Bootstrapping a startup means growing your business without external investment, relying on revenue to fund expansion. This approach allows founders to maintain complete control over their company's direction and decision-making.
What this video covers
That’s something that entrepreneurs dream about where they don’t have to report to anyone, where they can do their own thing, and they can move forward without any type of investment from outside sources. In today’s video, we’re going to be talking about the pros and then also the cons on bootstrapping your startup. So, let’s get into it!
What is bootstrapping? Bootstrapping is growing your business without any type of money from investors. The way that you’re building up the business is by getting that revenue in from your own customers and reinvesting it into the business and into different things so that you can continue to expand.
The next is the control over the direction. Typically, when you have accepted money from external investors, essentially here, you have the board that is going to be voting for everything, and you may come with a board with one thinking and a way of going about things.
Next is keeping your business. When you are accepting money from investors, those investors are not looking to become investors forever. They are expecting that maybe in five or a seven-year horizon, your company is going to be acquired by a larger business, and that is going to give them their returns on the investment that they put in.
Another thing here is the sense of accomplishment. The fact that you have been able to build this from the ground up without the help of any investors, with your own sweat and tears, with the money from your own customers, that’s a great thing to be proud of. Again, this is another pro and something that people that are bootstrapping their business really appreciate.
Next is building a business that really works. When you’re bootstrapping, and you don’t have a bunch of money to throw around, you are really going to be determined to find a business model that works and to get that business in a way in which you are addressing a need from customers so that you can get paid, and you can get paid quickly so that you can use that money to reinvest in the business.
In terms of the cons, the chances of survival are going to be reduced if you’re not getting external sources to invest in your money if you are bootstrapping your business. This is because you don’t have a lot of margin for error. When you’re getting investments from outside investors, you’re going to leave yourself a little bit of a cushion to be able to make certain mistakes. Obviously, when you’re building a business from the ground up, you’re going to make mistakes.
The next thing is growth. Growth is going to be much slower when you’re bootstrapping because you’re reinvesting that money that is coming in from customers. So it’s going to take much longer to be able to develop your business rather than getting a ton of money from outside investors, deploying it in marketing, and making it blow up.
Then, you’re going to have the lack of top-level help because when you’re raising money, you’re not raising money for the money itself, you’re raising money because of the networks that are giving you the money because you can leverage those toward distribution, getting top-tier talent, toward getting your business acquired, and introductions to other investors.
The next thing is you’re going to have to work a lot harder. In this case, you’re not going to be able to delegate right away tasks that are more admin or things where you can keep your eyes above the weeds. Here, you’re going to have to work much harder; you’re going to have to multitask even more, and that could take some time away from the strategy that you want to see and oversee at the time in order to execute later.
