The Good and the Bad of Bootstrapping by Jesse Pujji

TL;DR - Positive and negative aspects of retaining full control, focusing on clients, and managing resources as a bootstrapped startup

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Tags - startup, financing, capital, bootstrapping, pros and cons of bootstrapping

Questions answered:

  • What are some advantages and disadvantages of venture bootstrapping?

Summary:

  • Rather than seeking external fundings, founders of bootstrapped companies rely on savings, early cash flow, and conservative money management.
  • Bootstrapping allows founders to retain full control
    • Without a board to impose its ideas, timelines, or limits, founders can determine which strategic vision and, since they don’t have to wait for anyone’s approval, they can execute their plan and make changes at their own speed.
    • However, without a board looking over the business, it can take much longer to figure out that they have made a mistake. It also requires a little extra work and reaching out to mentors in the industry to lend their expertise.
  • Clients take center stage
    • Many companies build businesses their VCs or boards want them to build, rather than what their customers want.
    • Bootstrapping allows founders to focus on customers’ needs.
    • However, lack of capital can limit the startup’s flexibility (e.g. what happens if it loses its biggest client?) and building the right solution for customers sometimes requires lots of capital, which bootstrapping may not be able to provide.
  • Managing resources
    • Because there is no “free money” floating around, each team member knows and appreciates the value of a dollar.
    • Lack of capital can hinder forward thinking and building for the long haul.