You’ll need to figure out how to get by without taking investment money – a least for several months (possibly a lot more) because unless you are a successful serial entrepreneur with a great track record, you’ll have no choice.
Investors don’t invest in ideas. No investor is likely to invest in your company until you’ve made considerable headway. Investing in startups is risky. The more headway you make, the more you reduce the investor’s risk.
Not having investor money does have some advantages:
- You will, by necessity, keep your expense overhead low. When things take longer than you thought (they usually do) you’re in better shape to survive without running out of cash. Instead of dealing with difficult Board meetings and raising more money to fund yourself through the schedule slip, you can focus on getting the business back on track.
- You’ll retain control over your company. As soon as you accept investment money, the investors get significant control, even if they’ve purchased less than half of the company because investors usually get special rights that give them a lot of leverage. But perhaps the biggest leverage is that once you bulk-up the company to where expenses are way above your revenue (which is exactly what you do when you obtain investment financing) and things take longer than you thought (as is usually the case…), you’re in the awkward position of needing to raising more money to survive — even though you’ve missed your milestones. At that point, you’re addicted to investment money, and you can’t survive without it. And the investors decide when (and if) you get more money. Believe me, that’s control!
- You’ll have much more time to spend working on your startup. Raising investment dollars from angels or venture capital firms takes a huge amount of time. It’s virtually a full time job that usually takes at least 6 months – often longer. That’s a problem when running your startup is more than a full time job all by itself. Even after you raise investment money, you’ll spend a lot of time dealing with your investors. Overall, if you can bootstrap, you’ll spend much more time on your business!
So plan on “bootstrapping” without investor funding for a year – or more. And if you can, bootstrap all the way to cash-flow positive, that’s a great way to go!