If you’re starting out and looking for ways to get funding for your new business, a popular option is bootstrapping. Bootstrapping is where you get your business through a tough patch or early stage growth with your own funds.
But there are a few more reasons to consider bootstrapping, such as:
- You keep full control of your business.
- You can make strategic decisions independently without consulting a large board of directors or shareholders.
Having control can benefit your business, specifically in the early stages when being agile is essential for maximising the impact of your creative ideas. Bootstrapping gives you the opportunity to rapidly deploy your ideas, learn from them, improve them and deploy them again.
“We also found that VCs will usually be reluctant to invest if you haven’t bootstrapped for a while,” says Shafin Anwarsha, Co-Founder of Giraffe.
“They want to see that your company has some traction, and they want to see that you’re invested — that you’ve put your own money into the business and that you are committed to making it work.”
“We were fortunate enough to pitch our start-up in South Africa’s inaugural Shark Tank. Even more exciting, we were one of the few businesses that secured an investment,” says Jason Newmark, Co-Founder of Plan My Wedding.
What they learnt from that experience is that start-ups place too much emphasis on the importance of funding. “Attracting an investor is exciting, and the growth that funding can bring is positive for the business if used correctly, but the reason we received funding in the first place is because we were already building a sustainable business. That’s the kind of business investors are attracted to,” he says.
“Too many start-ups focus on finding funding to the detriment of actually building and bootstrapping their start-ups,” advises Newmark.
The hard truth behind bootstrapping
Every type of funding has pros and cons, so before you decide, ensure you have a very clear understanding of what bootstrapping entails. “A lot of people like the idea of building a business and escaping their boring corporate job. The truth is much more difficult than that, though,” explains Nicholas Haralambous, Founder of style company, Nicharry.com.
“If you really want to build a business without raising funding you have to portion out your salary and dedicate some of it to your new idea.” This means eating out less, going to the movies less and probably not buying those new shoes you had your eye on. Bootstrapping takes time and dedication, as well as your savings.
But, if you can make it work you’ll own 100% of your new business and won’t be indebted to anyone.