Fueling Growth Without Venture Capital Gains Appeal

(DGIwire) – When asked, a significant number of startup founders would probably claim it is nearly impossible to launch and scale a company without the financial backing of outsiders such as venture capitalists. As a recent article in AmericanInno.com reported, VC money can indeed help in a big way, providing cash to hire a good number of employees and launch marketing campaigns. But the article also noted that doing so can take crucial elements away from startups and their founders—such as board seats, autonomy and equity. These can have an impact on daily operations and the amount of cash that founders take home when the company is acquired or when it goes public.

“In stark contrast to going the VC route, the process of bootstrapping a company can result in a sustainable and profitable business without signing a single term sheet,” says Marty Schultz, a mentor-speaker, angel fund investor and award-winning innovator. “The greatest benefit of not having investors’ money is that it forces you to operate a really sustainable and healthy business.”

The AmericanInno.com article suggests reasons why this could be so; for example, bootstrapping forces a discipline that company management has to get right. They have to have a good product that has a product-market fit; they have to have customers that are paying for it; and they have to set up a business that is sustainable in the long run. The article also profiles a growing number of companies in the Washington, DC metro region that have followed this path.

Bootstrapping involves intense amounts of listening to the needs of potential partners and customers; it is crucial to remember to ask everyone with whom you come in contact if they would be willing to buy the product or service that is being created. Just as importantly, the founders need to gain an intimate understanding of the business needs of their potential initial customers.

From day one, Schultz adds, entrepreneurs should surround themselves with people they trust, and who have the same motivation they do. An entrepreneur should lead by example, seeking to instill in those they work with the kinds of values they believe will best impact the operation of the company. Decide on the type of culture desired in the organization and ensure it is in place from the start.

Flexibility is an absolute must for entrepreneurs who are bootstrapping their companies. It is also important for founders to love the new company and the work that must be done to ensure its success. Conversely, it is all too easy to lose sight of the fact that while serving as the head of a new endeavor, the founders are only as smart as what they have accomplished to date.

“Although there may come a time in the evolution of a company when seeking VC makes sense, it is a fact that in the earliest stages, bootstrapping holds specific advantages that should not be overlooked,” Schultz adds.