For many company founders making the decision to bootstrap your business or accept capital investment can be a difficult one. Each comes with it's own challenges, but what can cause greater discourse is that each path offers unique, and vastly different, benefits.
One of the most compelling arguments founders make in favor of bootstrapping is that when you bootstrap your business you to remain in control of your company. With outside investment comes serious accountability. The founders are no longer the sole decision makers, and like it or not you do what you are told when it comes to the direction of the business.
On the flip-side, when you bootstrap your business you are also taking on all of the liability if things should go awry. With capital investment comes security, stability, and support.
“If you want a life and financial stability while building your dream, VCs are a really great way to go. They have their purpose and benefits.”
-Brian Wilson, Founder, Backblaze
Take the Bootstrapping vs. Capital Investment Quiz
1. Do you have enough startup capital to start your business and survive one year?
- Yes: You have the ability to draw from personal resources and family/friends to fund your business and get things off the ground.
- No: Unfortunately, personal resources and outside support are not available.
2. Are your co-founders willing to make the same sacrifices/contributions as you are?
- Yes: You know your founding team well. You trust and believe that they ALL have the same level of commitment and ability to bootstrap as you do.
- No: The co-founders do not unanimously agree that this is a viable option.
3. Can all of the founders live off of no income or severely restricted income?
- Yes: Your team can realistically commit to the process.
- No: Regardless of commitment, your team has different life situations and responsibilities, and bootstrapping isn't realistic.
4. Are you willing to eliminate all costs that can be eliminated?
- Yes: Your team can create an office space in someone’s house, and are willing to work in a "no frills" environment with no admin support or IT staff.
- No: Your team is unwilling or divided about doing all of the dirty work themselves.
5. Do you have a market where the cost of acquisition is lower than lifetime value?
- Yes: You have a well balanced business model where your cost of aquisition is significntly lower than the lifetime value of your customer.
- No: Your cost of aquisition is greater than the lifetime value of your customers- probably not a viable business model.
6. Do you have a market where there is an unmet need? (Steven Blank’s 4 Steps to the Epiphany is a great textbook guide.)
- Yes: You've found a niche market or your solution solves an unmet need.
- No: Your solution isn't solving a new or existing issue in the market.
7. Do you have a market where test marketing suggests low cost acquisition that fits within financial model?
- Yes: You have found a zero or low cost aquisition channel that will allow you to scale your business for less than the cost of your sales and marketing (including any salary given to founders or employees).
- No: Your cost of aquisition requires significant capital investmnet.
If you've answered YES to most of the above questions there is a good chance that your company might have what it takes to bootstrap successfully.
Interested in finding out more? Download the Ebook: "Bootstrap Your Startup Backblaze's Rocky Road to Real Business Success with Zero Funding." You will learn how a Silicon Valley startup built and successful cloud-based consumer data backup business for five years before seeking any capital investment, and gain insight into how you might be able to do the same!