Startup Decision-Making: Bootstrapping vs Capital Raise

An article we liked from Cake:

Bootstrapping vs Capital Raise – What suits your company best?

So you’ve started a business, and it’s starting to gain some traction. 

Customers are raving, client lists are building and your product is, well, actually working pretty well! These are all good things, and things that you should be very proud of. However, from here, the next step can be a crucial decision for the future of your business.

Often, it comes down to one very basic question: Where would I like the business to go from here?

If your answer is ‘onwards and upwards’, well, this means you’re aiming for growth. And to get ‘growth’, the reality is, you will often need more money. How else would you hire that new super smart (albeit a little kooky) developer to stop those never-ending bugs infiltrating your site!?

In this article we consider the ways in which your company can raise funds to allow growth, and how you can decide which option will suit you, and your business, best.

You need money, but where will it come from?

In general, start-ups can consider two broad options:

1. You dig deep into your pockets, you crack that money box, and even sell that fancy car of yours to pull together the required funds yourself, otherwise referred to as ‘Bootstrapping’; OR
2. You offer others (whether they are family, friends, wealthy folk or even venture capital funds) a share of your business in return for money (or capital) injected into your business (otherwise referred to as a ‘Capital Raise’).

At Cake, we’ve seen our fair share of start-ups at this fork in the road, and our focus is to make sure they always manage their equity in the most effective way possible.

Bootstrapping – What, why and when?

Bootstrapping means launching or growing a venture using the founder’s own funds, and sustaining it by its own revenues. This means you will be dipping into your savings accounts, selling those golf clubs (that you never use), or even working two jobs to keep the venture going.

While we may make it sound kind of, well, horrible, it’s not all doom and gloom. A key difference between bootstrapping and...

Read the rest of this article at cakeequity.com...

Thanks for this article excerpt and its graphics to Cake.

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