Bootstrap vs Investment Funding: Choosing the Right Strategy for Your Start-Up
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Ever thought of starting up a business and being your own boss, doing things on your terms, your way, and making a real difference in the world? If you're nodding your head, then you might want to consider the next steps and how to do this… yes, we are talking do you Bootstrap your new baby or do you try to get Investment?
Many think letting someone super charge you while you focus on bringing your venture to life is the way forward, while others prefer to roll up their sleeves, build their business from the ground up and never sleep again.
Deciding on the path to become the next Canva , Envato or Xero isn’t easy and trying to decipher the secret sauce to success is even harder and here at JDP we hate to break it to you, but we don't have the answer… but what we do have is a list of pros and cons so you can decide your own individual path!
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Bootstrap:
PROS:
Bootstrapping means you won't need to take into consideration any other opinions or ideas but your own—you didn't start a company to be bossed around. You're in full control and have the authority to make all business decisions by yourself…
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Entrepreneurs can avoid diluting ownership of the company, not having to sacrifice shares or control. Instead, you keep all the monies as you watch it grow—but at what cost?
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Building your business from the ground up will give you satisfaction, and once your business is successful, you can say “I built that” knowing you didn’t get one ounce of help from investment funding.
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CONS:
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You don't have to be a brainiac to know that having little money means you'll find times tough. If you're looking to grow a multi-million-dollar business overnight, bootstrapping won't cut it. Chances are building your company from the ground up will make it difficult to initially invest in marketing, technology, and hiring top talent… unless you offer them equity?
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Without these funds and resources available at your fingertips, you’ll need to brace yourself as bootstrapping is a much slower game.
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Without the safety net of investment funding, there's also no guarantee that your business will be successful or generate revenue, meaning you'll need to keep at it for a?long?time and put in the hard yards.
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What happens if someone else comes up with the same idea and beats you to it? Is it better to be first to the market or will slow and steady win the race?
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Investment funding:
PROS:
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It's the gift that keeps on giving where you'll have loads of “free money” to pay for all those expenses such as rent, ping pong balls, people’s salaries, marketing materials, equipment, and much more.
Convincing someone to invest in your business can validate your idea, giving you reassurance that you’re onto something pretty special.
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Unlike having to repay traditional loans, investment funding is flexible, where it takes a share of the equity of the business but only when it’s making money, which can help your struggling start-up that might be strapped for cash in the early days.
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CONS:
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Like we said above, no, it's not like a traditional loan, but no one gets money for free without giving something in return. Investment funding is a deal, and you'll need to generate revenue quickly so they can have their return.
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Although you mightn't initially think this is a deal breaker when you accept funding, you are giving control and ownership of your business to someone who will want their return at some stage. This has ended badly for some companies, and it’s something to think about.
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If you secure funding, investors might want you to change your business model… after all, you are using their money, which could make the start of a business relationship somewhat rocky if you're not in agreement.
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Any of the above hit home with you? Any other pros or cons you can think of?
If this topic interests you please feel free to come along to our Brisbane office on June 22nd as we discuss "A Founders Guide to Start-Ups". We have three successful entrepreneurs sharing their secret sauce and giving some advice, so if you're considering beginning your own start-up, it might just help you sleep better at night.
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Quick, reserve your spot?here !