It’s 2022, and the venture capital industry has NOT had a good year. The money has dried up a bit, and it looks like bootstrapping vs venture capital could be a viable option for you.
Being a profitable business may just turn out to be cool again. However, there are, without question, tons of businesses that would never have made it without the steady flow of capital from venture capital (VC) firms over the past decade. We’re not knocking them, we’re jus’ saying’…
Let’s first talk about this new format: Lil Pod #1. It’s big ideas in small soundbytes, more value in less time, hyper-focused puns and idioms thrown in-between. Like today’s pod…
Today, the team dives in to:
- James mentoring at Techstars
- What kinds of start-ups need VC money
- The insanity that is Byrd
- Other scooter brands
- And more (than you bargained for)!
Watch now: Bootstrapping vs Venture Capital
Bootstrapping vs Venture Capital: Pros, Cons, and Ideas
When it comes to funding a business, there are two completely differing sets of thought: Bootstrapping it, or funding it with venture capital. That’s not to say that either one is right (or wrong), but rather that you need to pick the one that’s right for you and your business’ needs.
There are so many companies in the VC ecosystem right now, and it’s hard to believe that this is the argument used to raise funds. Sure, it works for the Ubers, SpaceX, and other “moonshots” – where the level of innovation is literally out of this world – because it’s doable. Companies are taking that approach because they can raise money and its pretty low risk, but why jump through all those hoops when you can just go about being a cashflow-positive business out of the gate?
Yes, it’s not going to work for everybody, but if it does, why seek funding?
Until about 5 years ago, things were pretty structured. Venture capitalists would give people enough runway to determine what they wanted to do and find a product/market fit… but they still had to know how much money they had and how much runway that would pay for.
Then things just got to such massive volume around 5 years ago that it all lost its perspective. Seeding went from a couple of million maybe to five or six times that, in the space of literally one seeding round!
Who needs that much money?
From a bootstrapping point of view, entrepreneurs should be encouraged – no matter how grandiose their ideas – to bootstrap as close to product/market fit as they can. That way, when they do get money, they’ll have a better idea of what to do with it versus not having a concrete plan of what to do with it when it comes in. That’s the key problem.
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