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Usually, a large number of small and medium scale enterprises (SME’s) that make up a large portion of the economy are bootstrapped as they start small with the money that they have together with reinvested net profits to gradually grow their businesses. But what about startups that want to grow to become a million dollar business? Is it possible to be bootstrapped? If yes, why the trending craze and frenzy for outside investment and funding that it almost seems to be that you cannot build a successful company without angel investors, venture capitalists and/or venture firms.
Bootstrap Financing (also referred to as bootstrapping) is a process of starting and growing your business without the aid/use or external funds like loans from banks, equity funding and also being able to allocate the little funds you have to the most profitable venture. Typically Bootstrapped startup’s capital comes from personal savings, soft loans from family and friends.
Unless Bootstrapping is not an option at all for your business model, first consider Bootstrapping
Bootstrapping comes with a number of positive strong points that should entice a founder to try it out. These may include but not limited to;
So, let’s say you’ve decided to tow this line for your startup, what are then the downsides of bootstrap financing?
Being armed with this information, (here are some questions you should answer before you decide to choose your funding path). What line would you want your startup to tow?
If your answers to the above prompts are mostly in the positive side, then the best option for you would be to Bootstrap.
So why waste a lot of time and talent scheming to raise funding from investors? Building a successful startup does not necessarily need funding at the early stages. Why then is there a sudden craze for looking for angel investors or capital venture firms rather than building your venture? Why not focus on building your venture with your personal savings or loans from family and friends just like some multi million businesses (Mailchimp, Shopify, GoPro and a host of others) have done and are still doing?
My advice to all founders and ‘would-be founders’ is rather than wallow in the craze of searching for investments at an early stage, BOOTSTRAP! Understand your customer needs, build a MVP and obtain revenue before looking to raise external funding.