Josh Steimle wrote an interesting blog entry last week about his personal debate on getting loans or bootstrapping his company. This is a very difficult decision for most entrepreneurs because a lot of people believe that more money is the solution to everything. It’s an interesting topic for me to write about since I am in the business of helping entrepreneurs raise money for their company — so you would think that I am 100% for fundraising — but that’s not the case.
We see a lot of deals every week — and thousands every month. If I were to guess, I would say that only 5-10% of the companies that sign up to FundingUniverse are great candidates to acquire capital. The rest of the companies may need capital down the road, but it probably isn’t the underlying issue to success right now. (By the way… I put myself into this same boat most of the time — I often think that we need to get more money to solve a particular problem, when there are other solutions that would be more beneficial to our company.)
Let’s just say this — the worst time to raise money is when you need it. If you and your company is in a difficult cash situation, there is probably another solution (bootstrapping) that can help reduce the stress. Those actions might require you to downsize on employees, work from home, reduce high expenses, and/or work harder to drive sales.
Yesterday, we (FundingUniverse) just released a new product that I call the Entrepreneur’s Roadmap. The Roadmap is a 13 lesson course on every aspect of raising capital — including bootstrapping — because we believe that every entrepreneur should first focus on bootstrapping your company before trying to raise capital.
The more and more I think about fundraising, I am starting to formulate the opinion that entrepreneurs should first focus (on a small scale) on how to build a profitable business model. If you can bootstrap your company to prove your business model, then fundraising will be much easier.
