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Bootstrapping Startup Vs Raising Money For Startups

Last updated: August 5, 2022
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There are many ways to get a startup off the ground and get the startup capital you need. However, bootstrapping and equity funding are two of the most popular methods. Both have pros and cons, and the best option for your startup depends on your circumstances.


Bootstrapping means startup funding with either your personal savings or by generating customer revenue. This can be a great choice if you don’t want to give up equity in your company, but it can be difficult to get started without outside assistance.


On the other hand, getting an outside investment and raising capital from investors can give you many resources to work with but can also come with strings attached. You’ll need to give up a portion of your company in exchange for the investment, and you’ll be answerable to your investors.


Both options for funding your business have pros and cons, but which is the right choice for you?

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    The Pros and Cons of Bootstrapping Startup

    The most significant advantage of bootstrapping startups is that it gives you complete control over your company; since you’re not beholden to an outside investor, you can make all the decisions about running your business without consulting anyone else.


    Additionally, a bootstrapped business can help you keep costs low and better manage your cash flow since you’re not spending any money you don’t have.


    However, the downside of bootstrapping is that it can be very risky; if your business fails, you could lose everything you’ve put into it. Additionally, raising money from other sources down the line can be difficult if you haven’t already established a track record of success.


    Pros and Cons of Bootstrapping Startup In a nutshell:

    PROS:

    • Bootstrapping gives you more control over your company.
    • Bootstrapping forces you to be more efficient with your money.
    • Bootstrapping can make you more creative in finding solutions to problems.

    CONS:

    • Bootstrapping can be slow and frustrating.
    • Bootstrapping can be risky if you don’t have a solid business plan.
    • Bootstrapping can limit your growth potential.

    Overall, whether or not to bootstrap your startup is a decision that should be made based on your specific circumstances.


    The Pros and Cons of Raising Money for a Startup

    One of the major benefits of raising money and finding investors for startup funding is the infusion of cash that can help a business grow. With the additional funds or venture capital, a startup can hire more personnel, expand its operations, and develop new products or services.


    In addition, having an outside investor can also bring in fresh perspectives and new ideas. Furthermore, it can provide a measure of accountability, as investors typically want to see a return on their investment. In some cases, raising money and finding investors may be the only way to keep a business afloat.


    On the other hand, if you raise outside money, the investor will likely require some ownership stake in your business. However, if you give up equity in exchange for external funding, you may lose some control over important decision-making.


    Getting an angel investor on board can also pressure you to achieve unrealistic growth targets to satisfy investors.


    Pros and Cons of Raising Money for a Startup In a nutshell:

    PROS:

    • Money can help you speed up the process of scaling your company.
    • Investors can bring a fresh perspective and new ideas.
    • You can bring on experienced talent to help you grow.
    • You can buy equipment and office space.

    CONS:

    • You can lose control of your company if you’re not careful.
    • It can be challenging to find investors who share your vision.
    • Pressure you to achieve unrealistic goals.

    What To Consider When Raising Money For A Startup

    First, consider how much money you’ll need to get your business off the ground. Don’t ask for more capital than you need, as potential investors will want to see that you’re responsible for your finances.


    Second, consider your target audience. To whom are you going to pitch your business? Make sure you have a strong elevator pitch and know your numbers inside and out.


    Third, consider what kind of equity you’re willing to give up in exchange for investment. Be realistic about how much of your company you’re willing to sell, and don’t hesitate to negotiate. Finally, remember that raising money is a process, so be prepared to invest the time and effort required to make it happen.


    Some questions to ask yourself are:

    1. How much money do you need?
    2. How much time do you have?
    3. What are your goals for the business?

    If you need much money, don’t have enough time, or your goal is to grow the business as quickly as possible, then raising money from investors might be the right choice for you.


    But if you’re comfortably bootstrapping and have more time to grow your business, that might be a better option.


    Why Is Raising Capital Better For Startups Than Bootstrapping Startup?

    The right decision you have to make could make or break your business: should you raise money from investors or bootstrap your way to success? As we have seen, both options have pros and cons, but in the end, raising money is always the better choice for startups.


    Here’s why:

    1. Money gives you the resources you need to grow your business.
    2. Investors can help you navigate the tricky waters of starting a business.
    3. Money lets you avoid risky business decisions.
    4. Investors can be a valuable source of advice and support.
    5. Money gives your business credibility and opens up new opportunities.
    6. Investors can help you reach a wider audience.
    7. Money makes it easier to attract top talent to your company.

    Conclusion

    Bootstrapping your startup is much work, but it has its benefits. You’ll have more control over your company and learn a lot along the way.


    However, if you have the opportunity to raise money for your startup, you should take it. You’ll get access to resources and contacts to help your company grow faster.


    Of course, sometimes it’s not so easy to find the right investor, and it is very time-consuming. That is especially a challenge for startups. An easy way to find thousands of investors is through AngelMatch, with over 90,000+ angels and venture capitalists on their list to find the perfect match for your success!