More good reasons to Bootstrap from Greg Gianforte 1
Just saw this article by Greg Gianforte from RightNow in SiliconValleyWatcher (via Ken’s Meme Deflector) that states that Most startups should avoid venture funding .
It outlines even further great reasons to bootstrap. Here are some of my favorite from the list:
If you start by selling your concept to potential prospects (rather than stock to VCs), you will either end up with initial customers or a conviction that your idea won’t work. Why raise money and then find out which one it will be?
This first one is really important. It takes a lot of time pitching to VC’s. It is much better to pitch your product/service to your customers.
Money removes spending discipline. If you have the money you will spend it – whether you have figured out your business model and market or not.
I can’t stress too much the importance of spending discipline. More startups have been killed by lack of this than anything else:
Raising VC money determines your exit strategy. You will either sell the business or take it public. What if you end up with a very profitable, modest sized business that you want to just run? That is no longer an option once you raise VC money.
Many people don’t think about this, but it is true. I’m sure 37 Signals are doing very good and are happy to keep doing what they do. If a VC entered into the equation, how long would that last? They would have to forget about the core business segment, that has now become loyal customers, in order to build to the levels of business that would be required to take it public.
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If you enjoyed that article, you might also enjoy an article in the February 2002 edition of Inc. Magazine about Gianforte’s career of bootstrapping companies.
I’m having problems posting the link to that story here because of your spam filter. I blogged about it on July 13, which you can find in my archives.