TL;DR - Advantages and disadvantages of bootstrapping a startup (no outside investment)
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Tags - bootstrapping, self financing, pros and cons of bootstrapping, entrepreneurship, initial capital, growth of startups
- What are the pros and cons of bootstrapping a startup?
- As much as 90% of all initial funding for startups comes from founders, family, and friends.
- Pros of bootstrapping:
- Easy and quick to secure money; not many have to be convinced and no approval process is required.
- No complexity of adding more partners or shareholders; at times, managing partners can be as much of a challenge for founders as managing the actual business.
- The founder can decide the direction of the business without having to convince or negotiate with anyone.
- All profits go to the founder (no dilution effect).
- The exit process tends to be more simple (no competing interests to negotiate).
- Cons of bootstrapping:
- Limited resources can limit the size and scope of the business
- Limited resources can limit the future growth of the business
- If the business fails, all the consequences are the founder’s to deal with.
- The founder may not have all the skills, knowledge, and experience needed to successfully grow the business without top level guidance
Follow up links:
- How to bootstrap a business, https://www.entrepreneur.com/article/305600
- Bootstrapping guide, https://neilpatel.com/blog/bootstrap-startup/
When to Bootstrap vs. Raise Equity,