For many professionals–especially Laptop Lounge members–creating a start-up is one of the most exciting and rewarding times in one’s career. Finding the marriage of passion and earning a living is one thing; having the freedom to make the big decisions, set the schedule, and see the fruits of your own creativity is another level entirely.
Early on in the process comes the question of financing this dream. Do you go after investors or finance it on your own? Especially for Internet-based startups, this is a vital decision. Luckily there are several resources available to help entrepreneurs assess the situation and consider important factors.
Benefits to bootstrapping include focusing on developing the product rather than raising capital. Most of us start our businesses out of passion, and rarely does that passion include asking people for money or going into debt. It can be disheartening to spend more time fundraising than creating, and it’s important not to lose that drive too early on (even Kickstarter recommends a descriptive video). Furthermore, the looming cloud of debt can damage the psyche, which distracts an otherwise clear mind.
Another benefit is flexibility. By starting small, testing the product on the market, and revising accordingly, your risk for financial loss is much lower. In other words, you’re able to adjust the product to market demands rather than being left with an expensive creation that doesn’t sell.
Downsides to bootstrapping are directly converse to the benefits. While it’s great to start lean and build accordingly, this also means that it takes much longer to get things going. Time is of the essence in innovation and being the first to the market can make or break the success of your startup.
No employer takes kindly to performance dips. By choosing to finance your venture, you may feel pulled in two directions while continuing your day job. If you continue to work, there may be great temptation to spend a minute here, an hour there, on your side business. This could lead to burning bridges and damaging your professional reputation, which would only hurt your venture later on.
How did you make the decision to finance your startup? Were there any surprises along the way?