Why Bootstrapping Is Just As Over-Rated As Raising Venture Capital

What a terribly muddled and bipolar article full of unsupported generalizations and platitudes.

Author writes -- "Moreover, not raising money from professional investors is—in all honesty—a potential red flag. It’s rare for an entrepreneur to run a business and spend millions of dollars without having any outside help."

Is there any data to prove this is a red flag? And rare? Nope. Speaking from experience, our bootstrapped firm has closed many enterprise clients without having raised VC. VC may help and be requisite in certain areas, but it certainly is not necessary.

Author writes - "Ultimately, while you may score extra points for building a large business despite being bootstrapped, you don’t actually score many points for running a small business if you have avoided venture capital..."

What does "winning points" have to do with anything? I suspect he's referring to some sort of ego gratification, but I'm not sure. If you run a business in which you feel you are adding value to customers/the world, growing at the rate you want, are in control, working with people you like and are financially where you want to be, I'm not sure what "points" have to do with anything.

Author writes -- "When it’s said and done, you can own 100% of a lemonade stand or 1% of Coca-Cola."

This is a false dichotomy, i.e., bootstrapped companies are "lemonade stands" and VC backed companies are Coca-Cola. VC backing is no guarantee of success.

Ultimately, there is nothing wrong or overrated about either path. Whichever is the right way to get you to where you want is what you should do.

Disclosure: I run a bootstrapped firm. One of our firm's primary customer groups is VCs.

This is one of the funniest articles I may have ever read.

Here's the thing. You have to figure out how to make money no matter what.

Whether you take money up front to fritter about finding a business model, or fritter about without any money, which do you think will work.. quicker?

It's like this article was written to keep the VC kool-aid flowing.

The world's biggest companies were bootstrapped. Apple, Microsoft, and more. There's nothing inherently wrong with bootstrapping. Except maybe that VC's aren't getting in on the action of the next bootstrapped Apple or Microsoft as early. It's as real of a filter as anything to see if your idea flies, or not.

"Throwing money at problems is usually a short term fix. By lacking capital, you’re forced to tackle issues head-on and generate real solutions."

Sounds like it's coming from someone who's never solved these problems. Boostrapping makes you solve those problems, um, even more so.

Is this article arguing that startups should seek VC simply for the sake of seeking VC? I'm exceedingly paranoid about giving up control of my business-- I want my customers and employees treated a certain way, I want my service to be presented and available on my terms (which goes back to how I treat my customers.)

If I can bootstrap, keep customers happy, keep employees paid (and content), keep my company and my money ... then why do I need VC?

Edit: I re-read it with a different ... attitude. Perhaps the author oversells the disadvantages of bootstrapping. Ownership is enough of an advantage for me personally. Dealing with the disadvantages keeps me nimble and, believe it or not, innovative.

The question is only interesting when discussing a startup that could do either one.

A number of businesses can only be done with VC (they require too much upfront capital), and many can't be done with VC (angel, perhaps, but not VC) because the opportunity is too small.

My take is that if you can do either, if you intend to be acquired, you should take VC; if not, bootstrap away! (And reconsider your business – it's no fun to compete in markets where your competition is VC-backed and you're bootstrapping yourself.)

Moreover, not raising money from professional investors is—in all honesty—a potential red flag. It’s rare for an entrepreneur to run a business and spend millions of dollars without having any outside help. When that is the case, it’s a normal reaction to wonder: why? Why hasn’t outside money been raised? It’s unfair, but saying that it’s never come up would be a lie.

I'm sure github wouldn't have any trouble raising money if they wanted it.