to the top of my mind, but there are dozens of pros (and cons!) of each model.