Venture capital is a buzzphrase these days among entrepreneurs. Young companies that have secured business funding from venture capital are seen as rising stars with great potential. And yet, while large initial investments can help a company get off the ground, there are plenty of reasons why bootstrapping may be a better idea. Here are the top three:
There is no substitute for having total control over your business. It is your brainchild, after all. You are the one who is passionate about its success and while outside advice can sometimes be helpful, being able to call the ultimate shots is vital to the health of your company. When venture capital is involved, you are tied to their rules and ideas about your business direction. Even when they say they just want to be a silent partner, you may find they have definite opinions when something goes wrong. By using only your own business funds or those you procure from friends or family or other means, you maintain control over the values and course of your company.
2. No Safety Net = Creative Solutions
If you start your company with a huge investment from venture capitalists, you may not feel too perturbed when you hit your first business snag. With less incentive to work out the problem efficiently and cost-effectively, you run the risk of developing bad financial practices. When you have no fiscal safety net, you are forced to work hard and think fast when it comes to problem-solving. You stay lean as needed and find the best ways to solve financial difficulties.
3. Realistic Growth
By using bootstrapping as your business funding at the beginning, you are able to grow at a sustainable pace rather than feeling forced to scale up quickly to meet investor demand. By providing your own funds, you can let your business model prove itself before dramatically increasing output, hiring new staff, or expanding too fast. Once you have established your company and shown its value to customers, venture capital can have a place in helping you grow and accomplish your ultimate business goals.
If venture capital is not knocking down your startup’s door, consider it a challenge to bootstrap yourself to success. Then you will eventually see VCs will be lining up to get a piece of your achievement.