In some cases, bootstrapping is actually better than going after funding from VCs. Jim Belosic, Pancake Laboratories’ Co-Founder and CEO, is one of those who stand for this belief, and in this article, he tells us why.
1. VC might ruin your business idea
Let’s agree that the core of every startup is an idea, an original one derived from its Founder(s). Now, most of times, when a startup gets funded by a VC, it works under that certain VC, and, by that condition, should, or in several cases, is obliged to follow all of VC’s demands. This makes the idea that Founders once had might be shifted should the VC finds out that the idea isn’t in line with its own vision and objectives.
2. Investment might ruin your objectives
After you receive the money from VC, it’s most likely that you’ll put more focus on things other than what you should be focusing on; your product. Founders often spend more times thinking about things irrelevant to their business, from office room design, furnitures, to board meeting, once they receive a funding. Remember, your product is everything.
3. VC might allow you to hire more than you actually need
Sometimes, it’s not about quantity, but quality. Hiring too many talents, at some point, might blur the job description and productivity. Having too many employees will result on new problems, like HR-related things and stuffs. It’s better to find one person who we really need for a position rather than hiring three or four people for the exactly same job description. Mailchimp, for instance, is operated by only three people, even though they’ve succcessfully gathered thousands of customers in seven years.
4. You’d be free from long-term barriers
Here’s the brief explanation. When you’re bootstrapping, you work for yourself and your company, meaning that you can make quick decisions which may make your production runs much more effectively. On the other hand, when you rely on VC, you work for them, meaning that every decision must get through them. It would consume more time and your production would be less effective, not to mention that you must, sometimes, argue with them.
5. Get funded, and basically you’re sold
There are investors who work purely for money, not for the development of startups they invest on. Here’s the problem. When you get funded, you must follow the demands of your investors. Thus, you must do practically anything to collect money, so must your investors. This is obviously not a good thing for you, your employees, your brand, and your users.
It’s true that there are moments when startups need to determine whether they want to go for investments or bootstrapping. The problem is, most of times founders receive equal, or in some cases, less money from investors rather than what they receive from sales. For those who understand the “Option Pool Shuffle” calculation model, you surely know what it means.
