Raise your hand if you’ve heard one of the following:  

• “I’m gonna raise a round to get this off the ground”
• “I need to get my pitch deck together for this raise”
• “I need an investor!”

You’ve probably even said one of them! 

Raising money for your venture can be one of the most fruitful things you can do. It can also be one of the most distracting things you can do in the early stages of building your tech company. What if I told you there was another, more foolproof way, to launch your business?

Why is it important?

The choice of seeking investment or bootstrapping can drastically change how you approach the early days of your company. Investment involves securing funding for your venture, from friends, family, angel investors, or institutional; investors, in exchange for equity. Bootstrapping is the process of self-funding the startup with a combination of personal funds, early revenue, and loans.

In both scenarios, strong communication, self-organization, and focus are required. Let’s see what each path entails.

Understanding how you can fund your startup can ease the path to the revenue, impact, and profit that makes sense for you. More importantly, it can make your journey more enjoyable, depending on your personality. See this article on understanding your personality https://www.16personalities.com/free-personality-test to better understand your personality. 

Investment Path

Securing investment can relieve short-term financial needs but increases the pressure to grow the company quickly and focus primarily on returns. Seeking investment presupposes at least 3 of the following to be true:

1. You have determined that the value is worth multiple millions of dollars 50M+
2. You are able to understand and secure your stake in the company through equity agreements
3. You have the disposition to seek funding, communicate the value, and secure investors
4. You have determined a quick path to market to acquire the value
5. You have prior experience successfully raising, growing, or exiting a company to lean on

Raising investment requires a strong disposition towards bullish, stubborn, and single-minded focus. This can take a toll on founders who are not prepared and may even discourage them.

Bootstrap Path

Bootstrapping can reduce outside pressure but may increase your time to market depending on how well you have scoped your MVP (Minimum Viable Product). Bootstrapping requires 

1. You have very strong financial acumen and are able to account for income and expenses expertly
2. A strong ability to test and adjust the business model early on to attract and grow revenue as quickly as possible
3. Delicately managing personal, institutional, and revenue sources of funding
4. The knowledge that you are not seeking investment but may entertain it if the opportunity presents itself

How does it help you?

From my experience working with startups at the earliest stages, it’s usually much easier to bootstrap the MVP. This provides you with the ability to get insight, make adjustments, and more without breaking the bank. By bootstrapping as much as possible, you’ll get a version of your product or service that validates your hypothesis/problem statement. There are various ways to go about this, each with its own drawbacks and positives. The ultimate goal is to develop a lean MVP that you can easily adjust based on end user/client feedback.

How can we help?

Because working with us is an investment in and of itself, we highly recommend thinking through your path to market rather than just the product. We specialize in providing and finding clarity where there is none. Below are some ways we can be of help to you:

• Structure initial market research for your target market and help you analyze the results
• Create a functional prototype that can be shopped around to potential customers to secure interest
• This is effective for B2B services and shows genuine interest which can make the funding journey a bit easier
• Create an MVP using off-the-shelf components that demonstrate a usable version of your product that solves the problem
• Airtable, Glide, reTool, …etc.: can be effective for providing value as well as allowing you to iterate very quickly
• If you have the technical skills then keep it very simple. Focus more on the result than the interface to start
• For example, a frontend built using reTool that utilizes backend service supported by a custom AI/ML model
• Dial down the vision into a more manageable roadmap. The solution does not need all of the bells and whistles on day one. It needs to do one or two things and do them well. I would recommend
• Needs to have: What needs to be there on day one
• Should have: What can wait for version 1 a few months later
• Want to have: What can wait for version 2 a year or more later

By doing the above, you will be able to reduce the cost of creating your solution, get the feedback and traction you need, and ultimately understand the real potential value of your venture.

References

1. Should Your Startup Bootstrap or Raise Venture Capital?
2. The Pros and Cons of Bootstrapping vs. Seeking Investment For Your Startup
3. What Funding is Best For My Startup: Bootstrap or Venture Capital
4. The Lean Startup