Why you should bootstrap your startup before raising money

Edited excerpt from After raising $125M at my last company, I’m bootstrapping PeopleSpark — here’s why by Mitchell Harper:

Bootstrapping or raising money aren’t mutually exclusive. There are immense benefits to bootstrapping before you raise money:
1. You’re 100% focused on generating revenue and profit as quickly and as efficiently as you can
2. You learn to keep costs low and keep an eye on anything taking money out of your pocket
3. Your employees adopt your mentality — careful where they spend money, resourceful with limited resources
4. You’re forced to experiment with different, low/no cost ways to win customers
5. You invest in your product, which matters more than anything else, and spend less on superficial stuff like a nice office, catered lunches and all the other crap most startups waste money on
6. You don’t have to spend time preparing board slides or attending board meetings
7. You can still get access to great (future) investors and pick their brains — the best VCs will understand that you don’t want to raise money right now, but will still work hard to build a relationship with you
8. Bootstrapping significantly de-risks your business in the eyes of future investors —“If they can get to a few hundred grand in revenue a year with no outside investment, imagine what they could do with $5M!”
9. If you can get to profitability, you have immense leverage when you decide to raise money, because you’ve done what probably less than 2% of startups have done

Notes:
(1) Cf. Why you shouldn’t raise too much money in your early funding rounds
(2) Re. “If they can get to a few hundred grand in revenue a year with no outside investment, imagine what they could do with $5M!” — see The real difference between funding rounds

2 thoughts on “Why you should bootstrap your startup before raising money

  1. Pingback: Reach versus monetization | A Founder's Notebook

  2. Pingback: VCs make two common errors, the data shows | A Founder's Notebook

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