In a few weeks I’m giving a talk to a group of entrepreneurs that have decided to eschew raising outside capital and focus on bootstrapping. With so much focus on TechCrunch and other publications about fundraising and venture rounds, it’s easy to get caught up in the belief that raising large amounts of capital is the only route. It’s not. Here are several benefits of not raising outside capital:
- Flexibility – Businesses change. Trends change. Being independent provides infinite flexibility to change course and pursue the best new opportunities. With no board of directors there’s maximum flexibility.
- Timeline – Without outside investors there’s no timeline on the business to sell after 5-7 years. Sometimes it doesn’t make sense to ever sell or there’s a desire to have a great cash flow business indefinitely.
- Quality of Life – Being an entrepreneur is already stressful enough. Once the business is working, there’s the option to focus on quality of life and less on the company.
- Expectations – With no investors there’s no expectation of building a large company at all costs. Expectations can be as high or low as personally chosen.
Overall, the biggest benefit of not raising outside capital is the ability to control your own destiny across every dimension. Control is what many entrepreneurs are seeking and not raising capital is the best route for that.
What else? What are some more benefits of not raising capital?
David Cummings on Startups 
Receiving money to fund an idea can give you a false sense of confidence in the value of the idea. Ultimately, the value of the idea must be proven by the marketplace. Will customers pay for it? Because bootstrapped companies have a more pressing need to find those customers and the right business model, they usually chart a shorter path to the business model that works. Advertisements and a fully staffed development team won’t lead to success if the idea or business model is off-target, and it could actually make that path longer. If you’ve proven the idea and model early, profits can fund the scaling phase.
Where are you speaking to that group of Entrepreneurs in a few weeks? My company is bootstrapped and growing quickly so I am interested to hear more detailed thoughts.
Bootstrapping forces you to focus on the fundamentals, Revenue and EBITDA. It forces a discipline into the organization that is very useful as you grow. As a founder\CEO, think about the amount of time spent raising capital then imagine using that time to grow your business.